|   | (X) | QUARTERLY REPORT PURSUANT TO SECTION 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) |

----

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

----

N

|                                                                                                                              | PAGE    |
|-----------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                              | NUMBER  |
| PART I  -  CONSOLIDATED FINANCIAL INFORMATION                                                                 |    |
|                                                                                                                              |    |
| ITEM 1  -   CONSOLIDATED FINANCIAL STATEMENTS                                                            |    |
|                                                                                                                              |    |
| Consolidated Statements of Financial Condition  at September 30, 2009 and December 31, 2008 (Unaudited)                 | 1       |
|                                                                                                                              |    |
| Consolidated Statements of Income for the Three and Nine Months ended September 30, 2009 and 2008 (Unaudited)                     | 2       |
|                                                                                                                              |    |
| Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months ended September 30, 2009 and 2008 (Unaudited) | 3       |
|                                                                                                                              |    |
| Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2009 and 2008 (Unaudited)       | 4       |
|                                                                                                                              |    |
| Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2009 and 2008 (Unaudited)                           | 5 - 6   |
|                                                                                                                              |    |
| Notes to Consolidated Financial Statements (Unaudited)                                                                            | 7 - 19  |
|                                                                                                                              |    |
| ITEM 2  -   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  | 20 - 27 |
|                                                                                                                              |    |
| ITEM 3 -   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                                               | 28      |
|                                                                                                                              |    |
| ITEM 4 -    CONTROLS AND PROCEDURES                                                                           | 28      |
|                                                                                                                              |    |
| PART II  -  OTHER INFORMATION                                                                                 |    |
|                                                                                                                              |    |
| ITEM 6 -     EXHIBITS                                                                                    | 29      |
|                                                                                                                              |    |
| SIGNATURES                                                                                                                        | 30      |
|                                                                                                                              |    |
| EXHIBIT INDEX                                                                                                                     | 31      |

----

Index

| Stewardship Financial Corporation and Subsidiary                                                                        |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Financial Condition                                                                          |   |
| (Unaudited)                                                                                                             |   |
|                                                                                                                    |   |   |   |   |   |   |
|                                                                                                                    |   | September 30, |   |   | December 31, |   |
|                                                                                                                    |   | 2009 |   |   | 2008 |   |
| Assets                                                                                                                  |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |
| Cash and due from banks                                                                                                 |   | $ | 13,590,000 |   |   | $ | 12,719,000 |   |
| Other interest-earning assets                                                                                           |   |   | 56,000 |   |   |   | 95,000 |   |
|        Cash and cash equivalents                                                     |   |   | 13,646,000 |   |   |   | 12,814,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Securities available for sale                                                                                           |   |   | 90,460,000 |   |   |   | 90,023,000 |   |
| Securities held to maturity; estimated fair value of $77,023,000 (2009) and                                             |   |   |   |   |   |   |   |   |
|     $49,150,000 (2008)                                                                              |   |   | 75,232,000 |   |   |   | 48,856,000 |   |
| FHLB-NY stock, at cost                                                                                                  |   |   | 3,195,000 |   |   |   | 2,420,000 |   |
| Loans, net of allowance for loan losses of $7,249,000 (2009) and $5,166,000 (2008)                                      |   |   | 443,552,000 |   |   |   | 434,103,000 |   |
| Mortgage loans held for sale                                                                                            |   |   | 1,018,000 |   |   |   | 394,000 |   |
| Premises and equipment, net                                                                                             |   |   | 7,000,000 |   |   |   | 7,470,000 |   |
| Accrued interest receivable                                                                                             |   |   | 3,142,000 |   |   |   | 3,371,000 |   |
| Bank owned life insurance                                                                                               |   |   | 8,837,000 |   |   |   | 8,599,000 |   |
| Other assets                                                                                                            |   |   | 3,539,000 |   |   |   | 3,766,000 |   |
|        Total assets                                                                  |   | $ | 649,621,000 |   |   | $ | 611,816,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Liabilities and stockholders' equity                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Liabilities                                                                                                             |   |   |   |   |   |   |   |   |
| Deposits:                                                                                                               |   |   |   |   |   |   |   |   |
|     Noninterest-bearing                                                                             |   | $ | 90,831,000 |   |   | $ | 99,099,000 |   |
|     Interest-bearing                                                                                |   |   | 423,781,000 |   |   |   | 407,432,000 |   |
|         Total deposits                                                          |   |   | 514,612,000 |   |   |   | 506,531,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Other borrowings                                                                                                        |   |   | 53,900,000 |   |   |   | 36,900,000 |   |
| Subordinated debentures                                                                                                 |   |   | 7,217,000 |   |   |   | 7,217,000 |   |
| Securities sold under agreements to repurchase                                                                          |   |   | 16,019,000 |   |   |   | 15,160,000 |   |
| Accrued interest payable                                                                                                |   |   | 1,494,000 |   |   |   | 1,582,000 |   |
| Accrued expenses and other liabilities                                                                                  |   |   | 2,307,000 |   |   |   | 1,630,000 |   |
|         Total liabilities                                                       |   |   | 595,549,000 |   |   |   | 569,020,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Commitments and contingencies                                                                                           |   |   | - |   |   |   | - |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                                                                    |   |   |   |   |   |   |   |   |
| Preferred stock, no par value; 2,500,000 shares authorized; 10,000 shares                                               |   |   |   |   |   |   |   |   |
|     issued and outstanding at September 30, 2009.  Liquidation preference of $10,000,000. |   |   | 9,721,000 |   |   |   | - |   |
| Common stock, no par value; 10,000,000 shares authorized;                                                               |   |   |   |   |   |   |   |   |
|     5,863,949 and 5,575,095 shares issued: 5,834,022 and 5,555,095 shares                           |   |   |   |   |   |   |   |   |
|     outstanding at September 30, 2009 and December 31, 2008, respectively                           |   |   | 40,759,000 |   |   |   | 37,962,000 |   |
| Treasury stock, 29,927 and 20,000 shares outstanding at September 30, 2009 and                                          |   |   |   |   |   |   |   |   |
|     December 31, 2008, respectively                                                                 |   |   | (368,000 | ) |   |   | (272,000 | ) |
| Retained earnings                                                                                                       |   |   | 2,834,000 |   |   |   | 4,383,000 |   |
| Accumulated other comprehensive income                                                                                  |   |   | 1,126,000 |   |   |   | 723,000 |   |
|         Total stockholders' equity                                              |   |   | 54,072,000 |   |   |   | 42,796,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|         Total liabilities and stockholders' equity                              |   | $ | 649,621,000 |   |   | $ | 611,816,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.                                                               |   |   |   |   |   |   |   |   |

----

Index

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

|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |
|------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|-----------|-----------|--------|--------|-----------|------------|--------|
|                                                 |   | Three Months Ended |      |   | Nine Months Ended |      |
|                                                 |   | September 30,      |      |   | September 30,     |      |
|                                                 |   | 2009               |      |   | 2008              |      |      | 2009   |   |      | 2008       |   |
| Interest income:                                     |   |               |      |   |              |      |      |   |   |      |       |   |
| Loans                                                |   | $                  | 6,831,000 |   |              | $         | 7,217,000 |   |   | $         | 20,097,000 |   |   | $ | 21,478,000 |   |
| Securities held to maturity                          |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Taxable                                              |   |               | 532,000   |   |              |      | 170,000   |   |   |      | 1,492,000  |   |   |   | 560,000 |   |
| Non-taxable                                          |   |               | 220,000   |   |              |      | 210,000   |   |   |      | 652,000    |   |   |   | 627,000 |   |
| Securities available for sale                        |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Taxable                                              |   |               | 934,000   |   |              |      | 1,194,000 |   |   |      | 3,137,000  |   |   |   | 3,301,000 |   |
| Non-taxable                                          |   |               | 50,000    |   |              |      | 53,000    |   |   |      | 154,000    |   |   |   | 121,000 |   |
| FHLB dividends                                       |   |               | 41,000    |   |              |      | 46,000    |   |   |      | 86,000     |   |   |   | 128,000 |   |
| Other interest-earning assets                        |   |               | 2,000     |   |              | 20,000    |      |   |   | 7,000     |       |   | 62,000 |   |
| Total interest income                                |   |               | 8,610,000 |   |              |      | 8,910,000 |   |   |      | 25,625,000 |   |   |   | 26,277,000 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Interest expense:                                    |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Deposits                                             |   |               | 2,131,000 |   |              |      | 2,533,000 |   |   |      | 6,706,000  |   |   |   | 8,055,000 |   |
| Borrowed money                                       |   |               | 503,000   |   |              | 567,000   |      |   |   | 1,525,000 |       |   | 1,694,000 |   |
| Total interest expense                               |   |               | 2,634,000 |   |              |      | 3,100,000 |   |   |      | 8,231,000  |   |   |   | 9,749,000 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Net interest income before provision for loan losses |   |               | 5,976,000 |   |              |      | 5,810,000 |   |   |      | 17,394,000 |   |   |   | 16,528,000 |   |
| Provision for loan losses                            |   |               | 1,200,000 |   |              | 1,175,000 |      |   |   | 2,375,000 |       |   | 1,535,000 |   |
| Net interest income after provision for loan losses  |   |               | 4,776,000 |   |              |      | 4,635,000 |   |   |      | 15,019,000 |   |   |   | 14,993,000 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Noninterest income:                                  |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Fees and service charges                             |   |               | 492,000   |   |              |      | 370,000   |   |   |      | 1,362,000  |   |   |   | 1,067,000 |   |
| Bank owned life insurance                            |   |               | 79,000    |   |              |      | 85,000    |   |   |      | 238,000    |   |   |   | 244,000 |   |
| Gain on sales of mortgage loans                      |   |               | 188,000   |   |              |      | 47,000    |   |   |      | 272,000    |   |   |   | 156,000 |   |
| Gain on calls and sales of securities                |   |               | 2,000     |   |              |      | 4,000     |   |   |      | 255,000    |   |   |   | 61,000 |   |
| Merchant processing                                  |   |               | -         |   |              |      | 340,000   |   |   |      | 118,000    |   |   |   | 1,070,000 |   |
| Other                                                |   |               | 60,000    |   |              | 48,000    |      |   |   | 232,000   |       |   | 289,000 |   |
| Total noninterest income                             |   |               | 821,000   |   |              |      | 894,000   |   |   |      | 2,477,000  |   |   |   | 2,887,000 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Noninterest expenses:                                |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Salaries and employee benefits                       |   |               | 2,128,000 |   |              |      | 1,968,000 |   |   |      | 6,264,000  |   |   |   | 6,078,000 |   |
| Occupancy, net                                       |   |               | 453,000   |   |              |      | 477,000   |   |   |      | 1,398,000  |   |   |   | 1,354,000 |   |
| Equipment                                            |   |               | 277,000   |   |              |      | 276,000   |   |   |      | 795,000    |   |   |   | 842,000 |   |
| Data processing                                      |   |               | 300,000   |   |              |      | 300,000   |   |   |      | 882,000    |   |   |   | 897,000 |   |
| Advertising                                          |   |               | 150,000   |   |              |      | 106,000   |   |   |      | 369,000    |   |   |   | 342,000 |   |
| FDIC insurance premium                               |   |               | 197,000   |   |              |      | 77,000    |   |   |      | 886,000    |   |   |   | 223,000 |   |
| Charitable contributions                             |   |               | 120,000   |   |              |      | 126,000   |   |   |      | 411,000    |   |   |   | 474,000 |   |
| Stationery and supplies                              |   |               | 64,000    |   |              |      | 87,000    |   |   |      | 188,000    |   |   |   | 316,000 |   |
| Merchant processing                                  |   |               | -         |   |              |      | 299,000   |   |   |      | 108,000    |   |   |   | 944,000 |   |
| Other                                                |   |               | 657,000   |   |              | 646,000   |      |   |   | 2,137,000 |       |   | 1,933,000 |   |
| Total noninterest expenses                           |   |               | 4,346,000 |   |              |      | 4,362,000 |   |   |      | 13,438,000 |   |   |   | 13,403,000 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Income before income tax expense                     |   |               | 1,251,000 |   |              |      | 1,167,000 |   |   |      | 4,058,000  |   |   |   | 4,477,000 |   |
| Income tax expense                                   |   |               | 358,000   |   |              | 329,000   |      |   |   | 1,198,000 |       |   | 1,399,000 |   |
| Net income                                           |   |               | 893,000   |   |              |      | 838,000   |   |   |      | 2,860,000  |   |   |   | 3,078,000 |   |
| Dividends on preferred stock and accretion           |   |               | 138,000   |   |              |      | -         |   |   |      | 367,000    |   |   |   | - |   |
| Net income available to common stockholders          |   | $                  | 755,000   |   |              | $         | 838,000   |   |   | $         | 2,493,000  |   |   | $ | 3,078,000 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Basic earnings per common share                      |   | $                  | 0.13      |   |              | $         | 0.14      |   |   | $         | 0.43       |   |   | $ | 0.53 |   |
| Diluted earnings per common share                    |   | $                  | 0.13      |   |              | $         | 0.14      |   |   | $         | 0.43       |   |   | $ | 0.52 |   |
|                                                 |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
| Weighted average number of common shares outstanding |   |               | 5,833,787 |   |              |      | 5,852,681 |   |   |      | 5,831,494  |   |   |   | 5,855,836 |   |
| Weighted average number of diluted common            |   |               |      |   |              |      |      |   |   |      |       |   |   |   |   |   |
|      shares outstanding     |   |               | 5,837,797 |   |              |      | 5,863,105 |   |   |      | 5,836,225  |   |   |   | 5,869,088 |   |

| Share data has been restated to reflect a 5% stock dividend paid November 17, 2008 and a 5% stock dividend delared on |
|-----------------------------------------------------------------------------------------------------------------------|
| September 15, 2009 and payable on November 16, 2009.                                                                  |   |   |   |   |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.                                                             |   |   |   |   |   |   |   |   |   |

----

Index

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

|                                                                       |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |
|----------------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|--------------|--------|-----------|----------|--------|--------|------------|--------|--------|---------------|----------|--------|---------------|--------|------------|--------|--------|
|                                                                       |   | Nine Months Ended September 30, 2009 |      |
|                                                                       |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   | Accumulated   |   |       |   |   |
|                                                                       |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   | Other         |   |       |   |   |
|                                                                       |   | Preferred                            |      |   | Common Stock |   |      | Treasury |   |   | Retained   |   |   | Comprehensive |     |   |          |   |
|                                                                       |   | Stock                                |      |   | Shares       |   |      | Amount   |   |   | Stock      |   |   | Earnings      |     |   | Income (Loss) |   |       | Total  |   |
|                                                                       |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |
| Balance -- December 31, 2008                                               |   | $                                    | -         |   |         |   | 5,575,095 |     |   | $      | 37,962,000 |   |   | $             | (272,000 | )      |          | $      | 4,383,000  |   |   | $ | 723,000 |   |   | $ | 42,796,000 |   |
| Proceeds from issuance of preferred                                        |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
|     stock and a warrant                                |   |                                 | 9,731,000 |   |         |   |  -   |     |   |   | 269,000    |   |   |          |  -  |   |          |   |  -    |   |   |   |  - |   |   |   | 10,000,000 |   |
| Preferred stock issuance costs                                             |   |                                 | (48,000   | )      |         |   |  -   |     |   |   |  -    |   |   |          |  -  |   |          |   |  -    |   |   |   |  - |   |   |   | (48,000 | ) |
| Cash dividends paid on common stock                                        |   |                                 | -         |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | (1,583,000 | )      |   |   | - |   |   |   | (1,583,000 | ) |
| 5% stock dividend (declared on September 15,                               |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |
|     2009 and payable November 16, 2009)                |   |                                 |      |   |         |   | 279,236   |     |   |   | 2,465,000  |   |   |          | (12,000  | )      |          |   | (2,453,000 | )      |   |   |  - |   |   |   | - |   |
| Payment of discount on dividend                                            |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
|     reinvestment plan (DRP)                            |   |                                 | -         |   |         |   | -         |     |   |   | (35,000    | )      |   |          | -        |   |          |   | -          |   |   |   | - |   |   |   | (35,000 | ) |
| Cash dividends accrued on preferred stock                                  |   |                                 | -         |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | (335,000   | )      |   |   | - |   |   |   | (335,000 | ) |
| Common stock issued under stock plans                                      |   |                                 | -         |   |         |   | 2,288     |     |   |   | 22,000     |   |   |          | 23,000   |   |          |   | -          |   |   |   | - |   |   |   | 45,000 |   |
| Stock option compensation expense                                          |   |                                 | -         |   |         |   | -         |     |   |   | 36,000     |   |   |          | -        |   |          |   | -          |   |   |   | - |   |   |   | 36,000 |   |
| Stock options exercised                                                    |   |                                 | -         |   |         |   | 7,330     |     |   |   | 40,000     |   |   |          | (32,000  | )      |          |   | -          |   |   |   | - |   |   |   | 8,000 |   |
| Repurchase of common stock                                                 |   |                                 | -         |   |         |   | -         |     |   |   | -          |   |   |          | (75,000  | )      |          |   | -          |   |   |   | - |   |   |   | (75,000 | ) |
| Accretion of discount on preferred stock                                   |   |                                 | 32,000    |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | (32,000    | )      |   |   |  - |   |   |   | - |   |
| Amortization of issuance costs                                             |   |                                 | 6,000     |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | (6,000     | )      |   |   |  - |   |   |   | - |   |
| Comprehensive income:                                                      |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
| Net income                                                                 |   |                                 | -         |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | 2,860,000  |   |   |   | - |   |   |   | 2,860,000 |   |
|    Change in unrealized holding gains on                    |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
|      securities available for sale arising during |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
|      the period (net of taxes of $295,000)        |   |                                 | -         |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | -          |   |   |   | 463,000 |   |   |   | 463,000 |   |
|    Reclassification adjustment for gains in                 |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
|      net income (net of taxes of $101,000)        |   |                                 | -         |   |         |   | -         |     |   |   | -          |   |   |          | -        |   |          |   | -          |   |   |   | 154,000 |   |   |   | 154,000 |   |
|    Change in fair value of interest rate                    |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
|      swap (net of tax benefit of $142,000)        |   |                                 |  -   |   |         |   |  -   |     |   |   |  -    |   |   |          |  -  |   |          |   |  -    |   |   |   | (214,000 | ) |   |   | (214,000 | ) |
| Total comprehensive income                                                 |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   | 3,263,000 |   |
|                                                                       |   |                                 |      |   |         |   |      |     |   |   |       |   |   |          |     |   |          |   |       |   |   |   |   |   |   |   |   |   |
| Balance -- September 30, 2009                                              |   | $                                    | 9,721,000 |   |         |   | 5,863,949 |     |   | $      | 40,759,000 |   |   | $             | (368,000 | )      |          | $      | 2,834,000  |   |   | $ | 1,126,000 |   |   | $ | 54,072,000 |   |

|                                                                       |   | Nine Months Ended September 30, 2008 |    |
|----------------------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                                       |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                       |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                                                       |   | Preferred                            |    |   | Common Stock |   |   | Treasury |   |   | Retained |   |   | Comprehensive |   |   |   |   |
|                                                                       |   | Stock                                |    |   | Shares |   |   | Amount |   |   | Stock |   |   | Earnings |   |   | Income (Loss) |   |   | Total |   |
|                                                                       |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2007                                               |   | $                                    | -       |   |   |   | 5,306,828 |   |   | $ | 34,871,000 |   |   | $ | - |   |   | $ | 5,943,000 |   |   | $ | 276,000 |   |   | $ | 41,090,000 |   |
| Cash dividends paid on common stock                                        |   |                                 | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,460,000 | ) |   |   | - |   |   |   | (1,460,000 | ) |
| 5% stock dividend (declared on September 16,                               |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     2008 and payable November 17, 2008)                |   |                                 |  - |   |   |   | 265,984 |   |   |   | 3,319,000 |   |   |   | (6,000 | ) |   |   | (3,313,000 | ) |   |   |  - |   |   |   | - |   |
| Payment of discount on DRP                                                 |   |                                 | -       |   |   |   | - |   |   |   | (34,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (34,000 | ) |
| Common stock issued under stock plans                                      |   |                                 | -       |   |   |   | 1,667 |   |   |   | 21,000 |   |   |   | 20,000 |   |   |   | - |   |   |   | - |   |   |   | 41,000 |   |
| Stock option compensation expense                                          |   |                                 | -       |   |   |   | - |   |   |   | 36,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 36,000 |   |
| Stock options exercised                                                    |   |                                 | -       |   |   |   | 11,180 |   |   |   | 70,000 |   |   |   | (21,000 | ) |   |   | - |   |   |   | - |   |   |   | 49,000 |   |
| Tax benefit on stock options exercised                                     |   |                                 |  - |   |   |   |  - |   |   |   | 2,000 |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   | 2,000 |   |
| Repurchase common stock                                                    |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   | (131,000 | ) |   |   |   |   |   |   |   |   |   |   | (131,000 | ) |
| Comprehensive income:                                                      |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net income                                               |   |                                 | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,078,000 |   |   |   | - |   |   |   | 3,078,000 |   |
|    Change in unrealized holding losses on                   |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      securities available for sale arising during |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      the period (net tax benefit of $597,000)     |   |                                 | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (949,000 | ) |   |   | (949,000 | ) |
|    Reclassification adjustment for gains                    |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      in net income (net taxes of $24,000)         |   |                                 | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 37,000 |   |   |   | 37,000 |   |
| Total comprehensive income                                                 |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,166,000 |   |
|                                                                       |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- September 30, 2008                                              |   | $                                    | -       |   |   |   | 5,585,659 |   |   | $ | 38,285,000 |   |   | $ | (138,000 | ) |   | $ | 4,248,000 |   |   | $ | (636,000 | ) |   | $ | 41,654,000 |   |
|                                                                       |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.                  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Index

| Stewardship Financial Corporation and Subsidiary              |   |
|---------------------------------------------------------------|--------|
| Consolidated Statements of Comprehensive Income (Loss)        |   |
| (Unaudited)                                                   |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   | Three Months Ended |   |   | Nine Months Ended |   |
|                                                          |   | September 30, |   |   | September 30, |   |
|                                                          |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized holding gains (losses)                   |   |   |   |   |   |   |   |   |   |   |   |   |
| on securities available for sale arising                      |   |   |   |   |   |   |   |   |   |   |   |   |
| during the period                                             |   | $ | 1,247,000 |   |   | $ | (423,000 | ) |   | $ | 1,268,000 |   |   | $ | (1,422,000 | ) |
| Reclassification adjustment for gains in net income           |   |   | 2,000 |   |   | 4,000 |   |   |   | 255,000 |   |   | 61,000 |   |
| Net unrealized gains (losses)                                 |   |   | 1,245,000 |   |   |   | (427,000 | ) |   |   | 1,013,000 |   |   |   | (1,483,000 | ) |
| Tax effect                                                    |   |   | 484,000 |   |   | (164,000 | ) |   |   | 396,000 |   |   | (571,000 | ) |
| Net unrealized gains (losses), net of tax amount              |   |   | 761,000 |   |   |   | (263,000 | ) |   |   | 617,000 |   |   |   | (912,000 | ) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Change in fair value of interest rate swap                    |   |   | (258,000 | ) |   |   | - |   |   |   | (356,000 | ) |   |   |   |   |
| Tax effect                                                    |   |   | (103,000 | ) |   | - |   |   |   | (142,000 | ) |   | - |   |
| Change in fair value of interest rate swap, net of tax amount |   |   | (155,000 | ) |   |   | - |   |   |   | (214,000 | ) |   |   | - |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other comprehensive income (loss)                       |   | $ | 606,000 |   |   | $ | (263,000 | ) |   | $ | 403,000 |   |   | $ | (912,000 | ) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See notes to unaudited consolidated financial statements.     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Index

| Stewardship Financial Corporation and Subsidiary                                                                                            |   |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                                                                       |   |
| (Unaudited)                                                                                                                                 |   |
|                                                                                                                                        |   |   |   |   |   |   |
|                                                                                                                                        |   | Nine Months Ended |   |
|                                                                                                                                        |   | September 30, |   |
|                                                                                                                                        |   | 2009 |   |   | 2008 |   |
| Cash flows from operating activities:                                                                                                       |   |   |   |   |   |   |
| Net income                                                                                                                                  |   | $ | 2,860,000 |   |   | $ | 3,078,000 |   |
| Adjustments to reconcile net income to                                                                                                      |   |   |   |   |   |   |   |   |
| net cash provided by operating activities:                                                                                                  |   |   |   |   |   |   |   |   |
| Depreciation and amortization of premises and equipment                                                                                     |   |   | 631,000 |   |   |   | 696,000 |   |
| Amortization of premiums and accretion of discounts, net                                                                                    |   |   | 456,000 |   |   |   | 89,000 |   |
| Accretion of deferred loan fees                                                                                                             |   |   | (151,000 | ) |   |   | (216,000 | ) |
| Provision for loan losses                                                                                                                   |   |   | 2,375,000 |   |   |   | 1,535,000 |   |
| Originations of mortgage loans held for sale                                                                                                |   |   | (33,778,000 | ) |   |   | (15,869,000 | ) |
| Proceeds from sale of mortgage loans                                                                                                        |   |   | 33,426,000 |   |   |   | 16,414,000 |   |
| Gain on sales of mortgage loans                                                                                                             |   |   | (272,000 | ) |   |   | (156,000 | ) |
| Gain on calls and sales of securities                                                                                                       |   |   | (255,000 | ) |   |   | (61,000 | ) |
| Loss on sale of equipment                                                                                                                   |   |   | - |   |   |   | 12,000 |   |
| Deferred income tax benefit                                                                                                                 |   |   | (903,000 | ) |   |   | (639,000 | ) |
| Amortization of intangible assets                                                                                                           |   |   | 24,000 |   |   |   | 24,000 |   |
| Nonqualified stock option expense                                                                                                           |   |   | 36,000 |   |   |   | 36,000 |   |
| Increase in bank owned life insurance                                                                                                       |   |   | (238,000 | ) |   |   | (244,000 | ) |
| Decrease (increase) in accrued interest receivable                                                                                          |   |   | 229,000 |   |   |   | (129,000 | ) |
| Decrease in other assets                                                                                                                    |   |   | 711,000 |   |   |   | 259,000 |   |
| Decrease in accrued interest payable                                                                                                        |   |   | (88,000 | ) |   |   | (615,000 | ) |
| Increase (decrease) in other liabilities                                                                                                    |   |   | 400,000 |   |   |   | (465,000 | ) |
| Net cash provided by operating activities                                                                                                   |   |   | 5,463,000 |   |   |   | 3,749,000 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                                                       |   |   |   |   |   |   |   |   |
| Purchase of securities available for sale                                                                                                   |   |   | (46,067,000 | ) |   |   | (41,754,000 | ) |
| Proceeds from maturities and principal repayments on securities available for sale                                                          |   |   | 11,796,000 |   |   |   | 5,973,000 |   |
| Proceeds from calls and sales on securities available for sale                                                                              |   |   | 34,854,000 |   |   |   | 16,197,000 |   |
| Purchase of securities held to maturity                                                                                                     |   |   | (40,703,000 | ) |   |   | (1,798,000 | ) |
| Proceeds from maturities and principal repayments on securities held to maturity                                                            |   |   | 4,953,000 |   |   |   | 3,191,000 |   |
| Proceeds from calls on securities held to maturity                                                                                          |   |   | 9,165,000 |   |   |   | 4,520,000 |   |
| Purchase of FHLB-NY stock                                                                                                                   |   |   | (775,000 | ) |   |   | (873,000 | ) |
| Net increase in loans                                                                                                                       |   |   | (11,673,000 | ) |   |   | (22,592,000 | ) |
| Additions to premises and equipment                                                                                                         |   |   | (161,000 | ) |   |   | (282,000 | ) |
| Sale of equipment                                                                                                                           |   |   | - |   |   |   | 4,000 |   |
|                  Net cash used in investing activities |   |   | (38,611,000 | ) |   |   | (37,414,000 | ) |
|                                                                                                                                        |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                       |   |   |   |   |   |   |   |   |
| Net decrease in noninterest-bearing deposits                                                                                                |   |   | (8,268,000 | ) |   |   | (5,189,000 | ) |
| Net increase in interest-bearing deposits                                                                                                   |   |   | 16,349,000 |   |   |   | 25,000,000 |   |
| Net increase (decrease) in securities sold under agreements to repurchase                                                                   |   |   | 859,000 |   |   |   | (986,000 | ) |
| Proceeds from term borrowings                                                                                                               |   |   | 6,000,000 |   |   |   | 65,000,000 |   |
| Net increase (decrease) in short term borrowings                                                                                            |   |   | 11,000,000 |   |   |   | (10,800,000 | ) |
| Payments on long term borrowings                                                                                                            |   |   | - |   |   |   | (36,270,000 | ) |
| Proceeds from issuance of preferred stock and warrants                                                                                      |   |   | 9,951,000 |   |   |   | - |   |
| Cash dividends paid on common stock                                                                                                         |   |   | (1,583,000 | ) |   |   | (1,460,000 | ) |
| Cash dividends paid on preferred stock                                                                                                      |   |   | (271,000 | ) |   |   | - |   |
| Payment of discount on dividend reinvestment plan                                                                                           |   |   | (35,000 | ) |   |   | (34,000 | ) |
| Purchase of treasury stock                                                                                                                  |   |   | (75,000 | ) |   |   | (131,000 | ) |
| Options exercised                                                                                                                           |   |   | 8,000 |   |   |   | 49,000 |   |
| Tax benefit of stock options                                                                                                                |   |   | - |   |   |   | 2,000 |   |
| Issuance of common stock                                                                                                                    |   |   | 45,000 |   |   |   | 41,000 |   |
| Net cash provided by financing activities                                                                                                   |   |   | 33,980,000 |   |   |   | 35,222,000 |   |
|                                                                                                                                        |   |   |   |   |   |   |   |   |
| Net increase in cash and cash equivalents                                                                                                   |   |   | 832,000 |   |   |   | 1,557,000 |   |
| Cash and cash equivalents - beginning                                                                                                       |   |   | 12,814,000 |   |   |   | 11,932,000 |   |
| Cash and cash equivalents - ending                                                                                                          |   | $ | 13,646,000 |   |   | $ | 13,489,000 |   |

----

Index

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

|                                                          |   | Nine Months Ended |      |
|---------------------------------------------------------------|--------|-------------------|-----------|
|                                                          |   | September 30,     |      |
|                                                          |   | 2009              |      | 2008 |   |
| Supplemental disclosures of cash flow information:            |   |              |      |   |   |   |
| Cash paid during the period for interest                      |   | $                 | 8,319,000 |   |   | $ | 10,364,000 |   |
| Cash paid during the period for income taxes                  |   | $                 | 1,134,000 |   |   | $ | 1,814,000 |   |
| Noncash investing activities - security purchases due brokers |   | $                 | -         |   |   | $ | 1,890,000 |   |
|                                                          |   |              |      |   |   |   |   |   |
|                                                          |   |              |      |   |   |   |   |   |

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

----

Index

o

----

Index

----

Index

----

Index

|                               |   | September 30, 2009 |       |
|------------------------------------|--------|--------------------|------------|
|                               |   |               |       |   | Gross |   |   | Gross |   |   |   |   |
|                               |   | Amoritzed          |       |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                               |   | Cost               |       |   | Holding Gains |   |   | Holding Losses |   |   | Value |   |
|                               |   |               |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                  | 25,490,000 |   |   | $ | 237,000 |   |   | $ | 27,000 |   |   | $ | 25,700,000 |   |
| Obligations of state and political |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |               | 5,286,000  |   |   |   | 175,000 |   |   |   | - |   |   |   | 5,461,000 |   |
| Mortgage-backed securities         |   |               | 54,458,000 |   |   |   | 1,758,000 |   |   |   | 9,000 |   |   |   | 56,207,000 |   |
| Other equity investments           |   |               | 3,020,000  |   |   |   | 85,000 |   |   |   | 13,000 |   |   |   | 3,092,000 |   |
|                               |   | $                  | 88,254,000 |   |   | $ | 2,255,000 |   |   | $ | 49,000 |   |   | $ | 90,460,000 |   |
|                               |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                               |   | December 31, 2008 |       |
|------------------------------------|--------|-------------------|------------|
|                               |   |              |       |   | Gross |   |   | Gross |   |   |   |
|                               |   | Amoritzed         |       |   | Unrealized |   |   | Unrealized |   | Fair |   |
|                               |   | Cost              |       |   | Holding Gains |   |   | Holding Losses |   | Value |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                 | 48,949,000 |   |   | $ | 741,000 |   |   | $ | 30,000 |   |   | $ | 49,660,000 |   |
| Obligations of state and political |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |              | 6,004,000  |   |   |   | 6,000 |   |   |   | 190,000 |   |   |   | 5,820,000 |   |
| Mortgage-backed securities         |   |              | 30,969,000 |   |   |   | 716,000 |   |   |   | 15,000 |   |   |   | 31,670,000 |   |
| Other equity investments           |   |              | 2,908,000  |   |   |   | - |   |   |   | 35,000 |   |   |   | 2,873,000 |   |
|                               |   | $                 | 88,830,000 |   |   | $ | 1,463,000 |   |   | $ | 270,000 |   |   | $ | 90,023,000 |   |

|                               |   | September 30, 2009 |       |
|------------------------------------|--------|--------------------|------------|
|                               |   |               |       |   | Gross |   |   | Gross |   |   |   |   |
|                               |   | Carrying           |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                               |   | Value              |       |   | Holding Gains |   |   | Holding Losses |   |   | Value |   |
|                               |   |               |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                  | 27,437,000 |   |   | $ | 199,000 |   |   | $ | 189,000 |   |   | $ | 27,447,000 |   |
| Obligations of state and political |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |               | 25,329,000 |   |   |   | 1,060,000 |   |   |   | 42,000 |   |   |   | 26,347,000 |   |
| Mortgage-backed securities         |   |               | 22,466,000 |   |   |   | 771,000 |   |   |   | 8,000 |   |   |   | 23,229,000 |   |
|                               |   | $                  | 75,232,000 |   |   | $ | 2,030,000 |   |   | $ | 239,000 |   |   | $ | 77,023,000 |   |
|                               |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                               |   | December 31, 2008 |       |
|------------------------------------|--------|-------------------|------------|
|                               |   |              |       |   | Gross |   |   | Gross |   |   |   |   |
|                               |   | Carrying          |       |   | Unrecognized |   |   | Unrecognized |   |   | Fair |   |
|                               |   | Value             |       |   | Holding Gains |   |   | Holding Losses |   |   | Value |   |
|                               |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies |   | $                 | 10,290,000 |   |   | $ | 217,000 |   |   | $ | - |   |   | $ | 10,507,000 |   |
| Obligations of state and political |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subdivisions           |   |              | 23,048,000 |   |   |   | 110,000 |   |   |   | 301,000 |   |   |   | 22,857,000 |   |
| Mortgage-backed securities         |   |              | 15,518,000 |   |   |   | 271,000 |   |   |   | 3,000 |   |   |   | 15,786,000 |   |
|                               |   | $                 | 48,856,000 |   |   | $ | 598,000 |   |   | $ | 304,000 |   |   | $ | 49,150,000 |   |

----

Index

|                                   |   | September 30, 2009 |       |
|----------------------------------------|--------|--------------------|------------|
|                                   |   | Amortized          |       |   | Fair |   |
|                                   |   | Cost               |       |   | Value |   |
|                                   |   |               |       |   |   |   |
| Maturity                               |   |               |       |   |   |   |
| Available for sale                     |   |               |       |   |   |   |
| Within one year                        |   | $                  | -          |   |   | $ | - |   |
| After one year, but within five years  |   |               | 5,504,000  |   |   |   | 5,528,000 |   |
| After five years, but within ten years |   |               | 8,337,000  |   |   |   | 8,561,000 |   |
| After ten years                        |   |               | 16,935,000 |   |   |   | 17,072,000 |   |
| Mortgage-backed securities             |   |               | 54,458,000 |   |   |   | 56,207,000 |   |
| Total                                  |   | $                  | 85,234,000 |   |   | $ | 87,368,000 |   |
|                                   |   |               |       |   |   |   |   |   |
| Held to maturity                       |   |               |       |   |   |   |   |   |
| Within one year                        |   | $                  | 1,020,000  |   |   | $ | 1,029,000 |   |
| After one year, but within five years  |   |               | 10,665,000 |   |   |   | 10,937,000 |   |
| After five years, but within ten years |   |               | 27,267,000 |   |   |   | 27,757,000 |   |
| After ten years                        |   |               | 13,814,000 |   |   |   | 14,071,000 |   |
| Mortgage-backed securities             |   |               | 22,466,000 |   |   |   | 23,229,000 |   |
| Total                                  |   | $                  | 75,232,000 |   |   | $ | 77,023,000 |   |

----

Index

| Available for Sale                                                              |   |                |      |   |                |   |    |   |   |
|---------------------------------------------------------------------------------|--------|---------------------|-----------|--------|---------------------|--------|---------|--------|--------|
| September 30, 2009                                                              |   | Less than 12 Months |      |   | 12 Months or Longer |   |    | Total  |   |
|                                                                            |   | Fair                |      |   | Unrecognized        |   |    | Fair   |   |   | Unrecognized |   |   | Fair |   |   | Unrecognized |   |
|                                                                            |   | Value               |      |   | Holding Losses      |   |    | Value  |   |   | Holding Losses |   |   | Value |   |   | Holding Losses |   |
|                                                                            |   |                |      |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                                                                |   |                |      |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |
|   sponsored agencies                                                  |   | $                   | 4,486,000 |   |                | $      | (14,000 | )      |   | $ | 1,987,000 |   |   | $ | (13,000 | ) |   | $ | 6,473,000 |   |   | $ | (27,000 | ) |
| Obligations of state and                                                        |   |                |      |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   political subdivisions                                              |   |                | -         |   |                |   | -       |   |   |   | 450,000 |   |   |   | - |   |   |   | 450,000 |   |   |   | - |   |
| Mortgage-backed                                                                 |   |                |      |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   securities                                                          |   |                | 966,000   |   |                |   | (9,000  | )      |   |   | - |   |   |   | - |   |   |   | 966,000 |   |   |   | (9,000 | ) |
| Other equity investments                                                        |   |                | 31,000    |   |                |   | (4,000  | )      |   |   | 31,000 |   |   |   | (9,000 | ) |   |   | 62,000 |   |   |   | (13,000 | ) |
|      Total temporarily                                 |   |                |      |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           impaired securities |   | $                   | 5,483,000 |   |                | $      | (27,000 | )      |   | $ | 2,468,000 |   |   | $ | (22,000 | ) |   | $ | 7,951,000 |   |   | $ | (49,000 | ) |

| December 31, 2008                                                               |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total  |   |
|---------------------------------------------------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|--------|--------|
|                                                                            |   | Fair                |       |   | Unrecognized        |   |     | Fair   |   |   | Unrecognized |   |   | Fair |   |   | Unrecognized |   |
|                                                                            |   | Value               |       |   | Holding Losses      |   |     | Value  |   |   | Holding Losses |   |   | Value |   |   | Holding Losses |   |
|                                                                            |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                                                                |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |
|   sponsored agencies                                                  |   | $                   | 7,464,000  |   |                | $      | (30,000  | )      |   | $ | - |   |   | $ | - |   |   | $ | 7,464,000 |   |   | $ | (30,000 | ) |
| Obligations of state and                                                        |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   political subdivisions                                              |   |                | 4,709,000  |   |                |   | (190,000 | )      |   |   | - |   |   |   | - |   |   |   | 4,709,000 |   |   |   | (190,000 | ) |
| Mortgage-backed                                                                 |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   securities                                                          |   |                | 1,651,000  |   |                |   | (8,000   | )      |   |   | 438,000 |   |   |   | (7,000 | ) |   |   | 2,089,000 |   |   |   | (15,000 | ) |
| Other equity investments                                                        |   |                | 40,000     |   |                |   | (4,000   | )      |   |   | 2,742,000 |   |   |   | (31,000 | ) |   |   | 2,782,000 |   |   |   | (35,000 | ) |
|      Total temporarily                                 |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           impaired securities |   | $                   | 13,864,000 |   |                | $      | (232,000 | )      |   | $ | 3,180,000 |   |   | $ | (38,000 | ) |   | $ | 17,044,000 |   |   | $ | (270,000 | ) |

| Held to Maturity                                                                |   |                |       |   |                |   |     |   |   |
|---------------------------------------------------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|--------|--------|
| September 30, 2009                                                              |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total  |   |
|                                                                            |   | Fair                |       |   | Unrecognized        |   |     | Fair   |   |   | Unrecognized |   |   | Fair |   |   | Unrecognized |   |
|                                                                            |   | Value               |       |   | Holding Losses      |   |     | Value  |   |   | Holding Losses |   |   | Value |   |   | Holding Losses |   |
|                                                                            |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                                                                |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |
|   sponsored agencies                                                  |   | $                   | 10,510,000 |   |                | $      | (189,000 | )      |   | $ | - |   |   | $ | - |   |   | $ | 10,510,000 |   |   | $ | (189,000 | ) |
| Obligations of state and                                                        |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   political subdivisions                                              |   |                | 1,590,000  |   |                |   | (33,000  | )      |   |   | 408,000 |   |   |   | (9,000 | ) |   |   | 1,998,000 |   |   |   | (42,000 | ) |
| Mortgage-backed                                                                 |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   securities                                                          |   |                | 1,987,000  |   |                |   | (8,000   | )      |   |   | 6,000 |   |   |   | - |   |   |   | 1,993,000 |   |   |   | (8,000 | ) |
|      Total temporarily                                 |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           impaired securities |   | $                   | 14,087,000 |   |                | $      | (230,000 | )      |   | $ | 414,000 |   |   | $ | (9,000 | ) |   | $ | 14,501,000 |   |   | $ | (239,000 | ) |

| December 31, 2008                                                               |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total  |   |
|---------------------------------------------------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|--------|--------|
|                                                                            |   | Fair                |       |   | Unrecognized        |   |     | Fair   |   |   | Unrecognized |   |   | Fair |   |   | Unrecognized |   |
|                                                                            |   | Value               |       |   | Holding Losses      |   |     | Value  |   |   | Holding Losses |   |   | Value |   |   | Holding Losses |   |
|                                                                            |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                                                                |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |
|   sponsored agencies                                                  |   | $                   | -          |   |                | $      | -        |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of state and                                                        |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   political subdivisions                                              |   |                | 13,440,000 |   |                |   | (301,000 | )      |   |   | - |   |   |   | - |   |   |   | 13,440,000 |   |   |   | (301,000 | ) |
| Mortgage-backed                                                                 |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   securities                                                          |   |                | 2,715,000  |   |                |   | (3,000   | )      |   |   | - |   |   |   | - |   |   |   | 2,715,000 |   |   |   | (3,000 | ) |
|      Total temporarily                                 |   |                |       |   |                |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           impaired securities |   | $                   | 16,155,000 |   |                | $      | (304,000 | )      |   | $ | - |   |   | $ | - |   |   | $ | 16,155,000 |   |   | $ | (304,000 | ) |

----

Index

|                                                                             |   | September 30, |        |   | December 31, |   |
|----------------------------------------------------------------------------------|--------|---------------|-------------|--------|--------------|--------|
|                                                                             |   | 2009          |        |   | 2008         |   |
|                                                                             |   |          |        |   |         |   |
| Mortgage                                                                         |   |          |        |   |         |   |
|             Residential   |   | $             | 38,220,000  |   |         | $      | 40,337,000 |   |
|             Commercial    |   |          | 241,358,000 |   |         |   | 226,183,000 |   |
| Commercial                                                                       |   |          | 105,424,000 |   |         |   | 100,282,000 |   |
| Home Equity                                                                      |   |          | 22,529,000  |   |         |   | 21,208,000 |   |
| Installment                                                                      |   |          | 43,449,000  |   |         |   | 51,290,000 |   |
| Other                                                                            |   |          | 262,000     |   |         |   | 356,000 |   |
|             Total loans   |   |          | 451,242,000 |   |         |   | 439,656,000 |   |
|                                                                             |   |          |        |   |         |   |   |   |
| Less:Deferred loan fees                                                          |   |          | 441,000     |   |         |   | 387,000 |   |
|           Allowance for loan losses |   |          | 7,249,000   |   |         |   | 5,166,000 |   |
|                                                                             |   |          | 7,690,000   |   |         |   | 5,553,000 |   |
|                                                                             |   |          |        |   |         |   |   |   |
|           Loans, net                |   | $             | 443,552,000 |   |         | $      | 434,103,000 |   |

----

Index

|                            |   | Nine Months Ended September 30, |      |
|---------------------------------|--------|---------------------------------|-----------|
|                            |   | 2009                            |      |   | 2008 |   |
|                            |   |                            |      |   |   |   |
| Balance, beginning of period    |   | $                               | 5,166,000 |   |   | $ | 4,457,000 |   |
| Provision charged to operations |   |                            | 2,375,000 |   |   |   | 1,535,000 |   |
| Recoveries of loans charged off |   |                            | 97,000    |   |   |   | 21,000 |   |
| Loans charged off               |   |                            | (389,000  | ) |   |   | (83,000 | ) |
|                            |   |                            |      |   |   |   |   |   |
| Balance, end of period          |   | $                               | 7,249,000 |   |   | $ | 5,930,000 |   |

|                                                              |   | September 30, |       |   | December 31, |   |
|-------------------------------------------------------------------|--------|---------------|------------|--------|--------------|--------|
|                                                              |   | 2009          |       |   | 2008         |   |
|                                                              |   |          |       |   |         |   |
| Impaired loans                                                    |   |          |       |   |         |   |
|     With related allowance for loan losses    |   | $             | 11,378,000 |   |         | $      | 2,762,000 |   |
|     Without related allowance for loan losses |   |          | 3,158,000  |   |         |   | 1,468,000 |   |
| Total impaired loans                                              |   | $             | 14,536,000 |   |         | $      | 4,230,000 |   |
|                                                              |   |          |       |   |         |   |   |   |
| Related allowance for loan losses                                 |   | $             | 2,436,000  |   |         | $      | 481,000 |   |

| Notional amount | $ 7,000,000              |
|-----------------|--------------------------|
| Pay rate        | 7.00%                    |
| Receive rate    | 3 month LIBOR plus 2.95% |
| Maturity        | March 17, 2016           |
| Unrealized loss | $356,000                 |

----

Index

|                                           |   | Fair Value of Derivative Instruments |   |
|------------------------------------------------|--------|--------------------------------------|--------|
|                                           |   |                                 |   |   |   |   |
|                                           |   | Liability Derivatives                |   |
|                                           |   | Balance                              |   |   |   |   |
|                                           |   | Sheet                                |   |   | Fair |   |
|                                           |   | Location                             |   |   | Value |   |
|                                           |   |                                 |   |   |   |   |
| Derivatives designated as hedging instruments: |   |                                 |   |   |   |   |
| Cash flow hedge                                |   | Other Liabilities                    |   |   | $ | 356,000 |   |
|                                           |   |                                 |   |   |   |   |   |   |

| The Effect of Derivative Instruments on the Consolidated Income Statement |   |
|---------------------------------------------------------------------------|--------|
| for the nine months ended September 30, 2009                              |   |
|                                                                      |   |   |   |
|                                                                      |   | Amount of Loss, |   |
|                                                                      |   | net of taxes, |   |
|                                                                      |   | Recognized in OCI |   |
|                                                                      |   | on Derivative |   |
| Cash Flow Hedging Relationship                                            |   | (Effective Portion) |   |
|                                                                      |   |   |   |
| Cash flow hedge                                                           |   | $ | 214,000 |   |
|                                                                      |   |   |   |   |

----

Index

|                          |   | Fair Value Measurements Using: |       |
|-------------------------------|--------|--------------------------------|------------|
|                          |   |                           |       |   | Quoted Prices in |   |   | Significant |   |   |   |   |
|                          |   |                           |       |   | Active Markets |   |   | Other |   |   | Significant |   |
|                          |   |                           |       |   | for Identical |   |   | Observable |   |   | Unobservable |   |
|                          |   | Carrying                       |       |   | Assets |   |   | Inputs |   |   | Inputs |   |
|                          |   | Value                          |       |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                          |   | At September 30, 2009          |       |
| Assets:                       |   |                           |       |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |       |   |   |   |   |   |   |   |   |   |
| U.S. government -             |   |                           |       |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   | $                              | 25,700,000 |   |   | $ | - |   |   | $ | 25,700,000 |   |   | $ | - |   |
| Obligations of state and      |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 5,461,000  |   |   |   | - |   |   |   | 5,461,000 |   |   |   | - |   |
| Mortgage-backed securities    |   |                           | 56,207,000 |   |   |   | - |   |   |   | 56,207,000 |   |   |   | - |   |
| Other equity investments      |   |                           | 3,092,000  |   |   |   | - |   |   |   | 3,092,000 |   |   |   | - |   |
| Total available for           |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   sale securities   |   | $                              | 90,460,000 |   |   | $ | - |   |   | $ | 90,460,000 |   |   | $ | - |   |
|                          |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                  |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                              | 356,000    |   |   | $ | - |   |   | $ | 356,000 |   |   | $ | - |   |
|                          |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |   | At December 31, 2008           |       |
| Assets:                       |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government -             |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   | $                              | 49,660,000 |   |   | $ | - |   |   | $ | 49,660,000 |   |   | $ | - |   |
| Obligations of state and      |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 5,820,000  |   |   |   | - |   |   |   | 5,820,000 |   |   |   | - |   |
| Mortgage-backed securities    |   |                           | 31,670,000 |   |   |   | - |   |   |   | 31,670,000 |   |   |   | - |   |
| Other equity investments      |   |                           | 2,873,000  |   |   |   | - |   |   |   | 2,873,000 |   |   |   | - |   |
| Total available for           |   |                           |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   sale securities   |   | $                              | 90,023,000 |   |   | $ | - |   |   | $ | 90,023,000 |   |   | $ | - |   |

|           |   |                  |      |   | Fair Value Measurements Using:                              |   |
|----------------|--------|-----------------------|-----------|--------|-------------------------------------------------------------|--------|
|           |   | CarryingValue         |      |   | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |
|           |   | At September 30, 2009 |      |
| Assets:        |   |                  |      |   |                                                        |   |   |   |   |   |   |   |
| Impaired loans |   | $                     | 8,942,000 |   |                                                        | $      | - |   |   | $ | - |   |   | $ | 8,942,000 |   |
|           |   |                  |      |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |
|           |   | At December 31, 2008  |      |
| Assets:        |   |                  |      |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans |   | $                     | 2,281,000 |   |                                                        | $      | - |   |   | $ | - |   |   | $ | 2,281,000 |   |

----

Index

|                                                           |   | September 30, 2009     |    |   | December 31, 2008 |   |
|----------------------------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                                           |   | Carrying               |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
|                                                           |   | Amount                 |    |   | Fair Value        |   |   | Amount |   |   | Fair Value |   |
|                                                           |   | (Dollars in thousands) |    |
| Financial assets:                                              |   |                   |    |   |              |   |   |   |   |   |   |   |
|      Cash and cash equivalents        |   | $                      | 13,646  |   |              | $      | 13,646 |   |   | $ | 12,814 |   |   | $ | 12,814 |   |
|      Securities held to maturity      |   |                   | 75,232  |   |              |   | 77,023 |   |   |   | 48,856 |   |   |   | 49,150 |   |
|      FHLB-NY stock                    |   |                   | 3,195   |   |              |   | N/A |   |   |   | 2,420 |   |   |   | N/A |   |
|      Net loans                        |   |                   | 443,552 |   |              |   | 444,827 |   |   |   | 434,103 |   |   |   | 436,193 |   |
|      Accrued interest receivable      |   |                   | 3,142   |   |              |   | 3,142 |   |   |   | 3,371 |   |   |   | 3,371 |   |
|                                                           |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                         |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
|      Deposits                         |   |                   | 514,612 |   |              |   | 516,273 |   |   |   | 506,531 |   |   |   | 508,325 |   |
|      Securities sold under agreements |   |                   |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
|         to repurchase  |   |                   | 16,019  |   |              |   | 16,019 |   |   |   | 15,160 |   |   |   | 15,160 |   |
|      Other borrowings                 |   |                   | 53,900  |   |              |   | 51,680 |   |   |   | 36,900 |   |   |   | 34,973 |   |
|      Subordinated debenture           |   |                   | 7,217   |   |              |   | 5,259 |   |   |   | 7,217 |   |   |   | 7,399 |   |
|      Accrued interest payable         |   |                   | 1,494   |   |              |   | 1,494 |   |   |   | 1,582 |   |   |   | 1,582 |   |
|      Interest rate swap               |   |                   | -       |   |              |   | 356 |   |   |   | - |   |   |   | - |   |

----

Index

|                                        |   | Three Months Ended                    |   |   | Nine Months Ended |   |
|---------------------------------------------|--------|---------------------------------------|--------|--------|-------------------|--------|
|                                        |   | September 30,                         |   |   | September 30,     |   |
|                                        |   | 2009                                  |   |   | 2008              |   |   | 2009 |   |   | 2008 |   |
|                                        |   | (in thousands, except per share data) |   |
|                                        |   |                                  |   |   |              |   |   |   |   |   |   |   |
| Net income                                  |   | $                                     | 893    |   |              | $      | 838 |   |   | $ | 2,860 |   |   | $ | 3,078 |   |
| Dividends on preferred stock and accretion  |   |                                  | 138    |   |              |   | - |   |   |   | 367 |   |   |   | - |   |
| Net income available to common stockholders |   | $                                     | 755    |   |              | $      | 838 |   |   | $ | 2,493 |   |   | $ | 3,078 |   |
|                                        |   |                                  |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares                     |   |                                  | 5,834  |   |              |   | 5,853 |   |   |   | 5,831 |   |   |   | 5,856 |   |
| Effect of dilutive stock options            |   |                                  | 4      |   |              |   | 10 |   |   |   | 5 |   |   |   | 12 |   |
| Total weighted average dilutive shares      |   |                                  | 5,838  |   |              |   | 5,863 |   |   |   | 5,836 |   |   |   | 5,869 |   |
|                                        |   |                                  |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per common share             |   | $                                     | 0.13   |   |              | $      | 0.14 |   |   | $ | 0.43 |   |   | $ | 0.53 |   |
|                                        |   |                                  |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per common share           |   | $                                     | 0.13   |   |              | $      | 0.14 |   |   | $ | 0.43 |   |   | $ | 0.52 |   |

----

Index

----

Index

e

----

Index

----

Index

| Analysis of Net Interest Income (Unaudited)       |   |
|---------------------------------------------------|--------|
| For the Three Months Ended September 30,          |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   | 2009 |   |   | 2008 |   |
|                                              |   |   |   |   |   |   |   | Average |   |   |   |   |   |   |   |   | Average |   |
|                                              |   |   |   |   | Interest |   |   | Rates |   |   |   |   |   | Interest |   |   | Rates |   |
|                                              |   | Average |   |   | Income/ |   |   | Earned/ |   |   | Average |   |   | Income/ |   |   | Earned/ |   |
|                                              |   | Balance |   |   | Expense |   |   | Paid |   |   | Balance |   |   | Expense |   |   | Paid |   |
|                                              |   | (Dollars in thousands) |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1) (2)                                     |   | $ | 451,396 |   |   | $ | 6,842 |   |   |   | 6.01 | % |   | $ | 447,028 |   |   | $ | 7,229 |   |   |   | 6.43 | % |
| Taxable investment securities (1)                 |   |   | 136,875 |   |   |   | 1,507 |   |   |   | 4.37 |   |   |   | 106,452 |   |   |   | 1,411 |   |   |   | 5.27 |   |
| Tax-exempt investment securities (1) (2)          |   |   | 30,295 |   |   |   | 398 |   |   |   | 5.21 |   |   |   | 28,737 |   |   |   | 383 |   |   |   | 5.33 |   |
| Other interest-earning assets                     |   |   | 124 |   |   |   | 2 |   |   |   | 6.40 |   |   |   | 2,998 |   |   |   | 20 |   |   |   | 2.65 |   |
| Total interest-earning assets                     |   |   | 618,690 |   |   |   | 8,749 |   |   |   | 5.61 |   |   |   | 585,215 |   |   |   | 9,043 |   |   |   | 6.15 |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                         |   |   | (6,734 | ) |   |   |   |   |   |   |   |   |   |   | (4,832 | ) |   |   |   |   |   |   |   |   |
| Other assets                                      |   |   | 33,393 |   |   |   |   |   |   |   |   |   |   |   | 34,959 |   |   |   |   |   |   |   |   |   |
| Total assets                                      |   | $ | 645,349 |   |   |   |   |   |   |   |   |   |   | $ | 615,342 |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                  |   | $ | 198,585 |   |   | $ | 678 |   |   |   | 1.35 | % |   | $ | 169,545 |   |   | $ | 636 |   |   |   | 1.49 | % |
| Savings deposits                                  |   |   | 42,489 |   |   |   | 46 |   |   |   | 0.43 |   |   |   | 38,158 |   |   |   | 57 |   |   |   | 0.59 |   |
| Time deposits                                     |   |   | 183,118 |   |   |   | 1,407 |   |   |   | 3.05 |   |   |   | 187,083 |   |   |   | 1,841 |   |   |   | 3.91 |   |
| Repurchase agreements                             |   |   | 15,509 |   |   |   | 189 |   |   |   | 4.83 |   |   |   | 16,241 |   |   |   | 135 |   |   |   | 3.31 |   |
| FHLB borrowing                                    |   |   | 42,458 |   |   |   | 249 |   |   |   | 2.33 |   |   |   | 52,590 |   |   |   | 314 |   |   |   | 2.38 |   |
| Subordinated debenture                            |   |   | 7,217 |   |   |   | 65 |   |   |   | 3.57 |   |   |   | 7,217 |   |   |   | 117 |   |   |   | 6.45 |   |
| Total interest-bearing liabilities                |   |   | 489,376 |   |   |   | 2,634 |   |   |   | 2.14 |   |   |   | 470,834 |   |   |   | 3,100 |   |   |   | 2.62 |   |
| Non-interest-bearing liabilities:                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                   |   |   | 96,008 |   |   |   |   |   |   |   |   |   |   |   | 98,358 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                 |   |   | 6,400 |   |   |   |   |   |   |   |   |   |   |   | 4,147 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                              |   |   | 53,565 |   |   |   |   |   |   |   |   |   |   |   | 42,003 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity        |   | $ | 645,349 |   |   |   |   |   |   |   |   |   |   | $ | 615,342 |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis)    |   |   |   |   |   |   | 6,115 |   |   |   |   |   |   |   |   |   |   |   | 5,943 |   |   |   |   |   |
| Tax Equivalent adjustment                         |   |   |   |   |   |   | (139 | ) |   |   |   |   |   |   |   |   |   |   | (133 | ) |   |   |   |   |
| Net interest income                               |   |   |   |   |   | $ | 5,976 |   |   |   |   |   |   |   |   |   |   | $ | 5,810 |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis)    |   |   |   |   |   |   |   |   |   |   | 3.47 | % |   |   |   |   |   |   |   |   |   |   | 3.53 | % |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets (taxable equivalent basis) (3) |   |   |   |   |   |   |   |   |   |   | 3.92 | % |   |   |   |   |   |   |   |   |   |   | 4.04 | % |

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

----

Index

| Analysis of Net Interest Income (Unaudited)       |   |
|---------------------------------------------------|--------|
| For the Nine Months Ended September 30,           |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   | 2009 |   |   | 2008 |   |
|                                              |   |   |   |   |   |   |   | Average |   |   |   |   |   |   |   |   | Average |   |
|                                              |   |   |   |   | Interest |   |   | Rates |   |   |   |   |   | Interest |   |   | Rates |   |
|                                              |   | Average |   |   | Income/ |   |   | Earned/ |   |   | Average |   |   | Income/ |   |   | Earned/ |   |
|                                              |   | Balance |   |   | Expense |   |   | Paid |   |   | Balance |   |   | Expense |   |   | Paid |   |
|                                              |   | (Dollars in thousands) |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1) (2)                                     |   | $ | 442,385 |   |   | $ | 20,133 |   |   |   | 6.08 | % |   | $ | 435,554 |   |   | $ | 21,513 |   |   |   | 6.60 | % |
| Taxable investment securities (1)                 |   |   | 139,284 |   |   |   | 4,715 |   |   |   | 4.52 |   |   |   | 101,304 |   |   |   | 3,990 |   |   |   | 5.26 |   |
| Tax-exempt investment securities (1) (2)          |   |   | 29,589 |   |   |   | 1,184 |   |   |   | 5.35 |   |   |   | 27,353 |   |   |   | 1,091 |   |   |   | 5.32 |   |
| Other interest-earning assets                     |   |   | 101 |   |   |   | 7 |   |   |   | 9.27 |   |   |   | 3,307 |   |   |   | 62 |   |   |   | 2.50 |   |
| Total interest-earning assets                     |   |   | 611,359 |   |   |   | 26,039 |   |   |   | 5.69 |   |   |   | 567,518 |   |   |   | 26,656 |   |   |   | 6.27 |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                         |   |   | (5,783 | ) |   |   |   |   |   |   |   |   |   |   | (4,649 | ) |   |   |   |   |   |   |   |   |
| Other assets                                      |   |   | 34,050 |   |   |   |   |   |   |   |   |   |   |   | 34,397 |   |   |   |   |   |   |   |   |   |
| Total assets                                      |   | $ | 639,626 |   |   |   |   |   |   |   |   |   |   | $ | 597,266 |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                  |   | $ | 183,059 |   |   | $ | 1,775 |   |   |   | 1.30 | % |   | $ | 163,435 |   |   | $ | 2,102 |   |   |   | 1.72 | % |
| Savings deposits                                  |   |   | 41,799 |   |   |   | 159 |   |   |   | 0.51 |   |   |   | 38,394 |   |   |   | 180 |   |   |   | 0.63 |   |
| Time deposits                                     |   |   | 196,462 |   |   |   | 4,772 |   |   |   | 3.25 |   |   |   | 181,398 |   |   |   | 5,773 |   |   |   | 4.25 |   |
| Repurchase agreements                             |   |   | 15,279 |   |   |   | 567 |   |   |   | 4.96 |   |   |   | 16,391 |   |   |   | 414 |   |   |   | 3.37 |   |
| FHLB borrowing                                    |   |   | 46,014 |   |   |   | 733 |   |   |   | 2.13 |   |   |   | 46,217 |   |   |   | 917 |   |   |   | 2.65 |   |
| Subordinated debenture                            |   |   | 7,217 |   |   |   | 225 |   |   |   | 4.17 |   |   |   | 7,217 |   |   |   | 363 |   |   |   | 6.72 |   |
| Total interest-bearing liabilities                |   |   | 489,830 |   |   |   | 8,231 |   |   |   | 2.25 |   |   |   | 453,052 |   |   |   | 9,749 |   |   |   | 2.87 |   |
| Non-interest-bearing liabilities:                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                   |   |   | 92,556 |   |   |   |   |   |   |   |   |   |   |   | 97,704 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                 |   |   | 4,892 |   |   |   |   |   |   |   |   |   |   |   | 4,600 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                              |   |   | 52,348 |   |   |   |   |   |   |   |   |   |   |   | 41,910 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity        |   | $ | 639,626 |   |   |   |   |   |   |   |   |   |   | $ | 597,266 |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis)    |   |   |   |   |   |   | 17,808 |   |   |   |   |   |   |   |   |   |   |   | 16,907 |   |   |   |   |   |
| Tax Equivalent adjustment                         |   |   |   |   |   |   | (414 | ) |   |   |   |   |   |   |   |   |   |   | (379 | ) |   |   |   |   |
| Net interest income                               |   |   |   |   |   | $ | 17,394 |   |   |   |   |   |   |   |   |   |   | $ | 16,528 |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis)    |   |   |   |   |   |   |   |   |   |   | 3.44 | % |   |   |   |   |   |   |   |   |   |   | 3.40 | % |
|                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   assets (taxable equivalent basis) (3) |   |   |   |   |   |   |   |   |   |   | 3.89 | % |   |   |   |   |   |   |   |   |   |   | 3.98 | % |

|      (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

|                                            |   | September 30, |   |   | June 30, |   |   | March 31, |   |   | December 31, |   |
|-------------------------------------------------|--------|---------------|--------|--------|----------|--------|--------|-----------|--------|--------|--------------|--------|
|                                            |   | 2009          |   |   | 2009     |   |   | 2009      |   |   | 2008         |   |
|                                            |   |          |   |   |     |   |   |      |   |   |         |   |
| Nonaccrual loans (1)                            |   | $             | 14,536 |   |     | $      | 11,533 |      |   | $      | 6,592        |   |   | $ | 4,230 |   |
| Loans past due 90 days or more and accruing (2) |   |          | 728    |   |     |   | -      |      |   |   | 414          |   |   |   | 353 |   |
| Total nonperforming loans                       |   |          | 15,264 |   |     |   | 11,533 |      |   |   | 7,006        |   |   |   | 4,583 |   |
|                                            |   |          |   |   |     |   |   |      |   |   |         |   |   |   |   |   |
| Restructured loans                              |   |          | 2,417  |   |     |   | 2,460  |      |   |   | 2,375        |   |   |   | 1,855 |   |
|                                            |   |          |   |   |     |   |   |      |   |   |         |   |   |   |   |   |
| Total nonperforming loans                       |   | $             | 17,681 |   |     | $      | 13,993 |      |   | $      | 9,381        |   |   | $ | 6,438 |   |
|                                            |   |          |   |   |     |   |   |      |   |   |         |   |   |   |   |   |
| Allowance for loan losses                       |   | $             | 7,249  |   |     | $      | 6,342  |      |   | $      | 5,324        |   |   | $ | 5,166 |   |
|                                            |   |          |   |   |     |   |   |      |   |   |         |   |   |   |   |   |
| Nonperforming loans to total loans              |   |          | 3.92   | %      |     |   | 3.18   | %         |   |   | 2.15         | %      |   |   | 1.46 | % |
| Nonperforming loans to total assets             |   |          | 2.72   | %      |     |   | 2.19   | %         |   |   | 1.45         | %      |   |   | 1.05 | % |
| Allowance for loan losses to total loans        |   |          | 1.61   | %      |     |   | 1.44   | %         |   |   | 1.22         | %      |   |   | 1.18 | % |
| Allowance for loan losses to                    |   |          |   |   |     |   |   |      |   |   |         |   |   |   |   |   |
| nonperforming loans                             |   |          | 41.00  | %      |     |   | 45.32  | %         |   |   | 56.75        | %      |   |   | 80.24 | % |

----

Index

----

Index

|               | Required | Actual | Excess |
|--------------------|----------|--------|--------|
|               |     |   |   |
| Leverage Ratio     | 4.00%    | 9.29%  | 5.29%  |
| Risk-based Capital |     |   |   |
| Tier 1             | 4.00%    | 12.23% | 8.23%  |
| Total              | 8.00%    | 13.48% | 5.48%  |

----

Index

M

M

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

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

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

----

Index

r

m

----

Index

A

|                                     | Stewardship Financial Corporation |
|------------------------------------------|-----------------------------------|
|                                     |                              |   |
|                                     |                              |   |
| Date:   November 13, 2009 | By:                               | /s/ Paul Van Ostenbridge |
|                                     |                              | Paul Van Ostenbridge |
|                                     |                              | President and Chief Executive Officer |
|                                     |                              | (Principal Executive Officer) |
|                                     |                              |   |
|                                     |                              |   |
|                                     |                              |   |
|                                     |                              |   |
| Date:   November 13, 2009 | By:                               | /s/ Claire M. Chadwick |
|                                     |                              | Claire M. Chadwick |
|                                     |                              | Senior Vice President and Chief Financial Officer |
|                                     |                              | (Principal Financial and Accounting Officer) |
|                                     |                              |   |

----

Index

B

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