----

----

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

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

| Commission file number 0-21855                                                     |
|------------------------------------------------------------------------------------|
|                                                                               |   |
| Stewardship Financial Corporation                                                  |
| (Exact name of registrant as specified in its charter)                             |
|                                                                               |
| New Jersey                                                                         | 22-3351447 |
| (State or other jurisdiction of incorporation or organization)                     | (I.R.S. Employer Identification No.) |
|                                                                               |   |
| 630 Godwin Avenue, Midland Park,  NJ                                     | 07432 |
| (Address of principal executive offices)                                           | (Zip Code) |
|                                                                               |   |
| (201)  444-7100                                                          |
| (Registrant’s telephone number, including area code)                         |
|                                                                               |   |
|                                                                               |
| (Former name, former address and former fiscal year, if changed since last report) |

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

----

----

----

Stewardship 

|                                                                               |   | PAGE    |
|------------------------------------------------------------------------------------|--------|---------|
|                                                                               |   | NUMBER  |
| PART I  -  CONSOLIDATED FINANCIAL INFORMATION                  |   |    |
|                                                                               |   |    |
| ITEM 1  -   CONSOLIDATED FINANCIAL STATEMENTS             |   |    |
|                                                                               |   |    |
| Consolidated Statements of Financial Condition                                     |   |    |
| at September 30, 2010 and December 31, 2009 (Unaudited)                            |   | 1       |
|                                                                               |   |    |
| Consolidated Statements of Income for the Three and                                |   |    |
| Nine Months ended September 30, 2010 and 2009 (Unaudited)                          |   | 2       |
|                                                                               |   |    |
| Consolidated Statement of Changes in Stockholders’ Equity for                |   |    |
| the Nine Months ended September 30, 2010 and 2009 (Unaudited)                      |   | 3       |
|                                                                               |   |    |
| Consolidated Statements of Comprehensive Income for the Three                      |   |    |
| and Nine Months ended September 30, 2010 and 2009 (Unaudited)                      |   | 4       |
|                                                                               |   |    |
| Consolidated Statements of Cash Flows for the Nine                                 |   |    |
| Months ended September 30, 2010 and 2009 (Unaudited)                               |   | 5 - 6   |
|                                                                               |   |    |
| Notes to Consolidated Financial Statements (Unaudited)                             |   | 7 - 18  |
|                                                                               |   |    |
| ITEM 2  -   MANAGEMENT’S DISCUSSION AND ANALYSIS OF |   |    |
| FINANCIAL CONDITION AND RESULTS OF                                                 |   |    |
| OPERATIONS                                                                         |   | 19 - 27 |
|                                                                               |   |    |
| ITEM 3 -    QUANTITATIVE AND QUALITATIVE DISCLOSURES                |   |    |
| ABOUT MARKET RISK                                                                  |   | 28      |
|                                                                               |   |    |
| ITEM 4T -   CONTROLS AND PROCEDURES                                      |   | 28      |
|                                                                               |   |    |
| PART II  - OTHER INFORMATION                                        |   |    |
|                                                                               |   |    |
| ITEM 6 -     EXHIBITS                                          |   | 29      |
|                                                                               |   |    |
| SIGNATURES                                                                         |   | 30      |
|                                                                               |   |    |
| EXHIBIT INDEX                                                                      |   | 31      |

----

Index

Stewardship 

|                                                                               |   | September 30, 2010 |        |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
| Assets                                                                             |   |               |        |   |              |   |
|                                                                               |   |               |        |   |              |   |
| Cash and due from banks                                                            |   | $                  | 22,068,000  |   |              | $      | 8,840,000 |   |
| Other interest-earning assets                                                      |   |               | 90,000      |   |              |   | 31,000 |   |
| Federal funds sold                                                                 |   |               | 3,000,000   |   |              |   | - |   |
| Cash and cash equivalents                                                          |   |               | 25,158,000  |   |              |   | 8,871,000 |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Securities available for sale                                                      |   |               | 127,348,000 |   |              |   | 103,026,000 |   |
| Securities held to maturity; estimated fair value of $50,265,000 (2010) and        |   |               |        |   |              |   |   |   |
| $68,765,000 (2009)                                                                 |   |               | 47,434,000  |   |              |   | 67,717,000 |   |
| FHLB-NY stock, at cost                                                             |   |               | 2,497,000   |   |              |   | 3,227,000 |   |
| Loans, net of allowance for loan losses of $9,327,000 (2010) and $6,920,000 (2009) |   |               | 440,890,000 |   |              |   | 453,119,000 |   |
| Mortgage loans held for sale                                                       |   |               | 9,326,000   |   |              |   | 660,000 |   |
| Premises and equipment, net                                                        |   |               | 6,477,000   |   |              |   | 6,861,000 |   |
| Accrued interest receivable                                                        |   |               | 2,674,000   |   |              |   | 3,167,000 |   |
| Other real estate owned                                                            |   |               | 356,000     |   |              |   | - |   |
| Bank owned life insurance                                                          |   |               | 9,737,000   |   |              |   | 9,488,000 |   |
| Other assets                                                                       |   |               | 8,165,000   |   |              |   | 7,708,000 |   |
| Total assets                                                                       |   | $                  | 680,062,000 |   |              | $      | 663,844,000 |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Liabilities and stockholders' equity                                               |   |               |        |   |              |   |   |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Liabilities                                                                        |   |               |        |   |              |   |   |   |
| Deposits:                                                                          |   |               |        |   |              |   |   |   |
| Noninterest-bearing                                                                |   | $                  | 102,820,000 |   |              | $      | 88,427,000 |   |
| Interest-bearing                                                                   |   |               | 463,025,000 |   |              |   | 441,503,000 |   |
| Total deposits                                                                     |   |               | 565,845,000 |   |              |   | 529,930,000 |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Federal Home Loan Bank of New York Advances                                        |   |               | 36,000,000  |   |              |   | 54,600,000 |   |
| Subordinated debentures                                                            |   |               | 7,217,000   |   |              |   | 7,217,000 |   |
| Securities sold under agreements to repurchase                                     |   |               | 15,241,000  |   |              |   | 15,396,000 |   |
| Accrued interest payable                                                           |   |               | 918,000     |   |              |   | 1,193,000 |   |
| Accrued expenses and other liabilities                                             |   |               | 1,992,000   |   |              |   | 1,997,000 |   |
| Total liabilities                                                                  |   |               | 627,213,000 |   |              |   | 610,333,000 |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Commitments and contingencies                                                      |   |               | -           |   |              |   | - |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Stockholders' equity                                                               |   |               |        |   |              |   |   |   |
| Preferred stock, no par value; 2,500,000 shares authorized; 10,000 shares          |   |               |        |   |              |   |   |   |
| issued and outstanding at September 30, 2010 and December 31, 2009.                |   |               |        |   |              |   |   |   |
| Liquidation preference of $10,000,000                                              |   |               | 9,781,000   |   |              |   | 9,736,000 |   |
| Common stock, no par value; 10,000,000 shares authorized;                          |   |               |        |   |              |   |   |   |
| 5,846,928 and 5,834,515 shares issued: 5,845,905 and 5,834,515 shares              |   |               |        |   |              |   |   |   |
| outstanding at September 30, 2010 and December 31, 2009, respectively              |   |               | 40,509,000  |   |              |   | 40,415,000 |   |
| Treasury stock, 1,023 shares outstanding at September 30, 2010                     |   |               | (14,000     | )      |              |   | - |   |
| Retained earnings                                                                  |   |               | 1,305,000   |   |              |   | 2,922,000 |   |
| Accumulated other comprehensive income, net                                        |   |               | 1,268,000   |   |              |   | 438,000 |   |
| Total stockholders' equity                                                         |   |               | 52,849,000  |   |              |   | 53,511,000 |   |
|                                                                               |   |               |        |   |              |   |   |   |
| Total liabilities and stockholders' equity                                         |   | $                  | 680,062,000 |   |              | $      | 663,844,000 |   |

----

Index

Stewardship 

|                                                 |   |                            |      |   |                           |   |
|------------------------------------------------------|--------|---------------------------------|-----------|--------|--------------------------------|--------|
|                                                 |   | Three Months EndedSeptember 30, |      |   | Nine Months EndedSeptember 30, |   |
|                                                 |   | 2010                            |      |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Interest income:                                     |   |                            |      |   |                           |   |   |   |   |   |   |   |
| Loans                                                |   | $                               | 6,797,000 |   |                           | $      | 6,831,000 |   |   | $ | 20,364,000 |   |   | $ | 20,097,000 |   |
| Securities held to maturity                          |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                              |   |                            | 239,000   |   |                           |   | 532,000 |   |   |   | 1,037,000 |   |   |   | 1,492,000 |   |
| Non-taxable                                          |   |                            | 229,000   |   |                           |   | 220,000 |   |   |   | 693,000 |   |   |   | 652,000 |   |
| Securities available for sale                        |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                              |   |                            | 758,000   |   |                           |   | 934,000 |   |   |   | 2,463,000 |   |   |   | 3,137,000 |   |
| Non-taxable                                          |   |                            | 34,000    |   |                           |   | 50,000 |   |   |   | 121,000 |   |   |   | 154,000 |   |
| FHLB dividends                                       |   |                            | 29,000    |   |                           |   | 41,000 |   |   |   | 98,000 |   |   |   | 86,000 |   |
| Other interest-earning assets                        |   |                            | 9,000     |   |                           |   | 2,000 |   |   |   | 15,000 |   |   |   | 7,000 |   |
| Total interest income                                |   |                            | 8,095,000 |   |                           |   | 8,610,000 |   |   |   | 24,791,000 |   |   |   | 25,625,000 |   |
|                                                 |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                    |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                             |   |                            | 1,590,000 |   |                           |   | 2,131,000 |   |   |   | 5,139,000 |   |   |   | 6,706,000 |   |
| Borrowed money                                       |   |                            | 555,000   |   |                           |   | 503,000 |   |   |   | 1,600,000 |   |   |   | 1,525,000 |   |
| Total interest expense                               |   |                            | 2,145,000 |   |                           |   | 2,634,000 |   |   |   | 6,739,000 |   |   |   | 8,231,000 |   |
|                                                 |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income before provision for loan losses |   |                            | 5,950,000 |   |                           |   | 5,976,000 |   |   |   | 18,052,000 |   |   |   | 17,394,000 |   |
| Provision for loan losses                            |   |                            | 1,500,000 |   |                           |   | 1,200,000 |   |   |   | 7,755,000 |   |   |   | 2,375,000 |   |
| Net interest income after provision for loan losses  |   |                            | 4,450,000 |   |                           |   | 4,776,000 |   |   |   | 10,297,000 |   |   |   | 15,019,000 |   |
|                                                 |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                  |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Fees and service charges                             |   |                            | 514,000   |   |                           |   | 492,000 |   |   |   | 1,486,000 |   |   |   | 1,362,000 |   |
| Bank owned life insurance                            |   |                            | 82,000    |   |                           |   | 79,000 |   |   |   | 249,000 |   |   |   | 238,000 |   |
| Gain on sales of mortgage loans                      |   |                            | 94,000    |   |                           |   | 188,000 |   |   |   | 215,000 |   |   |   | 272,000 |   |
| Gain on calls and sales of securities                |   |                            | -         |   |                           |   | 2,000 |   |   |   | 802,000 |   |   |   | 255,000 |   |
| Merchant processing                                  |   |                            | -         |   |                           |   | - |   |   |   | - |   |   |   | 118,000 |   |
| Other                                                |   |                            | 69,000    |   |                           |   | 60,000 |   |   |   | 265,000 |   |   |   | 232,000 |   |
| Total noninterest income                             |   |                            | 759,000   |   |                           |   | 821,000 |   |   |   | 3,017,000 |   |   |   | 2,477,000 |   |
|                                                 |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest expenses:                                |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                       |   |                            | 2,077,000 |   |                           |   | 2,128,000 |   |   |   | 6,151,000 |   |   |   | 6,264,000 |   |
| Occupancy, net                                       |   |                            | 501,000   |   |                           |   | 453,000 |   |   |   | 1,471,000 |   |   |   | 1,398,000 |   |
| Equipment                                            |   |                            | 285,000   |   |                           |   | 277,000 |   |   |   | 871,000 |   |   |   | 795,000 |   |
| Data processing                                      |   |                            | 334,000   |   |                           |   | 300,000 |   |   |   | 986,000 |   |   |   | 882,000 |   |
| FDIC insurance premium                               |   |                            | 251,000   |   |                           |   | 197,000 |   |   |   | 712,000 |   |   |   | 886,000 |   |
| Merchant processing                                  |   |                            | -         |   |                           |   | - |   |   |   | - |   |   |   | 108,000 |   |
| Other                                                |   |                            | 1,160,000 |   |                           |   | 991,000 |   |   |   | 3,012,000 |   |   |   | 3,105,000 |   |
| Total noninterest expenses                           |   |                            | 4,608,000 |   |                           |   | 4,346,000 |   |   |   | 13,203,000 |   |   |   | 13,438,000 |   |
| Income before income tax (benefit) expense           |   |                            | 601,000   |   |                           |   | 1,251,000 |   |   |   | 111,000 |   |   |   | 4,058,000 |   |
| Income tax (benefit) expense                         |   |                            | 261,000   |   |                           |   | 358,000 |   |   |   | (35,000 | ) |   |   | 1,198,000 |   |
| Net income                                           |   |                            | 340,000   |   |                           |   | 893,000 |   |   |   | 146,000 |   |   |   | 2,860,000 |   |
| Dividends on preferred stock and accretion           |   |                            | 137,000   |   |                           |   | 138,000 |   |   |   | 412,000 |   |   |   | 367,000 |   |
| Net (loss) income available to common stockholders   |   | $                               | 203,000   |   |                           | $      | 755,000 |   |   | $ | (266,000 | ) |   | $ | 2,493,000 |   |
|                                                 |   |                            |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Basic (loss) earnings per common share               |   | $                               | 0.03      |   |                           | $      | 0.13 |   |   | $ | (0.05 | ) |   | $ | 0.43 |   |
| Diluted (loss) earnings per common share             |   | $                               | 0.03      |   |                           | $      | 0.13 |   |   | $ | (0.05 | ) |   | $ | 0.43 |   |

----

Index

Stewardship 

|                                         |   | Nine Months Ended September 30, 2010 |      |
|----------------------------------------------|--------|--------------------------------------|-----------|
|                                         |   |                                 |      |
|                                         |   |  Preferred                      |      |   | Common Stock |   |   |  Treasury |  Retained |  Accumulated Other Comprehensive Gain (Loss), |   |
|                                         |   |  Stock                          |      |   | Shares |   |   | Amount |   |   |  Stock |   |   |  Earnings |   |   | Net |   |   | Total |   |
|                                         |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2009                 |   | $                                    | 9,736,000 |   |   |   | 5,834,515 |   |   | $ | 40,415,000 |   |   | $ | - |   |   | $ | 2,922,000 |   |   | $ | 438,000 |   |   | $ | 53,511,000 |   |
| Cash dividends paid on common stock          |   |                                 | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,343,000 | ) |   |   | - |   |   |   | (1,343,000 | ) |
| Payment of discount on dividend              |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| reinvestment plan                            |   |                                 | -         |   |   |   | - |   |   |   | (23,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (23,000 | ) |
| Cash dividends accrued on preferred stock    |   |                                 | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (375,000 | ) |   |   | - |   |   |   | (375,000 | ) |
| Common stock issued under stock plans        |   |                                 | -         |   |   |   | 3,037 |   |   |   | 24,000 |   |   |   | 29,000 |   |   |   | - |   |   |   | - |   |   |   | 53,000 |   |
| Stock option compensation expense            |   |                                 | -         |   |   |   | - |   |   |   | 38,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 38,000 |   |
| Stock options exercised                      |   |                                 | -         |   |   |   | 9,376 |   |   |   | 55,000 |   |   |   | (43,000 | ) |   |   | - |   |   |   | - |   |   |   | 12,000 |   |
| Accretion of discount on preferred stock     |   |                                 | 38,000    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (38,000 | ) |   |   |   |   |   |   | - |   |
| Amortization of issuance costs               |   |                                 | 7,000     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (7,000 | ) |   |   |   |   |   |   | - |   |
| Comprehensive income:                        |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                   |   |                                 | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 146,000 |   |   |   | - |   |   |   | 146,000 |   |
| Change in unrealized holding gains on        |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities available for sale arising during |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| the period (net tax expense of $466,000)     |   |                                 | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 744,000 |   |   |   | 744,000 |   |
| Reclassification adjustment for gains in     |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net income (net of taxes of $316,000)        |   |                                 | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 486,000 |   |   |   | 486,000 |   |
| Change in fair value of interest rate        |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| swap (net of tax benefit of $266,000)        |   |                                 | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (400,000 | ) |   |   | (400,000 | ) |
| Total comprehensive income                   |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 976,000 |   |
|                                         |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- September 30, 2010                |   | $                                    | 9,781,000 |   |   |   | 5,846,928 |   |   | $ | 40,509,000 |   |   | $ | (14,000 | ) |   | $ | 1,305,000 |   |   | $ | 1,268,000 |   |   | $ | 52,849,000 |   |
|                                         |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                                     |   | Nine Months Ended September 30, 2009 |      |
|------------------------------------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                                                     |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |  Preferred                      |      |   | Common Stock |   |   |   |   |   |  Retained |   |   |  Accumulated Other Comprehensive Gain (Loss), |   |   |   |   |
|                                                                                     |   | Stock                                |      |   | Shares |   |   | Amount |   |   | Treasury Stock |   |   | Earnings |   |   | Net |   |   | 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                                                                        |   |                                 | -         |   |   |   | - |   |   |   | (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 tax expense 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 |   |

----

Index

Stewardship Financial Corporation and Subsidiary

|                                                                                           |   | Three Months Ended September 30, |     |   | Nine Months Ended September 30, |   |
|------------------------------------------------------------------------------------------------|--------|----------------------------------|----------|--------|---------------------------------|--------|
|                                                                                           |   | 2010                             |     |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
| Net income                                                                                     |   | $                                | 340,000  |   |                            | $      | 893,000 |   |   | $ | 146,000 |   |   | $ | 2,860,000 |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss):                                                             |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Change in unrealized holding gains on securities                                               |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| available for sale arising during the period                                                   |   |                             | 505,000  |   |                            |   | 1,247,000 |   |   |   | 2,814,000 |   |   |   | 1,268,000 |   |
| Reclassification adjustment for gains in net income                                            |   |                             | -        |   |                            |   | 2,000 |   |   |   | 802,000 |   |   |   | 255,000 |   |
| Net unrealized gains                                                                           |   |                             | 505,000  |   |                            |   | 1,245,000 |   |   |   | 2,012,000 |   |   |   | 1,013,000 |   |
| Tax effect                                                                                     |   |                             | 194,000  |   |                            |   | 484,000 |   |   |   | 782,000 |   |   |   | 396,000 |   |
| Net unrealized gains, net of tax amount                                                        |   |                             | 311,000  |   |                            |   | 761,000 |   |   |   | 1,230,000 |   |   |   | 617,000 |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Change in fair value of interest rate swap                                                     |   |                             | (200,000 | )      |                            |   | (257,000 | ) |   |   | (666,000 | ) |   |   | (356,000 | ) |
| Tax effect                                                                                     |   |                             | (80,000  | )      |                            |   | (102,000 | ) |   |   | (266,000 | ) |   |   | (142,000 | ) |
| Change in fair value of interest rate swap,                                                    |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| net of tax amount                                                                              |   |                             | (120,000 | )      |                            |   | (155,000 | ) |   |   | (400,000 | ) |   |   | (214,000 | ) |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Total other comprehensive income                                                               |   |                             | 191,000  |   |                            |   | 606,000 |   |   |   | 830,000 |   |   |   | 403,000 |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                                     |   | $                                | 531,000  |   |                            | $      | 1,499,000 |   |   | $ | 976,000 |   |   | $ | 3,263,000 |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| The following is a summary of the accumulated other comprehensive income balances, net of tax. |   |                             |     |   |                            |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   | 9/30/2010 |   |   | 12/31/2009 |   |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gain on securities available for sale                                               |   |                             |     |   |                            |   |   |   |   | $ | 1,823,000 |   |   | $ | 593,000 |   |
| Unrealized loss on fair value of interest rate swap                                            |   |                             |     |   |                            |   |   |   |   |   | (555,000 | ) |   |   | (155,000 | ) |
|                                                                                           |   |                             |     |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive income, net                                                    |   |                             |     |   |                            |   |   |   |   | $ | 1,268,000 |   |   | $ | 438,000 |   |

----

Index

Stewardship 

|                                                                               |   | Nine Months EndedSeptember 30, |        |
|------------------------------------------------------------------------------------|--------|--------------------------------|-------------|
|                                                                               |   | 2010                           |        |   | 2009 |   |
| Cash flows from operating activities:                                              |   |                           |        |   |   |   |   |   |
| Net income                                                                         |   | $                              | 146,000     |   |   | $ | 2,860,000 |   |
| Adjustments to reconcile net (loss) income to                                      |   |                           |        |   |   |   |   |   |
| net cash provided by operating activities:                                         |   |                           |        |   |   |   |   |   |
| Depreciation and amortization of premises and equipment                            |   |                           | 609,000     |   |   |   | 631,000 |   |
| Amortization of premiums and accretion of discounts, net                           |   |                           | 718,000     |   |   |   | 456,000 |   |
| Accretion of deferred loan fees                                                    |   |                           | (88,000     | ) |   |   | (151,000 | ) |
| Provision for loan losses                                                          |   |                           | 7,755,000   |   |   |   | 2,375,000 |   |
| Originations of mortgage loans held for sale                                       |   |                           | (29,568,000 | ) |   |   | (33,778,000 | ) |
| Proceeds from sale of mortgage loans                                               |   |                           | 21,118,000  |   |   |   | 33,426,000 |   |
| Gain on sales of mortgage loans                                                    |   |                           | (215,000    | ) |   |   | (272,000 | ) |
| Gain on calls and sales of securities                                              |   |                           | (802,000    | ) |   |   | (255,000 | ) |
| Deferred income tax benefit                                                        |   |                           | (1,044,000  | ) |   |   | (903,000 | ) |
| Nonqualified stock option expense                                                  |   |                           | 38,000      |   |   |   | 36,000 |   |
| Increase in bank owned life insurance                                              |   |                           | (249,000    | ) |   |   | (238,000 | ) |
| Decrease in accrued interest receivable                                            |   |                           | 493,000     |   |   |   | 229,000 |   |
| (Increase) decrease in other assets                                                |   |                           | (196,000    | ) |   |   | 735,000 |   |
| Decrease in accrued interest payable                                               |   |                           | (275,000    | ) |   |   | (88,000 | ) |
| (Decrease) increase in other liabilities                                           |   |                           | (405,000    | ) |   |   | 400,000 |   |
| Net cash (used in) provided by operating activities                                |   |                           | (1,965,000  | ) |   |   | 5,463,000 |   |
|                                                                               |   |                           |        |   |   |   |   |   |
| Cash flows from investing activities:                                              |   |                           |        |   |   |   |   |   |
| Purchase of securities available for sale                                          |   |                           | (82,727,000 | ) |   |   | (46,067,000 | ) |
| Proceeds from maturities and principal repayments on securities available for sale |   |                           | 12,796,000  |   |   |   | 11,796,000 |   |
| Proceeds from calls and sales on securities available for sale                     |   |                           | 47,951,000  |   |   |   | 34,854,000 |   |
| Purchase of securities held to maturity                                            |   |                           | (5,566,000  | ) |   |   | (40,703,000 | ) |
| Proceeds from maturities and principal repayments on securities held to maturity   |   |                           | 4,469,000   |   |   |   | 4,953,000 |   |
| Proceeds from calls on securities held to maturity                                 |   |                           | 21,134,000  |   |   |   | 9,165,000 |   |
| Redemption (purchase) of FHLB-NY stock                                             |   |                           | 730,000     |   |   |   | (775,000 | ) |
| Net decrease (increase) in loans                                                   |   |                           | 4,206,000   |   |   |   | (11,673,000 | ) |
| Additions to premises and equipment                                                |   |                           | (225,000    | ) |   |   | (161,000 | ) |
| Net cash provided by (used in) investing activities                                |   |                           | 2,768,000   |   |   |   | (38,611,000 | ) |
|                                                                               |   |                           |        |   |   |   |   |   |
| Cash flows from financing activities:                                              |   |                           |        |   |   |   |   |   |
| Net increase (decrease) in noninterest-bearing deposits                            |   |                           | 14,393,000  |   |   |   | (8,268,000 | ) |
| Net increase in interest-bearing deposits                                          |   |                           | 21,522,000  |   |   |   | 16,349,000 |   |
| Net (decrease) increase in securities sold under agreements to repurchase          |   |                           | (155,000    | ) |   |   | 859,000 |   |
| Proceeds from term borrowings                                                      |   |                           | -           |   |   |   | 6,000,000 |   |
| Net (decrease) increase in short term borrowings                                   |   |                           | (18,600,000 | ) |   |   | 11,000,000 |   |
| Proceeds from issuance of preferred stock and warrants                             |   |                           | -           |   |   |   | 9,951,000 |   |
| Cash dividends paid on common stock                                                |   |                           | (1,343,000  | ) |   |   | (1,583,000 | ) |
| Cash dividends paid on preferred stock                                             |   |                           | (375,000    | ) |   |   | (271,000 | ) |
| Payment of discount on dividend reinvestment plan                                  |   |                           | (23,000     | ) |   |   | (35,000 | ) |
| Purchase of treasury stock                                                         |   |                           | -           |   |   |   | (75,000 | ) |
| Options exercised                                                                  |   |                           | 12,000      |   |   |   | 8,000 |   |
| Issuance of common stock                                                           |   |                           | 53,000      |   |   |   | 45,000 |   |
| Net cash provided by financing activities                                          |   |                           | 15,484,000  |   |   |   | 33,980,000 |   |
|                                                                               |   |                           |        |   |   |   |   |   |
| Net increase in cash and cash equivalents                                          |   |                           | 16,287,000  |   |   |   | 832,000 |   |
| Cash and cash equivalents - beginning                                              |   |                           | 8,871,000   |   |   |   | 12,814,000 |   |
| Cash and cash equivalents - ending                                                 |   | $                              | 25,158,000  |   |   | $ | 13,646,000 |   |

----

Index

|                                                         |   | Nine Months EndedSeptember 30, |      |
|--------------------------------------------------------------|--------|--------------------------------|-----------|
|                                                         |   | 2010                           |      |   | 2009 |   |
| Supplemental disclosures of cash flow information:           |   |                           |      |   |   |   |   |   |
| Cash paid during the period for interest                     |   | $                              | 7,014,000 |   |   | $ | 8,319,000 |   |
| Cash paid during the period for income taxes                 |   | $                              | 1,930,000 |   |   | $ | 1,134,000 |   |
|                                                         |   |                           |      |   |   |   |   |   |
| Supplemental schedule of non-cash flow activities:           |   |                           |      |   |   |   |   |   |
| Transfer of loans receivable to other real estate owned, net |   | $                              | 356,000   |   |   | $ | - |   |

----

Index

Stewardship 

----

Index

----

Index

|                                     |   | September 30, 2010 |        |
|------------------------------------------|--------|--------------------|-------------|
|                                     |   | Amortized          |        |   | Gross Unrealized |   |   | Fair |   |
|                                     |   |  Cost         |        |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury                            |   | $                  | 11,172,000  |   |   | $ | 279,000 |   |   | $ | - |   |   | $ | 11,451,000 |   |
| U.S. government-sponsored agencies       |   |               | 21,604,000  |   |   |   | 389,000 |   |   |   | 1,000 |   |   |   | 21,992,000 |   |
| Obligations of state and political       |   |               |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |               | 3,703,000   |   |   |   | 225,000 |   |   |   | - |   |   |   | 3,928,000 |   |
| Mortgage-backed securities - residential |   |               | 84,702,000  |   |   |   | 2,066,000 |   |   |   | 29,000 |   |   |   | 86,739,000 |   |
| Other equity investments                 |   |               | 3,173,000   |   |   |   | 88,000 |   |   |   | 23,000 |   |   |   | 3,238,000 |   |
|                                     |   | $                  | 124,354,000 |   |   | $ | 3,047,000 |   |   | $ | 53,000 |   |   | $ | 127,348,000 |   |

|                                     |   | December 31, 2009 |        |
|------------------------------------------|--------|-------------------|-------------|
|                                     |   | Amortized         |        |   | Gross Unrealized |   |   | Fair |   |
|                                     |   | Cost              |        |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |              |        |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies       |   | $                 | 32,642,000  |   |   | $ | 92,000 |   |   | $ | 448,000 |   |   | $ | 32,286,000 |   |
| Obligations of state and political       |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |              | 5,284,000   |   |   |   | 122,000 |   |   |   | 9,000 |   |   |   | 5,397,000 |   |
| Mortgage-backed securities - residential |   |              | 61,060,000  |   |   |   | 1,423,000 |   |   |   | 255,000 |   |   |   | 62,228,000 |   |
| Other equity investments                 |   |              | 3,058,000   |   |   |   | 66,000 |   |   |   | 9,000 |   |   |   | 3,115,000 |   |
|                                     |   | $                 | 102,044,000 |   |   | $ | 1,703,000 |   |   | $ | 721,000 |   |   | $ | 103,026,000 |   |

|                                     |   | September 30, 2010 |       |
|------------------------------------------|--------|--------------------|------------|
|                                     |   | Amortized          |       |   | Gross Unrecognized |   |   | Fair |   |
|                                     |   | Cost               |       |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies       |   | $                  | 4,222,000  |   |   | $ | 181,000 |   |   | $ | - |   |   | $ | 4,403,000 |   |
| Obligations of state and political       |   |               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |               | 26,513,000 |   |   |   | 1,654,000 |   |   |   | - |   |   |   | 28,167,000 |   |
| Mortgage-backed securities - residential |   |               | 16,699,000 |   |   |   | 996,000 |   |   |   | - |   |   |   | 17,695,000 |   |
|                                     |   | $                  | 47,434,000 |   |   | $ | 2,831,000 |   |   | $ | - |   |   | $ | 50,265,000 |   |

|                                     |   | December 31, 2009 |       |
|------------------------------------------|--------|-------------------|------------|
|                                     |   | Amortized         |       |   | Gross Unrecognized |   |   | Fair |   |
|                                     |   | Cost              |       |   | Gains |   |   | Losses |   |   | Value |   |
|                                     |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies       |   | $                 | 19,921,000 |   |   | $ | 90,000 |   |   | $ | 351,000 |   |   | $ | 19,660,000 |   |
| Obligations of state and political       |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                             |   |              | 27,038,000 |   |   |   | 871,000 |   |   |   | 84,000 |   |   |   | 27,825,000 |   |
| Mortgage-backed securities - residential |   |              | 20,758,000 |   |   |   | 547,000 |   |   |   | 25,000 |   |   |   | 21,280,000 |   |
|                                     |   | $                 | 67,717,000 |   |   | $ | 1,508,000 |   |   | $ | 460,000 |   |   | $ | 68,765,000 |   |

----

Index

|                                     |   | September 30, 2010 |        |
|------------------------------------------|--------|--------------------|-------------|
|                                     |   | Amortized Cost     |        |   | Fair Value |   |
|                                     |   |               |        |   |   |   |
| Maturity                                 |   |               |        |   |   |   |
| Available for sale                       |   |               |        |   |   |   |
| Within one year                          |   | $                  | 301,000     |   |   | $ | 306,000 |   |
| After one year, but within five years    |   |               | 27,903,000  |   |   |   | 28,506,000 |   |
| After five years, but within ten years   |   |               | 5,717,000   |   |   |   | 5,842,000 |   |
| After ten years                          |   |               | 2,558,000   |   |   |   | 2,717,000 |   |
| Mortgage-backed securities - residential |   |               | 84,702,000  |   |   |   | 86,739,000 |   |
| Total                                    |   | $                  | 121,181,000 |   |   | $ | 124,110,000 |   |
|                                     |   |               |        |   |   |   |   |   |
| Held to maturity                         |   |               |        |   |   |   |   |   |
| Within one year                          |   | $                  | 1,331,000   |   |   | $ | 1,348,000 |   |
| After one year, but within five years    |   |               | 11,484,000  |   |   |   | 12,119,000 |   |
| After five years, but within ten years   |   |               | 12,276,000  |   |   |   | 13,202,000 |   |
| After ten years                          |   |               | 5,644,000   |   |   |   | 5,901,000 |   |
| Mortgage-backed securities - residential |   |               | 16,699,000  |   |   |   | 17,695,000 |   |
| Total                                    |   | $                  | 47,434,000  |   |   | $ | 50,265,000 |   |

----

Index

| Available for Sale       |   |                |      |   |                |   |    |       |   |
|--------------------------|--------|---------------------|-----------|--------|---------------------|--------|---------|------------|--------|
| September 30, 2010       |   | Less than 12 Months |      |   | 12 Months or Longer |   |    | Total      |   |
|                     |   | Fair Value          |      |   | Unrealized Losses   |   |    | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|                     |   |                |      |   |                |   |    |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury            |   | $                   | -         |   |                | $      | -       |       |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| U.S. government-         |   |                |      |   |                |   |    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies       |   |                | 999,000   |   |                |   | (1,000  | )          |   |   | - |   |   |   | - |   |   |   | 999,000 |   |   |   | (1,000 | ) |
| Obligations of state and |   |                |      |   |                |   |    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions   |   |                | -         |   |                |   | -       |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Mortgage-backed          |   |                |      |   |                |   |    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential |   |                | 5,457,000 |   |                |   | (29,000 | )          |   |   | - |   |   |   | - |   |   |   | 5,457,000 |   |   |   | (29,000 | ) |
| Other equity investments |   |                | -         |   |                |   | -       |       |   |   | 53,000 |   |   |   | (23,000 | ) |   |   | 53,000 |   |   |   | (23,000 | ) |
| Total temporarily        |   |                |      |   |                |   |    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 6,456,000 |   |                | $      | (30,000 | )          |   | $ | 53,000 |   |   | $ | (23,000 | ) |   | $ | 6,509,000 |   |   | $ | (53,000 | ) |
|                     |   |                |      |   |                |   |    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| December 31, 2009        |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total      |   |
|--------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|------------|--------|
|                     |   | Fair Value          |       |   | Unrealized Losses   |   |     | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|                     |   |                |       |   |                |   |     |       |   |   |   |   |   |   |   |   |   |   |
| U.S. government-         |   |                |       |   |                |   |     |       |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies       |   | $                   | 23,282,000 |   |                | $      | (361,000 | )          |   | $ | 2,913,000 |   |   | $ | (87,000 | ) |   | $ | 26,195,000 |   |   | $ | (448,000 | ) |
| Obligations of state and |   |                |       |   |                |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions   |   |                | 373,000    |   |                |   | (2,000   | )          |   |   | 443,000 |   |   |   | (7,000 | ) |   |   | 816,000 |   |   |   | (9,000 | ) |
| Mortgage-backed          |   |                |       |   |                |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential |   |                | 15,156,000 |   |                |   | (255,000 | )          |   |   | - |   |   |   | - |   |   |   | 15,156,000 |   |   |   | (255,000 | ) |
| Other equity investments |   |                | -          |   |                |   | -        |       |   |   | 33,000 |   |   |   | (9,000 | ) |   |   | 33,000 |   |   |   | (9,000 | ) |
| Total temporarily        |   |                |       |   |                |   |     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 38,811,000 |   |                | $      | (618,000 | )          |   | $ | 3,389,000 |   |   | $ | (103,000 | ) |   | $ | 42,200,000 |   |   | $ | (721,000 | ) |

| Held to Maturity                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| September 30, 2010                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of September 30, 2010, there were no unrecognized losses on held to maturity securities. |   |   |

| December 31, 2009        |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total     |   |
|--------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|-----------|--------|
|                     |   | FairValue           |       |   | UnrecognizedLosses  |   |     | FairValue |   |   | UnrecognizedLosses |   |   | FairValue |   |   | UnrecognizedLosses |   |
|                     |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |
| U.S. government-         |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies       |   | $                   | 12,529,000 |   |                | $      | (351,000 | )         |   | $ | - |   |   | $ | - |   |   | $ | 12,529,000 |   |   | $ | (351,000 | ) |
| Obligations of state and |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions   |   |                | 4,504,000  |   |                |   | (69,000  | )         |   |   | 401,000 |   |   |   | (15,000 | ) |   |   | 4,905,000 |   |   |   | (84,000 | ) |
| Mortgage-backed          |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential |   |                | 1,949,000  |   |                |   | (25,000  | )         |   |   | - |   |   |   | - |   |   |   | 1,949,000 |   |   |   | (25,000 | ) |
| Total temporarily        |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| impaired securities      |   | $                   | 18,982,000 |   |                | $      | (445,000 | )         |   | $ | 401,000 |   |   | $ | (15,000 | ) |   | $ | 19,383,000 |   |   | $ | (460,000 | ) |

----

Index

|                                      |   | September 30, 2010 |        |   | December 31, 2009 |   |
|-------------------------------------------|--------|-------------------------|-------------|--------|------------------------|--------|
|                                      |   |                    |        |   |                   |   |
| Mortgage                                  |   |                    |        |   |                   |   |
| Residential                               |   | $                       | 32,612,000  |   |                   | $      | 36,246,000 |   |
| Commercial                                |   |                    | 248,620,000 |   |                   |   | 246,212,000 |   |
| Commercial                                |   |                    | 114,175,000 |   |                   |   | 114,893,000 |   |
| Home Equity                               |   |                    | 21,193,000  |   |                   |   | 21,779,000 |   |
| Installment                               |   |                    | 33,601,000  |   |                   |   | 41,006,000 |   |
| Other                                     |   |                    | 306,000     |   |                   |   | 340,000 |   |
| Total loans                               |   |                    | 450,507,000 |   |                   |   | 460,476,000 |   |
|                                      |   |                    |        |   |                   |   |   |   |
| Less:   Deferred loan fees |   |                    | 290,000     |   |                   |   | 437,000 |   |
| Allowance for loan losses                 |   |                    | 9,327,000   |   |                   |   | 6,920,000 |   |
|                                      |   |                    | 9,617,000   |   |                   |   | 7,357,000 |   |
|                                      |   |                    |        |   |                   |   |   |   |
| Loans, net                                |   | $                       | 440,890,000 |   |                   | $      | 453,119,000 |   |

----

Index

|                            |   | Nine Months Ended September 30, |       |
|---------------------------------|--------|---------------------------------|------------|
|                            |   | 2010                            |       |   | 2009 |   |
|                            |   |                            |       |   |   |   |
| Balance, beginning of period    |   | $                               | 6,920,000  |   |   | $ | 5,166,000 |   |
| Provision charged to operations |   |                            | 7,755,000  |   |   |   | 2,375,000 |   |
| Recoveries of loans charged off |   |                            | 87,000     |   |   |   | 97,000 |   |
| Loans charged off               |   |                            | (5,435,000 | ) |   |   | (389,000 | ) |
|                            |   |                            |       |   |   |   |   |   |
| Balance, end of period          |   | $                               | 9,327,000  |   |   | $ | 7,249,000 |   |

|                                        |   | September 30, 2010 |       |   | December 31, 2009 |   |
|---------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                        |   |               |       |   |              |   |
| Nonaccrual loans                            |   | $                  | 24,334,000 |   |              | $      | 19,656,000 |   |
| Loans past due 90 days or more and accruing |   |               | 10,000     |   |              |   | 415,000 |   |
| Restructured loans                          |   |               | 140,000    |   |              |   | 2,846,000 |   |
| Total nonperfoming loans                    |   |               | 24,484,000 |   |              |   | 22,917,000 |   |
| Other real estate owned                     |   |               | 356,000    |   |              |   | - |   |
| Total nonperforming assets                  |   | $                  | 24,840,000 |   |              | $      | 22,917,000 |   |

|                                      |   | September 30, 2010 |       |   | December 31, 2009 |   |
|-------------------------------------------|--------|-------------------------|------------|--------|------------------------|--------|
|                                      |   |                    |       |   |                   |   |
| Impaired loans                            |   |                    |       |   |                   |   |
| With related allowance for loan losses    |   | $                       | 13,271,000 |   |                   | $      | 8,668,000 |   |
| Without related allowance for loan losses |   |                    | 11,203,000 |   |                   |   | 13,834,000 |   |
| Total impaired loans                      |   | $                       | 24,474,000 |   |                   | $      | 22,502,000 |   |
|                                      |   |                    |       |   |                   |   |   |   |
| Related allowance for loan losses         |   | $                       | 2,205,000  |   |                   | $      | 1,903,000 |   |

----

Index

| Notional amount | $ 7,000,000              |
|-----------------|--------------------------|
| Pay rate        |    7.00%  |
| Receive rate    | 3 month LIBOR plus 2.95% |
| Maturity        | March 17, 2016           |
| Unrealized loss | $924,000                 |

|                           |   | Amount of Loss, Net of Taxes,           |    |
|--------------------------------|--------|-----------------------------------------|---------|
|                           |   | Recognized in OCI on Derivative         |    |
| Cash Flow Hedging Relationship |   | (Effective Portion)                     |    |
|                           |   | For the nine months ended September 30, |    |
|                           |   | 2010                                    |    |   | 2009 |   |
|                           |   |                                    |    |   |   |   |   |   |
| Cash flow hedge                |   | $                                       | 400,000 |   |   | $ | 214,000 |   |

----

Index

|                          |   | Fair Value Measurements Using: |        |
|-------------------------------|--------|--------------------------------|-------------|
|                          |   |                           |        |
|                          |   |                           |        |   | Quoted Prices in Active Markets for Identical Assets |   |   | Significant Other Observable Inputs |   |   | Significant Unobservable Inputs |   |
|                          |   | Carrying Value                 |        |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
|                          |   | At September 30, 2010          |        |
| Assets:                       |   |                           |        |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |        |   |   |   |   |   |   |   |   |   |
|                          |   |                           |        |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries               |   | $                              | 11,451,000  |   |   | $ | - |   |   | $ | 11,451,000 |   |   | $ | - |   |
| U.S. government -             |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   |                           | 21,992,000  |   |   |   | - |   |   |   | 21,992,000 |   |   |   | - |   |
| Obligations of state and      |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 3,928,000   |   |   |   | - |   |   |   | 3,928,000 |   |   |   | - |   |
| Mortgage-backed               |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential      |   |                           | 86,739,000  |   |   |   | - |   |   |   | 86,739,000 |   |   |   | - |   |
| Other equity investments      |   |                           | 3,238,000   |   |   |   | - |   |   |   | 3,238,000 |   |   |   | - |   |
| Total available for           |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sale securities               |   | $                              | 127,348,000 |   |   | $ | - |   |   | $ | 127,348,000 |   |   | $ | - |   |
|                          |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                  |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                              | 924,000     |   |   | $ | - |   |   | $ | 924,000 |   |   | $ | - |   |
|                          |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |   | At December 31, 2009           |        |
| Assets:                       |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries               |   | $                              | -           |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| U.S. government -             |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsered agencies            |   |                           | 32,286,000  |   |   |   | - |   |   |   | 32,286,000 |   |   |   | - |   |
| Obligations of state and      |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |                           | 5,397,000   |   |   |   | - |   |   |   | 5,397,000 |   |   |   | - |   |
| Mortgage-backed               |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| securities - residential      |   |                           | 62,228,000  |   |   |   | - |   |   |   | 62,228,000 |   |   |   | - |   |
| Other equity investments      |   |                           | 3,115,000   |   |   |   | - |   |   |   | 3,115,000 |   |   |   | - |   |
| Total available for           |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sale securities               |   | $                              | 103,026,000 |   |   | $ | - |   |   | $ | 103,026,000 |   |   | $ | - |   |
|                          |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                  |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                              | 258,000     |   |   | $ | - |   |   | $ | 258,000 |   |   | $ | - |   |

----

Index

|                    |   |                  |       |   |                                                 |   |
|-------------------------|--------|-----------------------|------------|--------|------------------------------------------------------|--------|
|                    |   |                  |       |   | Fair Value Measurements Using:                       |   |
|                    |   |                  |       |   | Quoted Prices in Active Markets for Identical Assets |   |   | Significant Other Observable Inputs |   |   | Significant Unobservable Inputs |   |
|                    |   | Carrying Value        |       |   | (Level 1)                                            |   |   | (Level 2) |   |   | (Level 3) |   |
|                    |   | At September 30, 2010 |       |
| Assets:                 |   |                  |       |   |                                                 |   |   |   |   |   |   |   |
| Impaired loans          |   | $                     | 11,066,000 |   |                                                 | $      | - |   |   | $ | - |   |   | $ | 11,066,000 |   |
| Other real estate owned |   | $                     | 356,000    |   |                                                 | $      | - |   |   | $ | - |   |   | $ | 356,000 |   |
|                    |   |                  |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
|                    |   | At December 31, 2009  |       |
| Assets:                 |   |                  |       |   |                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans          |   | $                     | 6,765,000  |   |                                                 | $      | - |   |   | $ | - |   |   | $ | 6,765,000 |   |
| Other real estate owned |   | $                     | -          |   |                                                 | $      | - |   |   | $ | - |   |   | $ | - |   |

|                                  | September 30, 2010     |   |        | December 31, 2009    |   |
|---------------------------------------|------------------------|--------|-------------|----------------------|--------|
|                                  | Carrying Amount        |   |        | Estimated Fair Value |   |   | Carrying Amount |   |   | Estimated Fair Value |   |
|                                  | (Dollars in thousands) |   |
| Financial assets:                     |                   |   |        |                 |   |   |   |   |   |   |   |   |
| Cash and cash equivalents             |                   | $      | 25,158,000  |                 |   | $ | 25,158,000 |   |   | $ | 8,871,000 |   |   | $ | 8,871,000 |   |
| Securities available for sale         |                   |   | 127,348,000 |                 |   |   | 127,348,000 |   |   |   | 103,026,000 |   |   |   | 103,026,000 |   |
| Securities held to maturity           |                   |   | 47,434,000  |                 |   |   | 50,265,000 |   |   |   | 67,717,000 |   |   |   | 68,765,000 |   |
| FHLB-NY stock                         |                   |   | 2,497,000   |                 |   |   | N/A |   |   |   | 3,227,000 |   |   |   | N/A |   |
| Net loans, including impaired loans   |                   |   | 440,890,000 |                 |   |   | 443,327,000 |   |   |   | 453,119,000 |   |   |   | 453,813,000 |   |
| Accrued interest receivable           |                   |   | 2,674,000   |                 |   |   | 2,674,000 |   |   |   | 3,167,000 |   |   |   | 3,167,000 |   |
|                                  |                   |   |        |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                |                   |   |        |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                              |                   |   | 565,845,000 |                 |   |   | 567,262,000 |   |   |   | 529,930,000 |   |   |   | 531,230,000 |   |
| FHLB-NY Advances                      |                   |   | 36,000,000  |                 |   |   | 34,904,000 |   |   |   | 54,600,000 |   |   |   | 51,949,000 |   |
| Subordinated debenture                |                   |   | 7,217,000   |                 |   |   | 6,324,000 |   |   |   | 7,217,000 |   |   |   | 5,943,000 |   |
| Securities sold under agreements      |                   |   |        |                 |   |   |   |   |   |   |   |   |   |   |   |   |
|     to repurchase |                   |   | 15,241,000  |                 |   |   | 15,241,000 |   |   |   | 15,396,000 |   |   |   | 15,396,000 |   |
| Accrued interest payable              |                   |   | 918,000     |                 |   |   | 918,000 |   |   |   | 1,193,000 |   |   |   | 1,193,000 |   |
| Interest rate swap                    |                   |   | 924,000     |                 |   |   | 924,000 |   |   |   | 258,000 |   |   |   | 258,000 |   |

----

Index

----

Index

|                                               |   | Three Months EndedSeptember 30,       |   |   | Nine Months EndedSeptember 30, |   |
|----------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------|--------|
|                                               |   | 2010                                  |   |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
|                                               |   | (In thousands, except per share data) |   |
|                                               |   |                                  |   |   |                           |   |   |   |   |   |   |   |
| Net income                                         |   | $                                     | 340    |   |                           | $      | 893 |   |   | $ | 146 |   |   | $ | 2,860 |   |
| Dividends on preferred stock and accretion         |   |                                  | 137    |   |                           |   | 138 |   |   |   | 412 |   |   |   | 367 |   |
| Net income (loss) available to common stockholders |   | $                                     | 203    |   |                           | $      | 755 |   |   | $ | (266 | ) |   | $ | 2,493 |   |
|                                               |   |                                  |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares                            |   |                                  | 5,842  |   |                           |   | 5,834 |   |   |   | 5,843 |   |   |   | 5,831 |   |
| Effect of dilutive stock options                   |   |                                  | -      |   |                           |   | 4 |   |   |   | - |   |   |   | 5 |   |
| Total weighted average dilutive shares             |   |                                  | 5,842  |   |                           |   | 5,836 |   |   |   | 5,843 |   |   |   | 5,835 |   |
|                                               |   |                                  |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings (loss) per common share             |   | $                                     | 0.03   |   |                           | $      | 0.13 |   |   | $ | (0.05 | ) |   | $ | 0.43 |   |
|                                               |   |                                  |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings (loss) per common share           |   | $                                     | 0.03   |   |                           | $      | 0.13 |   |   | $ | (0.05 | ) |   | $ | 0.43 |   |

----

Index

Stewardship 

----

----

Index

| Analysis of Net Interest Income (Unaudited)    |
|------------------------------------------------|
| For the Three Months Ended September 30,       |
|                                           |   |
|                                           |   | 2010 |   |   | 2009 |   |
|                                           |   | Average Balance |   |   | Interest Income/Expense |   |   | Average RatesEarned/Paid |   |   | AverageBalance |   |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |
|                                           |   | (Dollars in thousands) |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1) (2)                                  |   | $ | 458,443 |   |   | $ | 6,809 |   |   |   | 5.96 | % |   | $ | 451,396 |   |   | $ | 6,843 |   |   |   | 6.01 | % |
| Taxable investment securities (1)              |   |   | 145,343 |   |   |   | 1,025 |   |   |   | 2.83 |   |   |   | 136,875 |   |   |   | 1,506 |   |   |   | 4.37 |   |
| Tax-exempt investment securities (1) (2)       |   |   | 30,524 |   |   |   | 389 |   |   |   | 5.11 |   |   |   | 30,295 |   |   |   | 398 |   |   |   | 5.21 |   |
| Other interest-earning assets                  |   |   | 3,526 |   |   |   | 9 |   |   |   | 1.02 |   |   |   | 124 |   |   |   | 2 |   |   |   | 6.40 |   |
| Total interest-earning assets                  |   |   | 637,836 |   |   |   | 8,232 |   |   |   | 5.18 |   |   |   | 618,690 |   |   |   | 8,749 |   |   |   | 5.61 |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                      |   |   | (9,032 | ) |   |   |   |   |   |   |   |   |   |   | (6,734 | ) |   |   |   |   |   |   |   |   |
| Other assets                                   |   |   | 48,935 |   |   |   |   |   |   |   |   |   |   |   | 33,393 |   |   |   |   |   |   |   |   |   |
| Total assets                                   |   | $ | 677,739 |   |   |   |   |   |   |   |   |   |   | $ | 645,349 |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits               |   | $ | 243,019 |   |   | $ | 703 |   |   |   | 1.16 | % |   | $ | 198,585 |   |   | $ | 678 |   |   |   | 1.35 | % |
| Savings deposits                               |   |   | 46,054 |   |   |   | 38 |   |   |   | 0.32 |   |   |   | 42,489 |   |   |   | 46 |   |   |   | 0.43 |   |
| Time deposits                                  |   |   | 172,760 |   |   |   | 849 |   |   |   | 1.97 |   |   |   | 183,118 |   |   |   | 1,407 |   |   |   | 3.05 |   |
| Repurchase agreements                          |   |   | 15,250 |   |   |   | 186 |   |   |   | 4.89 |   |   |   | 15,509 |   |   |   | 189 |   |   |   | 4.83 |   |
| FHLB borrowing                                 |   |   | 36,000 |   |   |   | 242 |   |   |   | 2.70 |   |   |   | 42,458 |   |   |   | 249 |   |   |   | 2.33 |   |
| Subordinated debenture                         |   |   | 7,217 |   |   |   | 127 |   |   |   | 7.06 |   |   |   | 7,217 |   |   |   | 65 |   |   |   | 3.57 |   |
| Total interest-bearing liabilities             |   |   | 520,300 |   |   |   | 2,145 |   |   |   | 1.65 |   |   |   | 489,376 |   |   |   | 2,634 |   |   |   | 2.14 |   |
| Non-interest-bearing liabilities:              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                |   |   | 100,841 |   |   |   |   |   |   |   |   |   |   |   | 96,008 |   |   |   |   |   |   |   |   |   |
| Other liabilities                              |   |   | 3,269 |   |   |   |   |   |   |   |   |   |   |   | 6,400 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                           |   |   | 53,329 |   |   |   |   |   |   |   |   |   |   |   | 53,565 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity     |   | $ | 677,739 |   |   |   |   |   |   |   |   |   |   | $ | 645,349 |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis) |   |   |   | 6,087 |   |   |   |   |   |   |   |   |   |   |   | 6,115 |   |   |   |   |   |
| Tax Equivalent adjustment                      |   |   |   |   |   |   | (137 | ) |   |   |   |   |   |   |   |   |   |   | (139 | ) |   |   |   |   |
| Net interest income                            |   |   |   |   |   | $ | 5,950 |   |   |   |   |   |   |   |   |   |   | $ | 5,976 |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis) |   |   |   |   |   |   |   | 3.53 | % |   |   |   |   |   |   |   |   |   |   | 3.47 | % |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets (taxable equivalent basis) (3)          |   |   |   |   |   |   |   |   |   |   | 3.83 | % |   |   |   |   |   |   |   |   |   |   | 3.92 | % |

|   | (1)  | For purposes of these calculations, nonaccruing loans are included in the average balance.  Loans andtotal 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,        |
|                                           |   |
|                                           |   | 2010 |   |   | 2009 |   |
|                                           |   | AverageBalance |   |   | InterestIncome/Expense |   |   | AverageRates Earned/Paid |   |   | AverageBalance |   |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |
|                                           |   | (Dollars in thousands) |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Assets                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1) (2)                                  |   | $ | 460,761 |   |   | $ | 20,398 |   |   |   | 5.92 | % |   | $ | 442,385 |   |   | $ | 20,133 |   |   |   | 6.08 | % |
| Taxable investment securities (1)              |   |   | 139,247 |   |   |   | 3,598 |   |   |   | 3.45 |   |   |   | 139,284 |   |   |   | 4,714 |   |   |   | 4.52 |   |
| Tax-exempt investment securities (1) (2)       |   |   | 31,396 |   |   |   | 1,201 |   |   |   | 5.11 |   |   |   | 29,589 |   |   |   | 1,185 |   |   |   | 5.35 |   |
| Other interest-earning assets                  |   |   | 1,639 |   |   |   | 15 |   |   |   | 1.22 |   |   |   | 101 |   |   |   | 7 |   |   |   | 9.27 |   |
| Total interest-earning assets                  |   |   | 633,043 |   |   |   | 25,212 |   |   |   | 5.32 |   |   |   | 611,359 |   |   |   | 26,039 |   |   |   | 5.69 |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                      |   |   | (7,969 | ) |   |   |   |   |   |   |   |   |   |   | (5,783 | ) |   |   |   |   |   |   |   |   |
| Other assets                                   |   |   | 42,911 |   |   |   |   |   |   |   |   |   |   |   | 34,050 |   |   |   |   |   |   |   |   |   |
| Total assets                                   |   | $ | 667,985 |   |   |   |   |   |   |   |   |   |   | $ | 639,626 |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits               |   | $ | 234,097 |   |   | $ | 2,298 |   |   |   | 1.31 | % |   | $ | 183,059 |   |   | $ | 1,775 |   |   |   | 1.30 | % |
| Savings deposits                               |   |   | 47,248 |   |   |   | 138 |   |   |   | 0.39 |   |   |   | 41,799 |   |   |   | 159 |   |   |   | 0.51 |   |
| Time deposits                                  |   |   | 169,735 |   |   |   | 2,703 |   |   |   | 2.13 |   |   |   | 196,462 |   |   |   | 4,772 |   |   |   | 3.25 |   |
| Repurchase agreements                          |   |   | 15,348 |   |   |   | 551 |   |   |   | 4.80 |   |   |   | 15,279 |   |   |   | 567 |   |   |   | 4.96 |   |
| FHLB borrowing                                 |   |   | 39,324 |   |   |   | 728 |   |   |   | 2.48 |   |   |   | 46,014 |   |   |   | 733 |   |   |   | 2.13 |   |
| Subordinated debenture                         |   |   | 7,217 |   |   |   | 321 |   |   |   | 5.95 |   |   |   | 7,217 |   |   |   | 225 |   |   |   | 4.17 |   |
| Total interest-bearing liabilities             |   |   | 512,969 |   |   |   | 6,739 |   |   |   | 1.76 |   |   |   | 489,830 |   |   |   | 8,231 |   |   |   | 2.25 |   |
| Non-interest-bearing liabilities:              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                |   |   | 96,960 |   |   |   |   |   |   |   |   |   |   |   | 92,556 |   |   |   |   |   |   |   |   |   |
| Other liabilities                              |   |   | 4,042 |   |   |   |   |   |   |   |   |   |   |   | 4,892 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                           |   |   | 54,014 |   |   |   |   |   |   |   |   |   |   |   | 52,348 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity     |   | $ | 667,985 |   |   |   |   |   |   |   |   |   |   | $ | 639,626 |   |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable equivalent basis) |   |   |   | 18,473 |   |   |   |   |   |   |   |   |   |   |   | 17,808 |   |   |   |   |   |
| Tax Equivalent adjustment                      |   |   |   |   |   |   | (421 | ) |   |   |   |   |   |   |   |   |   |   | (414 | ) |   |   |   |   |
| Net interest income                            |   |   |   |   |   | $ | 18,052 |   |   |   |   |   |   |   |   |   |   | $ | 17,394 |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable equivalent basis) |   |   |   |   |   |   |   | 3.56 | % |   |   |   |   |   |   |   |   |   |   | 3.44 | % |
|                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| assets (taxable equivalent basis) (3)          |   |   |   |   |   |   |   |   |   |   | 3.90 | % |   |   |   |   |   |   |   |   |   |   | 3.89 | % |

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

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

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

----

Index

----

Index

----

Index

|                                            |   | September 30,2010 |   |   | June 30,2010 |   |   | March 31,2010 |   |   | December 31,2009 |   |
|-------------------------------------------------|--------|-------------------|--------|--------|--------------|--------|--------|---------------|--------|--------|------------------|--------|
|                                            |   |              |   |   |         |   |   |          |   |   |             |   |
| Nonaccrual loans (1)                            |   | $                 | 24,334 |   |         | $      | 25,712 |          |   | $      | 19,525           |   |   | $ | 19,656 |   |
| Loans past due 90 days or more and accruing (2) |   |              | 10     |   |         |   | -      |          |   |   | -                |   |   |   | 415 |   |
| Restructured loans                              |   |              | 140    |   |         |   | 1,210  |          |   |   | 2,775            |   |   |   | 2,846 |   |
|                                            |   |              |   |   |         |   |   |          |   |   |             |   |   |   |   |   |
| Total nonperforming loans                       |   |              | 24,484 |   |         |   | 26,922 |          |   |   | 22,300           |   |   |   | 22,917 |   |
|                                            |   |              |   |   |         |   |   |          |   |   |             |   |   |   |   |   |
| Other real estate owned                         |   |              | 356    |   |         |   | -      |          |   |   | -                |   |   |   | - |   |
|                                            |   |              |   |   |         |   |   |          |   |   |             |   |   |   |   |   |
| Total nonperforming assets                      |   | $                 | 24,840 |   |         | $      | 26,922 |          |   | $      | 22,300           |   |   | $ | 22,917 |   |
|                                            |   |              |   |   |         |   |   |          |   |   |             |   |   |   |   |   |
| Allowance for loan losses                       |   | $                 | 9,327  |   |         | $      | 8,745  |          |   | $      | 8,174            |   |   | $ | 6,920 |   |
|                                            |   |              |   |   |         |   |   |          |   |   |             |   |   |   |   |   |
| Nonperforming loans to total gross loans        |   |              | 5.43   | %      |         |   | 5.88   | %             |   |   | 4.83             | %      |   |   | 4.98 | % |
| Nonperforming assets to total assets            |   |              | 3.65   | %      |         |   | 3.99   | %             |   |   | 3.37             | %      |   |   | 3.45 | % |
| Allowance for loan losses to total gross loans  |   |              | 2.07   | %      |         |   | 1.91   | %             |   |   | 1.77             | %      |   |   | 1.50 | % |
| Allowance for loan losses to                    |   |              |   |   |         |   |   |          |   |   |             |   |   |   |   |   |
| nonperforming loans                             |   |              | 38.09  | %      |         |   | 32.48  | %             |   |   | 36.65            | %      |   |   | 30.20 | % |

----

Index

----

Index

|               |   | Actual |   |   | Required forCapitalAdequacyPurposes |   |   | To Be WellCapitalizedUnder PromptCorrectiveActionRegulations |   |
|--------------------|--------|--------|--------|--------|-------------------------------------|--------|--------|--------------------------------------------------------------|--------|
| Leverage ratio     |   |   |   |   |                                |   |   |                                                         |   |
| Corporation        |   |   | 8.64   | %      |                                |   | 4.00   | %                                                            |   |   | N/A |   |
| Bank               |   |   | 7.99   | %      |                                |   | 4.00   | %                                                            |   |   | 5.00 | % |
|               |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Risk-based capital |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Tier I             |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Corporation        |   |   | 12.03  | %      |                                |   | 4.00   | %                                                            |   |   | N/A |   |
| Bank               |   |   | 11.08  | %      |                                |   | 4.00   | %                                                            |   |   | 6.00 | % |
| Total              |   |   |   |   |                                |   |   |                                                         |   |   |   |   |
| Corporation        |   |   | 13.29  | %      |                                |   | 8.00   | %                                                            |   |   | N/A |   |
| Bank               |   |   | 12.33  | %      |                                |   | 8.00   | %                                                            |   |   | 10.00 | % |

----

Index

ITEM 

ITEM 

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

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

|   | (c) | Changes in Internal Controls over Financial Reporting |
|--------|-----|-------------------------------------------------------|

----

Index

| Item 6. | Exhibits |
|---------|----------|

----

Index

SIGNATURES

| Date:  | November 12, 2010 |   | By:    | /s/ Paul Van Ostenbridge              |
|--------|-------------------|--------|--------|---------------------------------------|
|   |              |   |   | Paul Van Ostenbridge                  |
|   |              |   |   | President and Chief Executive Officer |
|   |              |   |   | (Principal Executive Officer)         |

| Date:  | November 12, 2010 |   | By:    | /s/ Claire M. Chadwick                            |
|--------|-------------------|--------|--------|---------------------------------------------------|
|   |              |   |   | Claire M. Chadwick                                |
|   |              |   |   | Senior Vice President and Chief Financial Officer |
|   |              |   |   | (Principal Financial and Accounting Officer)      |

----

Index

EXHIBIT 

| 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 |

----