**UNITED
      STATES SECURITIES AND EXCHANGE COMISSION**


**WASHINGTON,
      DC 20549**


_______________________________________





**FORM
      10-QSB**


_______________________________________






QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)


OF
      THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      quarterly period ended March 31, 2007








**ES
      BANCSHARES, INC.**


(Exact
      name of small business issuer as specified in its charter)





**Maryland**
            
            **20-4663714**(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification No.)Incorporation
                or organization)




**68
      North Plank Road, Newburgh, New York 12550**


(Address
      of principal executive offices)





**1
      (866) 646-0003**


Issuer’s
      telephone number, including area code









Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports) and (2) has been subject
      to such filing requirements for the past 90 days.  
 YES x    
NO o.





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.   YES o    NO
x.





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity as
      of the latest practicable date.





As
      of May
      14, 2007 there were 1,719,227 issued and outstanding shares of the Registrant’s
      Common Stock





Transitional
      Small Business Disclosure Format (Check One)   YES o    NO
x.





**ES
        BANCSHARES, INC.**


**FORM
      10-QSB**


**FOR
      THE QUARTERLY PERIOD ENDED MARCH 31, 2007**











**PART
                  I – FINANCIAL INFORMATION****Page**Item
                  1.
              Financial
                  Statements (Unaudited)Consolidated
                  Balance Sheets at March 31, 2007 and December 31, 2006
              2Consolidated
                  Statements of Operations for the Three Months Ended March 31, 2007,
                  and
                  2006
              3Consolidated
                  Statement of Changes in Stockholders’ Equity For the Three Months Ended
                  March 31, 2007 and 2006
              4Consolidated
                  Statements of Cash Flows for the Three Months Ended March 31, 2007
                  and
                  2006
              5Notes
                  to Unaudited Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              11Item
                  3.
              Controls
                  and Procedures
              16**PART
                  11 – OTHER INFORMATION**Item
                  1.
              Legal
                  Procedures
              16Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              17Item
                  3
              Defaults
                  on Senior Securities
              17Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              17Item
                  5.
              Other
                  Information
              17Item
                  6.
              Exhibits
              17Signatures
              18








**Part
      1.        Item 1.**


ES
                  BANCSHARES, INCCONSOLIDATED
                  BALANCE SHEET(Unaudited)(In
                  thousands, except share data)
 March
                  31,
              
              
              December
                  31,2007
              
              
              2006ASSETSCash
                  and cash equivalents:Cash
                  and due from banks
              
              $
              1,546
              
              
              $
              2,734Federal
                  funds sold
              
              
              9,169
              
              
              
              11,609Total
                  cash and cash equivalents
              
              
              10,715
              
              
              
              14,343Certificates
                  of deposit at other financial institutions
              
              
              6,244
              
              
              
              5,746Securities:Available
                  for sale, at fair value
              
              
              7,491
              
              
              
              9,443Real
                  estate mortgage loans held for sale
              
              
              —
              
              
              
              215Loans
                  receivable, netReal
                  estate mortgage loans
              
              
              35,263
              
              
              
              35,151Commercial
                  and lines of credit
              
              
              12,907
              
              
              
              10,903Home
                  equity and consumer loans
              
              
              6,454
              
              
              
              6,046Construction
                  or development loans
              
              
              11,088
              
              
              
              9,128Deferred
                  cost
              
              
              333
              
              
              
              344Allowance
                  for loan losses
              
              
              (585
              )
              
              
              (581
              )Total
                  loans receivable, net
              
              
              65,460
              
              
              
              60,991Accrued
                  interest receivable
              
              
              465
              
              
              
              515Federal
                  Reserve Bank stock
              
              
              330
              
              
              
              335Federal
                  Home Loan Bank stock
              
              
              89
              
              
              
              —Goodwill
              
              
              581
              
              
              
              581Office
                  properties and equipment, net
              
              
              711
              
              
              
              741Prepaid
                  expenses
              
              
              85
              
              
              
              74Other
                  assets
              
              
              61
              
              
              
              55Total
                  assets
              
              $
              92,232
              
              
              $
              93,039LIABILITIES
                  AND STOCKHOLDERS' EQUITYLiabilities:Deposits:Non-interest
                  bearing
              
              $
              7,093
              
              
              $
              8,156Interest
                  bearing
              
              
              73,719
              
              
              
              73,318Borrowed
                  funds
              
              
              56
              
              
              
              53Accrued
                  interest payable
              
              
              152
              
              
              
              130Other
                  liabilities
              
              
              468
              
              
              
              440Total
                  liabilities
              
              
              81,488
              
              
              
              82,097Commitments
                  and contingenciesStockholders'
                  equityCapital
                  stock (par value $0.01; 5,000,000 shares authorized;1,719,227
                  shares of ES Bancshares, Inc.issued
                  at March 31, 2007 and at December 31, 2006)
              
              
              17
              
              
              
              17Additional
                  paid-in-capital
              
              
              16,874
              
              
              
              16,869Accumulated
                  deficit
              
              
              (6,040
              )
              
              
              (5,845
              )Accumulated
                  other comprehensive loss
              
              
              (107
              )
              
              
              (99
              )Total
                  stockholders' equity
              
              
              10,744
              
              
              
              10,942Total
                  liabilities and stockholders' equity
              
              $
              92,232
              
              
              $
              93,039


See
        accompanying notes to financial statements
 2
 
 **ES
                      BANCSHARES, INC.****CONSOLIDATED
                      STATEMENTS OF OPERATIONS****FOR
                      THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006****(Unaudited)****(In
                      thousands, except per share
                      data)**
 
 **For
                      the Three Months****Ended
                      March 31,****2007**
                  
                  
                  **2006**Interest
                      and dividend income:Loans
                  
                  $
                  1,149
                  
                  
                  $
                  617Securities
                  
                  
                  99
                  
                  
                  
                  83Certificates
                      of deposit
                  
                  
                  84
                  
                  
                  
                  32Fed
                      Funds and other earning assets
                  
                  
                  162
                  
                  
                  
                  106Total
                      interest and dividend income
                  
                  
                  1,494
                  
                  
                  
                  838Interest
                      expense:Deposits
                  
                  
                  876
                  
                  
                  
                  374Borrowed
                      funds
                  
                  
                  1
                  
                  
                  
                  0Total
                      interest expense
                  
                  
                  877
                  
                  
                  
                  374Net
                      interest income
                  
                  
                  617
                  
                  
                  
                  464Provision
                      for loan losses
                  
                  
                  4
                  
                  
                  
                  32Net
                      interest income after provision for loan losses
                  
                  
                  613
                  
                  
                  
                  432Non-interest
                      income:Service
                      charges and fees
                  
                  
                  73
                  
                  
                  
                  19Net
                        gain on sales of real estate mortgage loans held for
                        sale
                  
                  
                  17
                  
                  
                  
                  61Other
                  
                  
                  13
                  
                  
                  
                  2Total
                      non-interest income
                  
                  
                  103
                  
                  
                  
                  82Non-interest
                      expense:Compensation
                      and benefits
                  
                  
                  486
                  
                  
                  
                  488Occupancy
                      and equipment
                  
                  
                  161
                  
                  
                  
                  152Data
                      processing service fees
                  
                  
                  41
                  
                  
                  
                  33Other
                  
                  
                  223
                  
                  
                  
                  206Total
                      non-interest expense
                  
                  
                  911
                  
                  
                  
                  879Net
                      (loss) before income taxes
                  
                  
                  (195
                  )
                  
                  
                  (365
                  )Income
                      tax expense
                  
                  
                  —
                  
                  
                  
                  -Net
                      (loss)
                  
                  $
                  (195
                  )
                  
                  $
                  (365
                  )Other
                      comprehensive income (loss):Net
                      unrealized gain/(loss) on available-for-sale securities
                  
                  
                  (8
                  )
                  
                  
                  (27
                  )Comprehensive
                      income (loss)
                  
                  $
                  (203
                  )
                  
                  $
                  (392
                  )Weighted
                      average:Common
                      shares
                  
                  
                  1,719,227
                  
                  
                  
                  1,719,177(Loss)
                      per common share:Basic
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.21
                  )Basic
                      & diluted
                  
                  $
                  (0.11
                  )
                  
                  $
                  (0.21
                  )
  See
              accompanying notes to financial statements
  3
 **ES
                        BANCSHARES, INC.****CONSOLIDATED
                        STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY****FOR
                        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006****(Unaudited)****(In
                        thousands of dollars except, share
                        data)**
  
 **Accumulated****Additional**
                    
                    
                    
                    
                    
                    **Other****Capital
                        Stock**
                    
                    
                    **Paid-In**
                    
                    
                    **Accumulated**
                    
                    
                    **Comprehensive****Shares**
                    
                    
                    **Amount**
                    
                    
                    **Capital**
                    
                    
                    **Deficit**
                    
                    
                    **(Loss)**
                    
                    **Total**Balance
                        at January 1, 2006
                    
                    
                    1,719,177
                    
                    
                    $
                    8,596
                    
                    
                    $
                    8,276
                    
                    
                    $
                    (4,418
                    )
                    
                    $
                    (122
                    )
                    
                    $
                    12,332Stock
                        based compensation
                    
                    
                    
                    
                    
                    
                    —
                    
                    
                    
                    6
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    6Forfeited
                        employee stock options
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (6
                    )
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (6
                    )Comprehensive
                        loss:Net
                        loss for the period
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (365
                    )
                    
                    
                    —
                    
                    
                    
                    (365
                    )Net
                          unrealized (loss) on available-for-sale securities
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (27
                    )
                    
                    
                    (27
                    )Total
                        comprehensive loss
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (392
                    )Balance
                        at March 31, 2006
                    
                    
                    1,719,177
                    
                    
                    $
                    8,596
                    
                    
                    $
                    8,276
                    
                    
                    $
                    (4,783
                    )
                    
                    $
                    (149
                    )
                    
                    $
                    11,940Balance
                        at January 1, 2007
                    
                    
                    1,719,227
                    
                    
                    $
                    17
                    
                    
                    $
                    16,869
                    
                    
                    $
                    (5,845
                    )
                    
                    $
                    (99
                    )
                    
                    $
                    10,942Stock
                        based compensation
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    5
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    5Comprehensive
                        loss:Net
                        loss for the period
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (195
                    )
                    
                    
                    —
                    
                    
                    
                    (195
                    )Net
                          unrealized (loss) on available-for-sale securities
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (8
                    )
                    
                    
                    (8
                    )Total
                        comprehensive loss
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (203
                    )Balance
                        at March 31, 2007
                    
                    
                    1,719,227
                    
                    
                    $
                    17
                    
                    
                    $
                    16,874
                    
                    
                    $
                    (6,040
                    )
                    
                    $
                    (107
                    )
                    
                    $
                    10,744
    See
                accompanying notes to financial statements
 4
 **ES
                          Bancshares, Inc.****CONSOLIDATED
                          STATEMENT OF CASH FLOWS****(Unaudited)**
  
 For
                          the Three MonthsEnded
                          March 31,2007
                      
                      
                      2006(In
                          thousands)Cash
                          flows from operating activities:Net
                          loss for period
                      
                      $
                      (195
                      )
                      
                      $
                      (365
                      )Adjustments
                          to reconcile net losses to net cashprovided
                          by operating activities:Provision
                          for loan losses
                      
                      
                      4
                      
                      
                      
                      32Depreciation
                          expense
                      
                      
                      54
                      
                      
                      
                      50Amortization
                          of deferred fees, discounts and premiums, net
                      
                      
                      1
                      
                      
                      
                      (2
                      )Net
                          originations on loans held for sale
                      
                      
                      232
                      
                      
                      
                      353Net
                          gain on sale of real estate mortgage loans held for sale
                      
                      
                      (17
                      )
                      
                      
                      (61
                      )Stock
                          compensation expense
                      
                      
                      5
                      
                      
                      
                      1Changes
                          in assets and liabilities/decrease
                          in other assets
                      
                      
                      32
                      
                      
                      
                      (80
                      )Increase
                          in accrued expenses and other liabilities
                      
                      
                      51
                      
                      
                      
                      132Net
                          cash provided by operating activities
                      
                      
                      167
                      
                      
                      
                      60Cash
                          flows from investing activities:Maturity
                          of certificates of deposit at other financial institutions
                      
                      
                      2,399
                      
                      
                      
                      —Purchase
                          of certificates of deposit at other financial institutions
                      
                      
                      (2,897
                      )
                      
                      
                      —Purchase
                          of available-for-sale securities
                      
                      
                      —
                      
                      
                      
                      (2,999
                      )Proceeds
                          from principal payments and maturities of securities
                      
                      
                      1,943
                      
                      
                      
                      281Net
                          disbursements for loan originations
                      
                      
                      (4,472
                      )
                      
                      
                      (6,280
                      )Purchase
                          of Federal Home Loan Bank stock
                      
                      
                      (89
                      )
                      
                      
                      —Redemption
                          of Federal Reserve Bank stock
                      
                      
                      5
                      
                      
                      
                      8Leasehold
                          improvements and acquisitions of capital assets
                      
                      
                      (24
                      )
                      
                      
                      (9
                      )Net
                          cash used in investing activities
                      
                      
                      (3,135
                      )
                      
                      
                      (8,999
                      )Cash
                          flows from financing activities:Net
                          increase /   in deposits
                      
                      
                      (663
                      )
                      
                      
                      8,094Proceeds
                          of advance from line of credit
                      
                      
                      3
                      
                      
                      
                      —Net
                          cash / provided by financing activities
                      
                      
                      (660
                      )
                      
                      
                      8,094Net
                          decrease in cash and cash equivalents
                      
                      
                      (3,628
                      )
                      
                      
                      (845
                      )Cash
                          and cash equivalents at beginning of period
                      
                      
                      14,343
                      
                      
                      
                      13,550Cash
                          and cash equivalents at end of period
                      
                      $
                      10,715
                      
                      
                      $
                      12,705Supplemental
                          cash flow informationInterest
                          paid
                      
                      $
                      854
                      
                      
                      $
                      336Income
                          taxes paid
                      
                      $
                      —
                      
                      
                      $
                      —
   See
                  accompanying notes to financial statements
 5
 **ES
                BANCSHARES, INC.**
 **NOTES
        TO UNAUDITED FINANCIAL STATEMENTS**
 
 
 **Note
        1.  Commencement of Operations**
 
 On
        April
        28, 2004, Empire State Bank, N.A. (the “Bank”) sold 1,650,000 shares of its
        common stock at a price of $10.00 per share, for an aggregate consideration
        of
        $16,500,000 (the “Offering”).  In addition, for every five (5) shares
        of common stock purchased by a subscriber in the offering, such subscriber
        received a warrant to purchase, within a three-year period, one (1) share
        of
        common stock at an exercise price of $12.50 per share.  Upon receipt
        of final approvals from the Office of the Comptroller of the Currency (“OCC”)
        and the Federal Deposit Insurance Company (“FDIC”), the Bank commenced
        operations on June 28, 2004.


**Note
      2.  Holding Company Formation**





The
      Board of Directors of the Bank
      entered into an Agreement and Plan of Share Exchange (the “Plan”) on March 21,
      2006, as amended and restated as of May 16, 2006, under which the Bank
      reorganized into a one-bank holding company structure (the
“Reorganization”).  In connection with the Reorganization, the Bank
      formed ES Bancshares, Inc. (the “Company”), a Maryland corporation, to serve as
      the holding company.  The Reorganization was effected by an exchange
      of all of the outstanding shares of Bank Common Stock for shares of Company
      Common Stock (the “Share Exchange”).  Following the Share Exchange,
      the Bank became a wholly-owned subsidiary of the Company and former shares
      of
      Bank Common Stock represent the same number of shares of Company Common
      Stock.





The
      Company filed a Registration
      Statement on Form S-4 which the Securities and Exchange Commission (the “SEC”)
      declared effective on May 25, 2006.  The Bank’s shareholders approved
      the Reorganization at its Annual Meeting of Shareholders on July 6,
      2006.  The Reorganization was completed on August 15,
      2006.





**Note
      3.  Basis of Presentation**





The
      consolidated financial statements
      included herein include the accounts of the Company and the Bank, subsequent
      to
      the elimination of all significant intercompany balances and transactions,
      and
      have been prepared by the Company without audit.  In the opinion of
      management, the unaudited financial statements include all adjustments,
      consisting of normal recurring accruals, necessary for a fair presentation
      of
      the financial position and results of operations for the periods
      presented.  Certain information and footnote disclosures normally
      included in accordance with generally accepted accounting principles of the
      United States have been condensed or omitted pursuant to the rules and
      regulations of the SEC, however, the Company believes that the disclosures
      are
      adequate to make the information presented not misleading.  The
      operating results for the periods presented are not necessarily indicative
      of
      results to be expected for any other interim period or for the entire fiscal
      year ending December 31, 2007.  The unaudited interim financial
      statements presented herein should be read in conjunction with the annual
      financial statements of the Company as of and for the fiscal year ended December
      31, 2006, included in Form 10-KSB filed with the SEC.





The
      financial statements have been
      prepared in conformity with generally accepted accounting principles of the
      United States.  In preparing the financial statements, management is
      required to make estimates and assumptions that affect the reported amounts
      of
      assets, liabilities, income and expense.  Actual results could differ
      significantly from these estimates.  Material estimates that are
      particularly susceptible to significant change relate to the determination
      of
      the allowance for losses on loans, and the valuation allowance on deferred
      tax
      assets.





6


**Note
      4. Summary of Significant Accounting Policies**





**Warrants**





Effective
      April 15, 2007, the Company
      modified the terms of the warrants to purchase common stock of the Company
      by
      reducing the exercise price of $12.50 to $10.00 and extended the expiration
      term
      from June 28, 2007 to June 28, 2008.  There was no additional expense
      recognized as a result of the modification.  At March 31, 2007 the
      Company had 329,900 stockholder warrants issued and
      outstanding.  Additionally, there were 190,000 issuable organizer
      warrants as of March 31, 2007.  The organizer warrants are convertible
      into common shares at an exercise price of $10.00 and exercisable through June
      27, 2009 and their terms have not been modified.  The organizer
      warrants were valued at $323,000 and were expensed at the time of issuance
      in
      accordance with FAS 123. The fair value was determined using the minimum value
      method using the following assumptions: Grant date of June 28, 2004, $10.00
      strike price, $10.00 fair value of a share of capital stock at grant date,
      risk-free rate of 3.8%, no dividends, five (5) year life and no
      volatility.




**Stock
      Options**




On
      October 19, 2004 the Board of Directors approved the adoption of the Company’s
      Stock Option Plan and option grants were made for 173,000 shares at an exercise
      price of $10.50 per share.  These options have a 10-year term and may
      be either non-qualified stock options or incentive stock
      options.  These options were not deemed granted until shareholder
      approval occurred on May 3, 2005.  Subsequently, incentive options on
      10,000 shares at an exercise price of $10.00 per share, 6,250 shares at an
      exercise price of $10.50 per share, 5,000 shares at an exercise price of $10.00
      per share, and 10,000 shares at an exercise price of $10.50 per share were
      awarded on November 15, 2005, December 20, 2005, January 12, 2006, and January
      16, 2007, respectively.  Additionally, 5,000 non-qualified stock
      options at an exercise price of $10.50 were also awarded on January 16,
      2007.  The options vest at a rate of 20% on each of five annual
      vesting dates except for 65,000 options granted to Directors, which vested
      immediately.  Each option entitles the holder to purchase one share of
      common stock at an exercise price equal to the fair market value of the stock
      on
      the grant date.





Effective
      January 1, 2006, the Company
      adopted Statement of Financial Accounting Standards No. 123 (revised 2004)
      “Share-based Payment” (“SFAS 123(R)”), using the modified prospective transition
      method.  Previously, the Company accounted for stock-based
      compensation under the fair value method of accounting in accordance with SFAS
      123 prior to revision.  For accounting purposes, the Company
      recognizes expense for shares of common stock awarded under the Company’s Stock
      Option Plan over the vesting period at the fair market value of the shares
      on
      the date they are awarded.  The fair values of options granted are
      computed using the Black-Scholes option-pricing model, using the following
      weighted-average assumptions as of the grant dates.











7
 
  2007
                
                
                2006
                
                
                2005Risk
                    free interest rate
                
                
                4.74%
                
                
                
                4.35%
                
                
                
                3.98%Expected
                    option life
                
                
                5.0
                
                
                
                5.0
                
                
                
                5.0Expected
                    stock price volatility
                
                
                0.10%
                
                
                
                0.10%
                
                
                
                0.10%Dividend
                    yield
                
                
                0.00%
                
                
                
                0.00%
                
                
                
                0.00%Weighted
                      average fair value of optionsgranted during the
                      year
                
                $
                —
                
                
                $
                2.20
                
                
                $
                1.08


A
      summary of options outstanding under
      the Bank’s Stock Option Plan as of March 31, 2007, and changes during the
      three-month period then ended is presented below.





Weighted
              
              
              AverageAverage
              
              
              RemainingExercise
              
              
              ContractualShares
              
              
              Price
              
              
              Term
                  (yrs.)Outstanding
                  atJanuary
                  1, 2007
              
              
              147,750
              
              
              $
              10.47
              
              
              
              7.9Granted
              
              
              15,000
              
              
              
              10.50
              
              
              
              10.0Exercised
              
              
              —
              
              
              
              —
              
              
              
              —Forfieited
                  or expired
              
              
              —
              
              
              
              —
              
              
              
              —Outstanding
                  atMarch
                  31, 2007
              
              
              162,750
              
              
              $
              10.47
              
              
              
              7.8Options
                  exerciseable atMarch
                  31, 2007
              
              
              97,150
              
              
              $
              10.49
              
              
              
              7.7






As
      of March 31, 2007, there was $53,653
      of total unrecognized compensation cost related to nonvested stock options
      granted under the Stock Option Plan.  The cost is expected to be
      recognized over a period of approximately 35 months.





**Earnings
      (Loss) Per Share**





Basic
      earnings (loss) per share is
      computed by dividing net income (loss) by the weighted average number of common
      shares outstanding for the period.  Diluted earnings (loss) per share
      reflects the potential dilution that could occur if securities or other
      contracts to issue common stock (such as stock warrants and options) were
      exercised or converted into common stock or resulted in the issuance of common
      stock that then shared in the earnings of the entity.  Diluted
      earnings (loss) per share is computed by dividing net income (loss) by the
      weighted-average number of shares outstanding for the period plus
      common-equivalent shares computed using the treasury stock method. None of
      the
      329,900 stockholder warrants, or 190,000 organizer warrants, or 162,750 stock
      options were considered in computing diluted earnings (loss) per share because
      to do so would have been antidilutive.





8


**Income
      Taxes**





Deferred
      tax assets and liabilities are the expected future tax amounts for the temporary
      differences between carrying amounts and tax bases of assets and liabilities,
      computed using tax rates.  Temporary differences are differences
      between the tax basis of assets and liabilities and their reported amounts
      in
      the financial statements that will result in taxable or deductible amounts
      in
      future years. The effect on deferred taxes of a change in tax rates is
      recognized in income in the period that includes the enactment date. The tax
      benefit on net operating losses, included in deferred tax assets, was
      approximately $1.9 million at March 31, 2007.  The net operating
      losses are being carried forward and will be available to reduce future taxable
      income.  Realization of deferred tax assets is dependent upon the
      generation of future taxable income.  A valuation allowance is
      provided when it is more likely than not that some portion of the deferred
      tax
      asset will not be realized.  Because the Bank has no operating
      history, management recorded a valuation allowance against the total amount
      of
      deferred tax assets.





**Securities**





The
      Company is required to report readily-marketable equity and debt securities
      in
      one of the following categories: (i) “held-to-maturity” (management has the
      positive intent and ability to hold to maturity), which are reported at
      amortized cost; (ii) “trading” (held for current resale), which are to be
      reported at fair value, with unrealized gain and losses included in earnings;
      and (iii) “available for sale” (all other debt and marketable equity
      securities), which are to be reported at fair value, with unrealized gains
      and
      losses reported net of taxes, as accumulated other comprehensive income, a
      separate component of stockholders’ equity.  The Company currently
      classifies all securities as available-for-sale.





Premiums
      and discounts on investments in debt and equity securities are amortized to
      expense or accreted to income over the estimated life of the respective
      securities using methods approximating the effective interest method. Gains
      and
      losses on the sales of securities are recognized upon realization based on
      the
      specific identification method.





**Loans
      Held for Sale**





Loans
      originated and intended for sale
      in the secondary market are carried at the lower of cost or estimated fair
      value
      in the aggregate. All sales are made with servicing released and without
      recourse. Gains and losses on the disposition of loans held for sale are
      determined on the specific identification basis. Net unrealized losses on loans
      held for sale are recognized through a valuation allowance by charges to
      income.  There were no valuation allowances as of March 31,
      2007.





**Loans**





Loans
      receivable that management has the intent and ability to hold for the
      foreseeable future or until maturity or payoff are reported at their unpaid
      principal adjusted for any charge-offs, the allowance for loan losses, and
      any
      deferred fees and costs on originated loans and any unamortized premiums or
      discounts on purchased loans. Loan origination and commitment fees and certain
      direct loan origination costs will be deferred and the net amount amortized
      as
      an adjustment of the related loan’s yield using methods that approximate the
      interest method over the contractual life of the loan. Loan interest income
      is
      accrued daily on outstanding balances.





**Classification
      of Assets.**





Regulations
      require that the Company
      classify its own assets on a regular basis and establish prudent valuation
      allowances based on such classifications.  In addition, in connection
      with examinations, OCC examiners have the authority to identify problem assets,
      and if appropriate, require that they be classified. There are three
      classifications for problem assets: substandard, doubtful, and
      loss.  Substandard assets have one or more defined weaknesses and are
      characterized by the distinct possibility that the




9


institution
      will sustain some loss if the deficiencies are not
      corrected.  Doubtful assets have the weaknesses of substandard assets,
      with the additional characteristics that the weaknesses make collection or
      liquidation in full on the basis of currently existing facts, conditions and
      values questionable, and there is a high possibility of loss.  An
      asset classified loss is considered uncollectible and of such little value
      that
      continuance as an asset on the balance sheet of the institution is not
      warranted.  Assets classified as substandard or doubtful require the
      Company to establish general allowances for loan losses.  If an asset
      or portion thereof is classified as loss, the Company must either establish
      specific allowances for loan losses in the amount of 100% of the portion of
      the
      asset classified loss, or charge off such amount.  If a Company does
      not agree with an examiner's classification of an asset, it may appeal this
      determination to the Regional Director of the OCC.  On the basis of
      management's review, at March 31, 2007, the Bank had $277,804 of assets
      classified as substandard.  There were no assets classified as
      doubtful or loss.





**Allowance
      for Loan Losses**





The
      allowance for loan losses is increased by provisions for loan losses charged
      to
      income.  Losses are charged to the allowance when all or a portion of
      a loan is deemed to be uncollectible.  Subsequent recoveries of loans
      previously charged off are credited to the allowance for loan losses when
      realized.





The
      allowance for loan losses is a significant estimate based upon management’s
      periodic evaluation of the loan portfolio under current economic conditions,
      considering factors such as the Company’s past loss experience, known and
      inherent risks in the portfolio, adverse situations that may affect the
      borrower’s ability to repay, and the estimated value of the underlying
      collateral.  Establishing the allowance for loan losses involves
      significant management judgment, utilizing the best available information at
      the
      time of review.  Those judgments are subject to further review by
      various sources, including the Bank’s regulators, who may require the Company to
      recognize additions to the allowance based on their judgment about information
      available to them at the time of their examination.  While management
      estimates loan losses using the best available information, future adjustments
      to the allowance may be necessary based on changes in economic and real estate
      market conditions, further information obtained regarding known problem loans,
      the identification of additional problem loans, and other
      factors.  Allocations of the allowance may be made for specific loans,
      but the entire allowance is available for any loan that in management’s judgment
      should be charged off.





**Cash
      Flows**





Cash
      and cash equivalents include cash,
      deposits with other financial institutions, and federal funds
      sold.  Net cash flows are reported for customer loan and deposit
      transactions, interest-bearing deposits in other financial institutions, and
      federal funds purchased.





**Note
      5.  Commitments and Contingencies**





**Legal
      Proceedings**





The
      Company has not been a party to any legal proceedings, which may have a material
      effect on the Company’s results of operations and financial
      condition.  However, in the normal course of its business, the Company
      may become involved as plaintiff or defendant in proceedings such as judicial
      mortgage foreclosures and proceedings to collect on loan obligations and to
      enforce contractual obligations.





**Operating
      Lease Commitments**





The
      Company is obligated under non-cancelable operating leases for its main office
      location in Newburgh, New York and its branch office location in New Paltz,
      New
      York.  The leases are for initial terms of 10 years and 15 years,
      respectively and have various renewal options.  Rent expense under
      operating leases was $74,000 for the three months ended March 31,
      2007.  At March 31, 2007, the future




10


minimum
      rental payments under operating lease agreements for the fiscal years ending
      December 31 are $159,000 in 2007, $215,000 in 2008, $219,000 in 2009, $226,000
      in 2010, $229,000 in 2011 and a total of $1.1 million for 2012 and
      thereafter.





The
      Bank’s lease obligation for its Staten Island, New York and Lynbrook, New York
      lending offices is on a month-to-month basis at $800 per month.





**Off-Balance
      Sheet Financial Instruments**





The
      Company’s off-balance sheet
      financial instruments at March 31, 2007 were limited to loan origination
      commitments of $14.4 million (including one-to-four family loans held for sale
      of $4.3 million) and unused lines of credit (principally commercial and home
      equity lines) extended to customers of $9.9 million.  Substantially
      all of these commitments and lines of credit have been provided to customers
      within the Bank’s primary lending area.  Loan origination commitments
      at March 31, 2007 consisted of adjustable and fixed rate commitments of $9.3
      million and $5.1 million respectively, with interest rates ranging from 5.50%
      to
      9.60%.








**Item
      2.** **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**





**Forward-Looking
      Statements**





This
      Report on Form 10-QSB of the
      Company includes “forward-looking statements” within the meaning of the
      Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
      as
      amended, that are based on the current beliefs of, as well as assumptions made
      by and information currently available to, the management of the
      Company.  All statements other than statements of historical facts
      included in this Report, including, without limitation, statements contained
      under the caption “Management’s Discussion and Analysis” regarding the Company’s
      business strategy and plans and objectives of the management of the Company
      for
      future operations, are forward-looking statements.  When used in this
      Report, the words “anticipate”, “believe”, “estimate”, “project”, “predict”,
“expect”, “intend” or words or phrases of similar import, as they relate to the
      Company or the Company’s management, are intended to identify forward-looking
      statements.  Although the Company believes that the expectations
      reflected in such forward-looking statements are reasonable, such expectations
      may not prove to be correct.  All forward-looking statements are
      subject to risks and uncertainties that could cause actual results to differ
      materially from those anticipated, believed, estimated, projected, predicted,
      expected or intended including risks and uncertainties including changes in
      economic conditions in our market area, changes in local real estate values,
      changes in regulatory policies, fluctuations in interest rates, local loan
      and
      deposit demand levels, competition, our ability to control expenses, our ability
      to increase our lower cost deposits, our ability to execute our plan to attain
      profitability, and other factors.  The Company does not intend to
      update these forward-looking statements.  All subsequent written and
      oral forward-looking statements attributable to the Company or persons acting
      on
      its behalf are expressly qualified in their entirety by applicable cautionary
      statements.





**Comparison
      of Financial Condition at March 31, 2007 and December 31,
      2006**





Total
      assets at March 31, 2007 amounted
      to $92.2 million, representing a decrease of $807,000 or –0.9%, from $93.0
      million at December 31, 2006.  The decrease in assets was primarily
      attributable to a $3.6 million decrease in  total cash and cash
      equivalents, and a $1.9 million decrease in securities available for sale that
      was partially offset by a $4.5 million increase in total loans receivable,
      net.





11


Overall,
      total loans receivable, net,
      increased $4.5 million, or 7.3%, to $65.5 million at March 31, 2007 from $61.0
      million at December 31, 2006.  Commercial loans and commercial lines
      of credit increased $2.0 million, or 18.4%, from $10.9 million to $12.9 million,
      home equity and consumer loans increased $408,000, or 6.7%, from $6.0 million
      to
      $6.4 million, and construction or development loans increased $2.0 million,
      or
      21.5%, from $9.1 million to $11.1 million.  Commercial real estate
      loans increased $157,000, or 0.5%, from $33.6 million at December 31, 2006
      to
      $33.7 million at March 31, 2007, while residential mortgage loans, excluding
      mortgage loans held for sale, decreased $45,000, or 2.8%, to $1.5 million over
      the same three-month period.  Management may consider slowing loan
      growth in the future depending on economic, regulatory, deposit growth and
      capital considerations.





Total
      cash and cash equivalents at March 31, 2007 decreased $3.6 million, or 25.3%,
      to
      $10.7 million from $14.3 million at December 31, 2006, while certificates of
      deposit at other financial institutions increased $498,000, or 8.7%, to $6.2
      million from $5.7 million during the same period.  Total securities at
      March 31, 2007 decreased $1.9 million, or 20.7%, to $7.5 million from $9.4
      million at December 31, 2006.





Interest
      bearing deposits grew
      $401,000, or 0.5%, to $73.7 million at March 31, 2007 from $73.3 million at
      December 31, 2006.  The net growth over the three-month period
      consisted of a $2.3 million increase in savings accounts, and decreases of
      $58,000 in money market accounts, $79,000 in NOW accounts, and $1.8 million
      in
      certificates of deposit.  Over the same three-month period
      non-interest bearing accounts decreased $1.1 million, or 13.0%, from $8.2
      million to $7.1 million.





Stockholders’
equity
      decreased by
      $198,000 to $10.7 million at March 31, 2007 from $10.9 million at December
      31,
      2006.  The decrease is primarily attributable to a net loss for the
      quarter of $195,000 and an $8,000 increase in net unrealized loss in market
      value of securities available-for-sale.  The ratio of stockholders’
equity to total assets decreased to 11.6% at March 31, 2007 from 11.8% at
      December 31, 2006.  Book value per share decreased to $6.25 at March
      31, 2007 from $6.36 at December 31, 2006.  See “Liquidity and Capital
      Resources” for information regarding the Bank’s regulatory capital amounts and
      ratios.




















12


**Analysis
      of Net Interest Income**





The
      following tables summarize the Company’s average balance sheets for interest
      earning assets and interest bearing liabilities, average yields and costs (on
      an
      annualized basis), and certain other information for the three-month period
      ended March 31, 2007 as compared to the comparable three-month period ended
      March 31, 2006.  The yields and costs were derived by dividing
      interest income or expense by the average balance of assets and
      liabilities****for the period shown.  Substantially
      all average balances were computed based on daily balances.  The
      yields include deferred fees and discounts, which are considered yield
      adjustments.




**For
                  the Three Months Ended March 31,****2007**
              
              
              **2006****Average**
              
              
              
              
              
              
              
              
              **Average****Average**
              
              
              
              
              
              **Yield
                  /**
              
              
              **Average**
              
              
              
              
              
              **Yield
                  /****Balance**
              
              
              **Interest**
              
              
              **Cost**
              
              
              **Balance**
              
              
              **Interest**
              
              
              **Cost****(Dollars
                  in thousands)****Assets**Interest-earning
                  assets:Loans
              
              $
              62,384
              
              
              $
              1,149
              
              
              
              7.37
              %
              
              $
              36,664
              
              
              $
              617
              
              
              
              6.73
              %Fed
                  Funds
              
              
              11,811
              
              
              
              155
              
              
              
              5.24
              %
              
              
              9,014
              
              
              
              100
              
              
              
              4.50
              %Certificates
                  of deposit
              
              
              6,233
              
              
              
              84
              
              
              
              5.48
              %
              
              
              2,738
              
              
              
              32
              
              
              
              4.74
              %FRB
                  Stock
              
              
              334
              
              
              
              7
              
              
              
              7.78
              %
              
              
              377
              
              
              
              6
              
              
              
              6.37
              %Securities-available
                  for sale
              
              
              8,303
              
              
              
              99
              
              
              
              4.79
              %
              
              
              7,720
              
              
              
              83
              
              
              
              4.30
              %Total
                  interest-earning assets
              
              
              89,065
              
              
              $
              1,494
              
              
              
              6.65
              %
              
              
              56,513
              
              
              $
              838
              
              
              
              5.93
              %Allowance
                  for loan losses
              
              
              (583
              )
              
              
              
              
              
              
              
              
              
              
              (113
              )Cash
                  & Due from banks
              
              
              2,010
              
              
              
              
              
              
              
              
              
              
              
              1,898Other
                  Non-interest earning assets
              
              
              1,920
              
              
              
              
              
              
              
              
              
              
              
              2,001Total
                  assets
              
              $
              92,412
              
              
              
              
              
              
              
              
              
              
              $
              60,299**Liabilities
                  and  Stockholders' Equity**Interest-bearing
                  liabilities:NOW
                  accounts
              
              $
              843
              
              
              $
              1
              
              
              
              0.38
              %
              
              $
              657
              
              
              $
              1
              
              
              
              0.31
              %Money
                  Market accounts
              
              
              49,108
              
              
              
              607
              
              
              
              4.90
              %
              
              
              19,148
              
              
              
              189
              
              
              
              4.00
              %Regular
                  savings accounts
              
              
              5,440
              
              
              
              44
              
              
              
              3.21
              %
              
              
              3,766
              
              
              
              26
              
              
              
              2.80
              %Certficates
                  of Deposit
              
              
              18,067
              
              
              
              224
              
              
              
              4.92
              %
              
              
              14,533
              
              
              
              158
              
              
              
              4.41
              %Total
                  interest-bearing deposits
              
              
              73,458
              
              
              
              876
              
              
              
              4.73
              %
              
              
              38,104
              
              
              
              374
              
              
              
              3.98
              %Borrowings
              
              
              54
              
              
              
              1
              
              
              
              8.25
              %
              
              
              -
              
              
              
              -
              
              
              
              -Total
                  interest-bearing liabilities
              
              $
              73,512
              
              
              $
              877
              
              
              
              4.73
              %
              
              $
              38,104
              
              
              $
              374
              
              
              
              3.98
              %Non-interest-bearing
                  liabilities
              
              
              8,052
              
              
              
              
              
              
              
              
              
              
              
              9,987Total
                  liabilities
              
              
              81,564
              
              
              
              
              
              
              
              
              
              
              
              48,091Stockholders'
                  equity
              
              
              10,848
              
              
              
              
              
              
              
              
              
              
              
              12,208Total
                  liabilities and stockholders' equity
              
              $
              92,412
              
              
              
              
              
              
              
              
              
              
              $
              60,299Net
                  interest income
              
              
              
              
              
              $
              617
              
              
              
              
              
              
              
              
              
              
              $
              464Average
                  interest rate spread(1)
              
              
              
              
              
              
              
              
              
              
              1.92
              %
              
              
              
              
              
              
              
              
              
              
              1.95
              %Net
                  interest margin (2)
              
              
              
              
              
              
              
              
              
              
              2.77
              %
              
              
              
              
              
              
              
              
              
              
              3.28
              %Net
                  interest-earning assets(3)
              
              $
              15,553
              
              
              
              
              
              
              
              
              
              
              $
              18,409Ratio
                  of average interest-earning assets to average interest-bearing
                  liabilities
              
              
              
              
              
              
              
              
              
              
              121.16
              %
              
              
              
              
              
              
              
              
              
              
              148.31
              %
 (1)  Average
                  interest rate spread represents the difference between the yield
                  on
                  average interest-earning assets and and the cost of average
                  interest-bearing liabilities.(2)  Net
                  interest margin represents net interest income divided by average
                  total
                  interest-earning assets.(3)  Net
                  interest-earning assets represents total interest-earning assets
                  less
                  total interest-bearing
                  liabilities.


13


**Results
      of Operations for the Quarters Ended March 31, 2007 and March 31,
      2006**





***General.***  For
      the quarter ended March 31, 2007, the Company recognized a net loss of $195,000,
      or ($0.11) per diluted share, as compared to a net loss of $365,000, or ($0.21)
      per diluted share, for the quarter ended March 31, 2006.





***Interest
      Income.***Interest income amounted to $1.5 million for
      the quarter ended March 31, 2007, as compared to $838,000 for the quarter ended
      March 31, 2006.  The increase of $656,000 was primarily attributable
      to the increase in average interest-earning assets, which increased $32.6
      million to $89.1 million for the quarter ended March 31, 2007 from $56.5 million
      for the comparable quarter ended one year earlier, and to the higher yields
      that
      were realized in 2007 as compared to 2006.  The average yield on
      interest-earning assets for the quarter ended March 31, 2007 was 6.65%, which
      was 72 basis points higher than the 5.93% yield on the Bank’s interest-earning
      assets for the quarter ended March 31, 2006.





Average
      loan balances increased by $25.7 million, from $36.7 million for the quarter
      ended March 31, 2006 to $62.4 million for the quarter ended March 31, 2007,
      while the average yield increased from 6.73% to 7.37% over the same respective
      periods.  The average balances of the Bank’s Fed Funds and securities
      available for sale increased by $2.8 million and $583,000, respectively, over
      the quarter ended March 31, 2007 as compared to the quarter ended March 31,
      2006.  The average yields on those respective interest-earning assets
      increased to 5.24% from 4.50%, and to 4.79% from 4.30% over the same comparable
      periods primarily as a result of higher interest rates that were available
      to
      these short-term assets during the latter period.  The average balance
      and yield of the Bank’s certificates of deposit at other financial institutions
      for the quarter ended March 31, 2007 was $6.2 million and 5.48%, respectively,
      as compared to an average balance of $2.7 million and a yield of 4.74% for
      the
      comparable quarter ended one-year earlier.


***Interest
      Expense.***Total interest expense for the quarter ended
      March 31, 2007 increased by $503,000, from $374,000 to $877,000, when compared
      to the same three-month period one year earlier.  The increase was
      primarily due to increases in short-term interest rates, and to the increase
      in
      the average balances of the Bank’s interest-bearing deposits.  Average
      money market account balances increased $30.0 million, from $19.1 million for
      the quarter ended March 31, 2006 to $49.1 million for the quarter ended March
      31, 2007.  Over those respective quarters the average costs for those
      balances increased 90 basis points, from 4.00% to 4.90%.  The average
      balances and costs of the Bank’s certificates of deposit portfolio increased to
      $18.1 million at an average cost of 4.92% over the quarter ended March 31,
      2007,
      from $14.5 million at an average cost of 4.41% over the same quarter ended
      one-year earlier.  For the quarter ended March 31, 2007, the average
      balance of the Company’s borrowed funds was $54,000 and its average cost was
      8.25%.  These borrowed funds were used by the Company to fund its
      formation costs and subsequent expenses.  Since the Company was formed
      during the quarter ended September 30, 2006, there were no borrowed funds during
      the quarter ended March 31, 2006.





***Net
      Interest
      Income.***  Net interest income was approximately $617,000
      for the quarter ended March 31, 2007 as compared to $464,000 for the same
      quarter in the prior year.  The Bank’s average interest rate spread
      decreased to 1.92% for the quarter ended March 31, 2007 from 1.95% for the
      quarter ended March 31, 2006, while the net interest margin decreased to 2.77%
      from 3.28%, over the same respective periods.





***Provision
      for Loan Losses*****.**  For the three months
      ended March 31, 2007 the provision for loan losses was $4,000 as compared to
      $32,000 for the three months ended March 31, 2006, which was higher primarily
      because the portfolio’s net loan growth was greater in 2006 than in
      2007.  Moreover, as a result of its analysis of the adequacy of the
      allowance for loan losses, the Company also determined that an increased
      provision was not warranted because the loan portfolio’s overall risk profile at
      March 31, 2007 had improved as compared to December 31, 2006.





14


***Non-interest
      Income.***Non-interest income for the quarter ended March
      31, 2007 increased $21,000 to approximately $103,000 as compared to $82,000
      for
      the quarter ended March 31, 2006.  Service charges and fees increased
      by $44,000, from $19,000 for the quarter ended March 31, 2006 to $63,000 for
      the
      quarter ended March 31, 2007, primarily as a result of servicing a greater
      number of deposit and loan customers.  That increase was partially
      mitigated by a $34,000 decrease in the net gain on sales of real estate mortgage
      loans held for sale over the same comparable quarters, primarily because of
      a
      general softening in the overall housing market evident this year relative
      to
      last.  Other non-interest income categories increased to $13,000 for
      the quarter ended March 31, 2007 from $2,000 for the same quarter in 2006
      primarily from annuity sales and rent earned from subletting excess office
      space.





***Non-interest
      Expense.***Non-interest expense for the quarter ended
      March 31, 2007 increased $32,000 when compared to the same quarter in
      2006.  Compensation and benefits decreased $2,000 primarily as a
      result of a reduction in commissions paid on a smaller volume of originated
      loans. The increases in occupancy and equipment expense and in data processing
      fees were primarily attributable to increases in rent, utilities and maintenance
      costs, and in servicing a greater number of deposit and loan customers,
      respectively.  Other non-interest expense increased to $223,000 for
      the quarter ended March 31, 2007, from $206,000 for the quarter ended March
      31,
      2006.  The $17,000 increase was primarily due to increases in
      professional and consulting fees, advertising, and other operating expenses
      related to the expansion of the Bank’s business activities.





***Income
      Tax Expense.***We receive no tax benefit from our net
      operating losses as they are being carried forward and will be available to
      reduce future taxable income.





**Liquidity
      and Capital Resources**





The
      primary sources of funds are
      deposits, capital, proceeds from the sale of loans, and principal and interest
      payments on loans and securities.  While maturities and scheduled
      payments on loans and securities provide an indication of the timing of the
      receipt of funds, other sources of funds such as loan prepayments and deposit
      inflows are less predictable due to the effects of changes in interest rates,
      economic conditions and competition.





The
      primary investing activities of the Company are the origination of loans and
      the
      purchase of investment securities.  For the three months ended March
      31 2007, the Company originated loans of approximately $10.1 million including
      real estate mortgage loans held for sale.  At March 31, 2007, the
      Company had outstanding loan origination commitments of $14.1 million (including
      one-to-four-family real estate mortgage loans held for sale of $4.0 million)
      and
      undisbursed lines of credit and construction loans in process of $9.9
      million.  The Company anticipates that it will have sufficient funds
      available to meet its current loan originations and other
      commitments.





At
      March
      31, 2007, total deposits were approximately $80.8 million of which approximately
      $17.5 million was in certificates of deposit.  Certificates of deposit
      scheduled to mature in one year or less from March 31, 2007 totaled $9.5
      million.  Based on past experience the Company anticipates that most
      such certificates of deposit can be renewed upon their expiration.





As
      stated
      earlier, the Company completed the holding company formation during the quarter
      ended September 30, 2006.  In order to pay the various costs
      associated with the formation, as well as other subsequent expenses as incurred,
      the Company secured a credit facility of $200,000 from its wholesale
      correspondent bank, Atlantic Central Bankers Bank, of which the Company
      exercised $56,000.





While
      the
      Bank has not borrowed funds since it commenced operations, it may do so in
      the
      future based upon its need for funds and the cost of deposits as an alternative
      source of funds.  In general the Bank manages its liquidity by
      maintaining sufficient levels of short-term investments so that funds are
      available for investment in loans when needed.  The Bank monitors its
      liquidity on a regular basis.  Excess liquidity is invested in
      overnight federal funds sold and other short-term investments.  The
      Bank has




15


unused
      credit lines of $5.0 million with its correspondent bank, Atlantic Central
      Bankers Bank, which is separate from the Company’s credit facility mentioned
      above.





**Recent
      Accounting Standards**





In
      September 2006, the FASB issued Statement No. 157, Fair Value
      Measurements.  This Statement defines fair value, establishes a
      framework for measuring fair value and expands disclosures about fair value
      measurements.  This Statement establishes a fair value hierarchy about
      the assumptions used to measure fair value and clarifies assumptions about
      risk
      and the effect of a restriction on the sale or use of an asset.  The
      standard is effective for fiscal years beginning after November 15,
      2007.  The Company has not completed its evaluation of the impact of
      the adoption of this standard.





In
      February 2006, the Financial Accounting Standards Board (FASB) issued Statement
      No. 155, “Accounting for Certain Hybrid Financial Instruments – an amendment to
      FASB Statements No. 133 and 140.”  This Statement permits fair value
      re-measurement for any hybrid financial instruments, clarifies which instruments
      are subject to the requirements of Statement No. 133, and establishes a
      requirement to evaluate interest in securitized financial assets and other
      items.  The new standard is effective for financial assets acquired or
      issued after the beginning of the entity’s first fiscal year that begins after
      September 15, 2006.  The Company has determined the adoption of this
      Statement does not have a material impact on the Company’s consolidated
      financial position or results of operations.





In
      March
      2006, the FASB issued Statement No. 156, “Accounting for Servicing of Financial
      Assets – an amendment of FASB Statement No. 140.”  This Statement
      provides the following:  1) revised guidance on when a servicing asset
      and servicing liability should be recognized; 2) requires all separately
      recognized servicing assets and servicing liabilities to be initially measured
      at fair value, if practicable; 3) permits an entity to elect to measure
      servicing assets and servicing liabilities at fair value each reporting date
      and
      report changes inn fair value in earnings in the period in which the changes
      occur; 4) upon initial adoption, permits a one time reclassification of
      available-for-sale securities to trading securities for securities which are
      identified as offsetting the entity’s exposure to change in the fair value of
      servicing assets or liabilities that a servicer elects to subsequently measure
      at fair value; and 5) requires separate presentation of servicing assets and
      servicing liabilities subsequently measured at fair value in the statement
      of
      financial position and additional footnote disclosures.  This standard
      is effective as of the beginning of an entity’s first fiscal year that begins
      after September 15, 2006 with the effects of initial adoption being reported
      as
      a cumulative effect adjustment to retained earnings.  The Company has
      determined the adoption of this Statement does not have a material impact on
      the
      Company’s consolidated financial position or results of operations.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159, “The Fair Value Option for Financial Assets and Financial Liabilities –
Including an amendment of FASB Statement No. 115” (“SFAS No.
      159”).  SFAS No. 159 permits entities to choose to measure certain
      financial assts and financial liabilities at fair value.  SFAS No. 159
      is effective as of the beginning of an entity’s first fiscal year beginning
      after November 15, 2007.  The Company has not completed its evaluation
      of the impact of this Statement on the Company’s consolidated financial position
      or results of operations.





In
      July
      2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which
      prescribes a recognition threshold and measurement attribute for a tax position
      taken or expected to be taken in a tax return.  FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition.  The Company adopted FIN
      48 as of January 1, 2007.  A tax position is recognized as a benefit
      only if it is “more likely than not” that the tax position would be sustained in
      a tax examination, with a tax examination being presumed to
      occur.  The amount recognized is the largest amount of tax benefit
      that is greater than 50% likely of being realized on examination.  For
      tax positions not meeting the “more likely than not” test, no tax benefit is
      recorded.  The adoption had no affect on the Company’s consolidated
      financial position or results of operations.





16


The
      Company and its subsidiary are subject to U.S. federal income tax as well as
      income tax of the state of New York.  The Company does not expect the
      total amount of tax benefits to significantly increase in the next twelve
      months.





**Item
      3.  Controls and Procedures**





The
      Company has adopted interim disclosure controls and procedures designed to
      facilitate the Company’s financial reporting.  The interim disclosure
      controls currently consist of communications among the Chief Executive Officer,
      the Chief Operations Officer, the Chief Financial Officer and each department
      head to identify any transactions, events, trends, risks or contingencies which
      may be material to the Company’s operations.  In addition, the Chief
      Executive Officer, Chief Operating Officer, Chief Financial Officer and the
      Audit Committee meet on a quarterly basis and discuss the Company’s material
      accounting policies.  The Company’s Chief Executive Officer and Chief
      Financial Officer have evaluated the effectiveness of these interim disclosure
      controls as of March 31, 2007 and found them to be adequate.





The
      Company maintains internal control
      over financial reporting.  There have not been any significant changes
      in such internal control over financial reporting that have materially been
      affected, or are reasonably likely to materially affect, the Company’s internal
      control over financial reporting.









**PART
      II**





**Item
      1.  Legal Proceedings**





The
      Company is not involved in any
      pending legal proceedings other than routine legal proceedings occurring in
      the
      ordinary course of business.  At March 31, 2007, we were not involved
      in any legal proceedings, the outcome of which would be material to our
      financial condition or results of operations.







**Item
      2.  Unregistered Sales of Securities and Use of
      Proceeds**





None






**Item
      3.  Defaults on Senior Securities**





None







**Item
      4.  Submission of Matters to a Vote of Security
      Holders**





None







**Item
      5.  Other Information**





None











17


**Item
      6.  Exhibits**





****




**Reference
                  to Previous Filing****Exhibit
                Number**
              
              **Document**
              
              **If
                  Applicable**3.1
              
              Articles
                  of Incorporation
              
              *3.2
              
              Amended
                  Bylaws
              
              *4
              
              Form
                  of Stock Certificate
              
              **10.1
              
              Employment
                  Agreement dated September 23, 2004
              
              **Between
                  the Bank and Anthony P. Costa.10.2
              
              Employment
                  Agreement dated September 23, 2004
              
              **Between
                  the Bank and Philip Guarnieri10.3
              
              Employment
                  Agreement dated October 20, 2005
              
              **Between
                  the Bank and Arthur Budich10.4
              
              Empire
                  State Bank, N.A. 2004 Stock Option Plan
              
              **31.1
              
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 200231.2
              
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 200232.1
              
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 200232.2
              
              Certification
                  of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002






*
      Previously filed with the SEC as an exhibit to the Company’s Quarterly Report on
      Form 10-QSB for the period ended September 30, 2006.





**
      Previously filed with the SEC as an exhibit to the Company’s Registration
      Statement on Form S-4 filed on April 14, 2006 and subsequently amended on April
      18, 2006, May 1, 2006 and May 23, 2006 and a post-effective amendment filed
      on
      June 9, 2006.  All of such previously filed documents are hereby
      incorporated herein by reference in accordance with Item 601 of Regulation
      S-B.















18





**SIGNATURES**





In
      accordance with the requirements of
      the Securities Exchange Act of 1934 (the “Exchange Act”), the registrant caused
      this report to be signed on its behalf by the undersigned, hereunto duly
      authorized, as of May 15, 2007.






**Empire
              State Bank,
              National Association**Date:    
                  May 15 , 2007
            By:
            /s/ Anthony
              P. CostaAnthony
                P. CostaChairman
                and Chief Executive Officer


Date:    
                  May 15 , 2007
            By:
            /s/ Arthur
              W. BudichArthur
              W. BudichExecutive
              Vice President and Chief Financial Officer

















































19