10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

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

For the transition period from ________ to ________

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	(I.R.S. Employer Identification No.)
incorporation or organization)
630 Godwin Avenue, Midland Park,  NJ	07432
(Address of principal executive offices)	(Zip Code)
(201)  444-7100
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

Indicate by a checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ý     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such fies). Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No ý

The number of shares outstanding, net of treasury stock, of the Issuer’s Common Stock, no par value, as of May 8, 2009 was 5,536,645.

Stewardship Financial Corporation

INDEX

	PAGE
	NUMBER
PART I  -  CONSOLIDATED FINANCIAL INFORMATION
ITEM 1  -   CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Financial Condition at March 31, 2009 and December 31, 2008 (Unaudited)	1
Consolidated Statements of Income for the Three Months ended March 31, 2009 and 2008 (Unaudited)	2
Consolidated Statement of Changes in Stockholders’ Equity for the Three Months ended March 31, 2009 and 2008 (Unaudited)	3
Consolidated Statements of Cash Flows for the Three Months ended March 31, 2009 and 2008 (Unaudited)	4 - 5
Notes to Consolidated Financial Statements (Unaudited)	6 - 12
ITEM 2  -   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13 - 19
ITEM 3 -   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	20
ITEM 4T-    CONTROLS AND PROCEDURES	20
PART II  -  OTHER INFORMATION	21
SIGNATURES	22
EXHIBIT INDEX	23

Stewardship Financial Corporation and Subsidiary
Consolidated Statements of Financial Condition
(Unaudited)
	March 31,			December 31,
	2009			2008
Assets
Cash and due from banks	$	11,669,000		$	12,719,000
Other interest-earning assets		151,000			95,000
Cash and cash equivalents		11,820,000			12,814,000
Securities available for sale		106,577,000			90,023,000
Securities held to maturity; estimated fair value of $71,784,000 (2009) and
$49,150,000 (2008)		70,842,000			48,856,000
FHLB-NY stock, at cost		3,032,000			2,420,000
Loans, net of allowance for loan losses of $5,324,000 (2009) and $5,166,000 (2008)		431,467,000			434,103,000
Mortgage loans held for sale		1,968,000			394,000
Premises and equipment, net		7,331,000			7,470,000
Accrued interest receivable		3,334,000			3,371,000
Bank owned life insurance		8,682,000			8,599,000
Other assets		3,963,000			3,766,000
Total assets	$	649,016,000		$	611,816,000
Liabilities and stockholders' equity
Liabilities
Deposits:
Noninterest-bearing	$	87,376,000		$	99,099,000
Interest-bearing		428,094,000			407,432,000
Total deposits		515,470,000			506,531,000
Other borrowings		50,500,000			36,900,000
Subordinated debentures		7,217,000			7,217,000
Securities sold under agreements to repurchase		15,162,000			15,160,000
Accrued interest payable		1,747,000			1,582,000
Accrued expenses and other liabilities		5,340,000			1,630,000
Total liabilities		595,436,000			569,020,000
Commitments and contingencies		-			-
Stockholders' equity
Preferred stock, no par value; 2,500,000 shares authorized; 10,000 shares
issued and outstanding at March 31, 2009.  Liquidation preference of $10,000,000.		9,692,000			-
Common stock, no par value; 10,000,000 shares authorized;
5,584,713 and 5,575,095 shares issued: 5,553,645 and 5,555,095 shares
outstanding at March 31, 2009 and December 31, 2008, respectively		38,294,000			37,962,000
Treasury stock, 31,068 and 20,000 shares outstanding at March 31, 2009 and
December 31, 2008, respectively		(379,000	)		(272,000	)
Retained earnings		4,951,000			4,383,000
Accumulated other comprehensive income		1,022,000			723,000
Total stockholders' equity		53,580,000			42,796,000
Total liabilities and stockholders' equity	$	649,016,000		$	611,816,000
See notes to unaudited consolidated financial statements.

1

Stewardship Financial Corporation and Subsidiary
Consolidated Statements of Income
(Unaudited)
	Three Months Ended
	March 31,
	2009		2008
Interest income:
Loans	$	6,608,000	$	7,185,000
Securities held to maturity
Taxable		441,000		204,000
Non-taxable		213,000		207,000
Securities available for sale
Taxable		1,137,000		994,000
Non-taxable		52,000		27,000
FHLB dividends		19,000		34,000
Other interest-earning assets		3,000		6,000
Total interest income		8,473,000		8,657,000
Interest expense:
Deposits		2,372,000		2,910,000
Borrowed money		503,000		585,000
Total interest expense		2,875,000		3,495,000
Net interest income before provision for loan losses		5,598,000		5,162,000
Provision for loan losses		150,000		100,000
Net interest income after provision for loan losses		5,448,000		5,062,000
Noninterest income:
Fees and service charges		396,000		295,000
Bank owned life insurance		83,000		81,000
Gain on sales of mortgage loans		11,000		55,000
Gain on calls and sales of securities		39,000		41,000
Merchant processing		118,000		369,000
Other		60,000		135,000
Total noninterest income		707,000		976,000
Noninterest expenses:
Salaries and employee benefits		2,059,000		2,016,000
Occupancy, net		472,000		449,000
Equipment		265,000		273,000
Data processing		305,000		308,000
FDIC insurance premium		170,000		73,000
Charitable contributions		171,000		162,000
Stationery and supplies		59,000		111,000
Merchant processing		108,000		325,000
Other		799,000		762,000
Total noninterest expenses		4,408,000		4,479,000
Income before income tax expense		1,747,000		1,559,000
Income tax expense		560,000		498,000
Net income		1,187,000		1,061,000
Dividends on preferred stock and accretion		92,000		-
Net income available to common stockholders	$	1,095,000	$	1,061,000
Basic earnings per common share	$	0.20	$	0.19
Diluted earnings per common share	$	0.20	$	0.19
Weighted average number of common shares outstanding		5,551,734		5,576,090
Weighted average number of diluted common
shares outstanding		5,557,098		5,591,517
Share data has been restated to reflect a 5% stock dividend paid November 17, 2008.
See notes to unaudited consolidated financial statements.

2

Stewardship Financial Corporation and Subsidiary
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
	Three Months Ended March 31, 2009
															Accumulated
															Other
															Comprehensive
	Preferred			Common Stock					Treasury			Retained			Gain (Loss),
	Stock			Shares		Amount			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		(49,000	)															(49,000	)
Cash dividends paid on common stock		-			-		-			-			(527,000	)		-		(527,000	)
Payment of discount on dividend
reinvestment plan		-			-		(11,000	)		-			-			-		(11,000	)
Cash dividends accrued on preferred
stock		-			-		-			-			(84,000	)		-		(84,000	)
Common stock issued under stock plans		-			2,288		22,000			-			-			-		22,000
Stock option compensation expense		-			-		12,000			-			-			-		12,000
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		8,000			-		-			-			(8,000	)				-
Amortization of issuance costs		2,000			-		-			-			-					2,000
Comprehensive income:
Net income		-			-		-			-			1,187,000			-		1,187,000
Change in unrealized holding gains on
securities available for sale arising during
the period (net tax expense of $177,000)		-			-		-			-			-			275,000		275,000
Reclassification adjustment for gains in
net income (net of taxes of $15,000)		-			-		-			-			-			24,000		24,000
Total comprehensive income																		1,486,000
Balance -- March 31, 2009	$	9,692,000			5,584,713	$	38,294,000		$	(379,000	)	$	4,951,000		$	1,022,000	$	53,580,000
	Three Months Ended March 31, 2008
															Accumulated
															Other
															Comprehensive
				Common Stock					Treasury			Retained			Gain (Loss),
	Amount			Shares		Amount			Stock			Earnings			Net		Total
Balance -- December 31, 2007	$	-			5,306,828	$	34,871,000		$	-		$	5,943,000		$	276,000	$	41,090,000
Cash dividends paid on common stock		-			-		-			-			(478,000	)		-		(478,000	)
Payment of discount on dividend
reinvestment plan		-			-		(11,000	)		-			-			-		(11,000	)
Common stock issued under stock plans		-			1,667		21,000			-			-			-		21,000
Stock option compensation expense		-			-		12,000			-			-			-		12,000
Stock options exercised		-			8,976		43,000			(21,000	)		-			-		22,000
Comprehensive income:
Net income		-			-		-			-			1,061,000			-		1,061,000
Change in unrealized holding gains on
securities available for sale arising during
the period (net tax benefit of $249,000)		-			-		-			-			-			397,000		397,000
Reclassification adjustment for gains
in net income (net taxes of $17,000)		-			-		-			-			-			24,000		24,000
Total comprehensive income																		1,482,000
Balance -- March 31, 2008	$	-			5,317,471	$	34,936,000		$	(21,000	)	$	6,526,000		$	697,000	$	42,138,000
See notes to unaudited consolidated financial statements.

3

Stewardship Financial Corporation and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
	Three Months Ended
	March 31,
	2009			2008
Cash flows from operating activities:
Net income	$	1,187,000		$	1,061,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization of premises and equipment		210,000			240,000
Amortization of premiums and accretion of discounts, net		123,000			30,000
Accretion of deferred loan fees		(56,000	)		(59,000	)
Provision for loan losses		150,000			100,000
Originations of mortgage loans held for sale		(2,948,000	)		(5,642,000	)
Proceeds from sale of mortgage loans		1,385,000			4,736,000
Gain on sale of loans		(11,000	)		(55,000	)
Gain on calls and sales of securities		(39,000	)		(41,000	)
Loss on sale of equipment		-			12,000
Deferred income tax benefit		(69,000	)		(50,000	)
Amortization of intangible assets		8,000			8,000
Nonqualified stock option expense		12,000			12,000
Amortization of stock issuance costs		2,000			-
Increase in bank owned life insurance		(83,000	)		(81,000	)
Decrease in accrued interest receivable		37,000			99,000
(Increase) decrease in other assets		(328,000	)		86,000
Increase (decrease) in accrued interest payable		165,000			(235,000	)
Increase in other liabilities		615,000			33,000
Net cash provided by operating activities		360,000			254,000
Cash flows from investing activities:
Purchase of securities available for sale		(30,248,000	)		(18,442,000	)
Proceeds from maturities and principal repayments on securities available for sale		2,730,000			1,746,000
Proceeds from calls and sales on securities available for sale		11,417,000			7,316,000
Purchase of securities held to maturity		(24,289,000	)		(404,000	)
Proceeds from maturities and principal repayments on securities held to maturity		1,018,000			412,000
Proceeds from calls on securities held to maturity		4,250,000			3,770,000
Purchase of FHLB-NY stock		(612,000	)		(575,000	)
Net decrease (increase) in loans		2,542,000			(5,137,000	)
Additions to premises and equipment		(71,000	)		(170,000	)
Sale of equipment		-			4,000
Net cash used in investing activities		(33,263,000	)		(11,480,000	)
Cash flows from financing activities:
Net decrease in noninterest-bearing deposits		(11,723,000	)		(6,496,000	)
Net increase in interest-bearing deposits		20,662,000			10,764,000
Net increase (decrease) in securities sold under agreements to repurchase		2,000			(775,000	)
Proceeds from term borrowings		6,000,000			30,000,000
Net increase (decrease) in short term borrowings		7,600,000			(16,800,000	)
Payments on long term borrowings		-			(420,000	)
Proceeds from issuance of preferred stock and warrants		9,951,000			-
Cash dividends paid on common stock		(527,000	)		(478,000	)
Payment of discount on dividend reinvestment plan		(11,000	)		(11,000	)
Purchase of treasury stock		(75,000	)		-
Options exercised		8,000			22,000
Issuance of common stock		22,000			21,000
Net cash provided by financing activities		31,909,000			15,827,000
Net (decrease) increase in cash and cash equivalents		(994,000	)		4,601,000
Cash and cash equivalents - beginning		12,814,000			11,932,000
Cash and cash equivalents - ending	$	11,820,000		$	16,533,000

4

Stewardship Financial Corporation and Subsidiary
Consolidated Statements of Cash Flows (continued)
(Unaudited)
	Three Months Ended
	March 31,
	2009		2008
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	2,710,000	$	3,729,000
Cash paid during the period for income taxes	$	-	$	-
Noncash investing activities - security purchases due brokers	$	3,010,000	$	1,209,000
See notes to unaudited consolidated financial statements.

5

Stewardship Financial Corporation and Subsidiary

Notes to Consolidated Financial Statements

March 31, 2009

(Unaudited)

Note 1.   Summary of Significant Accounting Policies

Certain information and footnote disclosures normally included in the unaudited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Principles of consolidation

The consolidated financial statements include the accounts of Stewardship Financial Corporation (the “Corporation”) and its wholly owned subsidiary, Atlantic Stewardship Bank (the “Bank”).  The Bank includes its wholly owned subsidiaries, Stewardship Investment Corp., Stewardship Realty, LLC and Atlantic Stewardship Insurance Company, LLC.  All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.  Certain prior period amounts have been reclassified to conform to the current presentation.  The consolidated financial statements of the Corporation have been prepared in conformity with accounting principles generally accepted in the United States of America.  In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the statements of financial condition and revenues and expenses during the reporting periods.  Actual results could differ significantly from those estimates.

Material estimates

Material estimates that are particularly susceptible to significant changes relate to the determination of the allowance for loan losses and fair value of financial instruments.  Management believes that the allowance for loan losses is adequate.  While management uses available information to recognize probable incurred losses on loans, future additions to the allowance for loan losses may be necessary based on changes in economic conditions in the market area.

Basis of presentation

The interim unaudited consolidated financial statements included herein have been prepared in accordance with instructions for Form 10-Q and the rules and regulations of the SEC and, therefore, do not include information or footnotes necessary for a complete presentation of consolidated financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America.  However, all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of the consolidated financial statements, have been included.  The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the results which may be expected for the entire year.  All share and per share amounts have been restated for stock splits and stock dividends.

Adoption of New Accounting Standards

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination.  The adoption SFAS 141(R) did not have a material effect on the Corporation’s results of operations or financial position.

In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51”  (“SFAS 160”), which changes the accounting and reporting for minority interests, which are now re-characterized as noncontrolling interests and classified as a component of equity within the consolidated balance sheet.  The adoption of SFAS No. 160 did not have a significant impact on the Corporation’s results of operations or financial position.

In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133” (“SFAS 161”).   SFAS 161 amends and expands the disclosure requirements of SFAS 133 for derivative instruments and hedging activities.  SFAS 161 requires qualitative disclosure about objectives and strategies

6

for using derivative and hedging instruments, quantitative disclosures about fair value amounts of the instruments and gains and losses on such instruments, as well as disclosures about credit-risk features in derivative agreements.  The adoption of SFAS 161 did not have a material effect on the Corporation’s results of operations or financial position.

Recently Issued But Not Yet Effective Accounting Standards

In April 2009, the FASB issued Staff Position No. 107-1 and APB 28-1 (“FSP 107-1”), Interim Disclosures about Fair Value of Financial Instruments. FSP 107-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only required in annual financial statements. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  The Corporation plans to adopt this FSP in the second quarter.  The adoption of FSP 107-1 is not expected to have a material effect on the Corporation’s results of operations or financial position.

In April 2009, the FASB issued Staff Position No. 115-2 and FAS 124-2(“FSP 115-2 / 124-2”), Recognition and presentation of Other-Than-Temporary Impairments, which amends existing guidance for determining whether impairment is other-than-temporary for debt securities.  FSP 115-2 / 124-2 requires an entity to access whether it intends to sell, or it is more likely than not that it will be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.  If either of these criteria is met, the entire difference between amortized cost and fair value is recognized in earnings.  For securities that do not meet the aforementioned criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.    Additionally, this FSP expands and increases the frequency of existing disclosures about other-than-temporary impairments for debt and equity securities.  FSP 115-2 / 124-2 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  The Corporation plans to adopt this FSP in the second quarter.  The adoption of FSP 115-2 / 124-2 is not expected to have a material effect on the Corporation’s results of operations or financial position.

In April 2009, the FASB issued Staff Position 157-4 (“FSP 157-4”), Determining Fair Value When the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.  FSP 157-4 emphasizes that even if there has been a significant decrease in the volume and level of activity, the objective of a fair value measurement remains the same.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants.  The FSP provides a number of factors to consider when evaluating whether there has been a significant decrease in the volume and level of activity for an asset or liability in relation to normal market activity.   In addition, when transactions or quoted prices are not considered orderly, adjustments to those prices based on the weight of available information may be needed to determine the appropriate fair value.  The FSP also requires increased disclosures.  FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009 and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009.  The Corporation plans to adopt this FSP in the second quarter.  The adoption of FSP 157-4 is not expected to have a material effect on the Corporation’s results of operations or financial position.

7

Note 2.   Securities – Available for Sale and Held to Maturity

The fair value of the available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

	March 31, 2009
			Gross		Gross
	Fair		Unrealized		Unrealized
	Value		Holding Gains		Holding Losses
U.S. government-sponsored agencies	$	42,884,000	$	498,000	$	133,000
Obligations of state and political
subdivisions		5,722,000		47,000		76,000
Mortgage-backed securities		55,004,000		1,329,000		2,000
Other securities		2,967,000		25,000		4,000
	$	106,577,000	$	1,899,000	$	215,000
	December 31, 2008
			Gross		Gross
	Fair		Unrealized		Unrealized
	Value		Holding Gains		Holding Losses
U.S. government-sponsored agencies	$	49,660,000	$	741,000	$	30,000
Obligations of state and political
subdivisions		5,820,000		6,000		190,000
Mortgage-backed securities		31,670,000		716,000		15,000
Other securities		2,873,000		-		35,000
	$	90,023,000	$	1,463,000	$	270,000

The following is a summary of the held to maturity securities and related unrecognized gains and losses:

	March 31, 2009
			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
	Value		Holding Gains		Holding Losses		Value
U.S. government-sponsored agencies	$	28,753,000	$	157,000	$	163,000	$	28,747,000
Obligations of state and political
subdivisions		23,617,000		545,000		131,000		24,031,000
Mortgage-backed securities		18,472,000		535,000	$	1,000		19,006,000
	$	70,842,000	$	1,237,000	$	295,000	$	71,784,000
	December 31, 2008
			Gross		Gross
	Carrying		Unrecognized		Unrecognized		Fair
	Value		Holding Gains		Holding Losses		Value
U.S. government-sponsored agencies	$	10,290,000	$	217,000	$	-	$	10,507,000
Obligations of state and political
subdivisions		23,048,000		110,000		301,000		22,857,000
Mortgage-backed securities		15,518,000		271,000		3,000		15,786,000
	$	48,856,000	$	598,000	$	304,000	$	49,150,000

On a quarterly basis, the Corporation makes an assessment to determine whether there have been any events or economic circumstances to indicate that a security is impaired on an other-than-temporary basis.  The Corporation considers many factors including the length of time the security has had a market value less than the cost basis; the intent

8

and ability of the Corporation to hold the security for a period of time sufficient for a recovery in value; and recent events specific to the issuer or industry.  Management considers the decline in market value of these securities to be temporary.

Mortgage-backed securities are comprised primarily of government agencies such as the Government National Mortgage Association ("GNMA") and government-sponsored agencies such as the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Banks ("FHLB") and the Federal Home Loan Mortgage Corporation (“FHLMC”).

Note 3.   Loans

The following table sets forth the composition of loans:

	March 31,		December 31,
	2009		2008
Mortgage
Residential	$	39,690,000	$	40,337,000
Commercial		229,333,000		226,183,000
Commercial		96,587,000		100,282,000
Equity		22,803,000		21,208,000
Installment		48,398,000		51,290,000
Other		385,000		356,000
Total loans		437,196,000		439,656,000
Less:    Deferred loan fees		405,000		387,000
Allowance for loan losses		5,324,000		5,166,000
		5,729,000		5,553,000
Loans, net	$	431,467,000	$	434,103,000

Note 4.   Allowance for Loan Losses

	Three Months Ended March 31,
	2009			2008
Balance, beginning of period	$	5,166,000		$	4,457,000
Provision charged to operations		150,000			100,000
Recoveries of loans charged off		87,000			18,000
Loans charged off		(79,000	)		(4,000	)
Balance, end of period	$	5,324,000		$	4,571,000

Note 5.   Loan Impairment

The Corporation has defined the population of impaired loans to include all nonaccrual loans.  The following table sets forth information regarding the impaired loans as of the periods indicated.

	March 31,		December 31,
	2009		2008
Impaired loans
With related allowance for loan losses	$	2,981,000	$	2,762,000
Without related allowance for loan losses		3,611,000		1,468,000
Total impaired loans	$	6,592,000	$	4,230,000
Related allowance for loan losses	$	655,000	$	481,000

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Note 6.   Fair Value

Statement of Financial Accounting Standard No. 157, “Fair Value Measurements“, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair values of securities available for sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

The Company measures impairment of collateralized loans based on the estimated fair value of the collateral less estimated costs to sell, incorporating assumptions that experienced parties might use in estimating the value of such collateral (Level 3 inputs).

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements at Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2009
Assets:
Available for sale securities	$	106,577,000	$	-	$	106,577,000	$	-
	At December 31, 2008
Assets:
Available for sale securities	$	90,023,000	$	-	$	90,023,000	$	-

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements Using:
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	At March 31, 2009
Assets:
Impaired loans	$	2,326,000	$	-	$	-	$	2,326,000
	At December 31, 2008
Assets:
Impaired loans	$	2,281,000	$	-	$	-	$	2,281,000

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Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $2,981,000 at March 31, 2009, with a valuation allowance of $655,000, resulting in an additional provision for loan losses of $174,000 for the three months ended March 31, 2009.

Note 7.   Earnings Per Share

Basic earnings per share is calculated by dividing net income available to common stockholders by the average daily number of common shares outstanding during the period.  Common stock equivalents are not included in the calculation.  Diluted earnings per share is computed similar to that of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potential dilutive common shares were issued.

The following is a reconciliation of the calculation of basic and diluted earnings per share.

	Three Months Ended
	March 31,
	2009		2008
	(in thousands, except per share data)
Net income	$	1,187	$	1,061
Dividends on preferred stock and accretion		92		-
Net income available to common stockholders	$	1,095	$	1,061
Weighted average shares		5,552		5,576
Effect of dilutive stock options		5		16
Total weighted average dilutive shares		5,557		5,592
Basic earnings per common share	$	0.20	$	0.19
Diluted earnings per common share	$	0.20	$	0.19

Stock options to purchase 67,295 and 54,408 average shares of common stock were not considered in computing diluted earnings per share for the three months ended March 31, 2009 and 2008, respectively, because they were antidilutive.   A common stock warrant to purchase 84,746 average shares of common stock was not considered in computing diluted earnings per share for the three months ended March 31, 2009 because it was antidilutive.

All share and per share amounts have been restated to reflect a 5% stock dividend declared on September 16, 2008 and payable November 17, 2008.

Note 8.   Preferred Stock

On January 30, 2009, in exchange for issuing 10,000 shares of Series A Preferred Stock (the “Senior Preferred Shares”) and a warrant to purchase 127,119 shares of common stock, the Corporation received $10.0 million as part of the United States Treasury Department’s Capital Purchase Program (“CPP”).  

The Senior Preferred Shares pay a cumulative dividend of 5% per annum for the first five years and 9% per annum thereafter.  Dividends are payable quarterly in arrears and the Corporation accrues the preferred dividends as earned over the period the Senior Preferred Shares are outstanding.

The warrant to purchase 127,119 of common shares has an exercise price of $11.80 per share.  The exercise price for the warrant was calculated based on the average of the closing prices of the Corporation’s common stock on the 20 trading days ending on the last trading day prior to the date of the Treasury’s approval of the Corporation’s application under the program.

Of the $10 million of proceeds, $9.7 million was allocated to the Senior Preferred Shares and $269,000 was allocated to the warrant based on their estimated relative fair values as of January 30, 2009.  The resulting discount on the Senior Preferred Shares of $269,000 is being accreted through a charge to retained earnings over an estimated five year life using an effective yield method.  The Senior Preferred Shares and warrant issued under the CPP are includable in Tier I capital for regulatory capital.

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The Corporation may repay the funds provided under the CPP without regard to whether the Corporation has replaced such funds from any other source or to any waiting period, subject to regulatory approval.  Until the earlier of the third anniversary of the Treasury’s investment in the Senior Preferred Shares or when all of the Senior Preferred Shares have been redeemed by the Corporation or transferred by the Treasury to third parties, the Corporation may not, without the consent of the Treasury, increase the common stock cash dividend.

12

Stewardship Financial Corporation

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This Form 10-Q contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “plan,” “estimated,” and “potential.”  Examples of forward looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the Corporation that are subject to various factors which could cause actual results to differ materially from these estimates.  These factors include: changes in general, economic, and market conditions, legislative and regulatory conditions, or the development of an interest rate environment that adversely affects the Corporation’s interest rate spread or other income anticipated from operations and investments.  As used in this Form 10-Q, “we” and “us” and “our” refer to Stewardship Financial Corporation and its consolidated subsidiary, Atlantic Stewardship Bank, depending on the context.

Critical Accounting Policies and Estimates

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures found elsewhere in this Form 10-Q, are based upon the Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires the Corporation to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.  Note 1 to the Corporation’s Audited Consolidated Financial Statements for the year ended December 31, 2008 included in our Annual Report on Form 10-K for the year ended December 31, 2008, as supplemented by this report, contains a summary of the Corporation’s significant accounting policies.  Management believes the Corporation’s policy with respect to the methodology for the determination of the allowance for loan losses involves a higher degree of complexity and requires management to make difficult and subjective judgments, which often require assumptions or estimates about highly uncertain matters.  Changes in these judgments, assumptions or estimates could materially impact results of operations.  This critical policy and its application are periodically reviewed with the Audit Committee and the Board of Directors.

The allowance for loan losses is based upon management’s evaluation of the adequacy of the allowance, including an assessment of known and inherent risks in the portfolio, giving consideration to the size and composition of the loan portfolio, actual loan loss experience, level of delinquencies, detailed analysis of individual loans for which full collectability may not be assured, the existence and estimated net realizable value of any underlying collateral and guarantees securing the loans, and current economic and market conditions.  Although management uses the best information available, the level of the allowance for loan losses remains an estimate, which is subject to significant judgment and short-term change.  Various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses.  Such agencies may require the Corporation to make additional provisions for loan losses based upon information available to them at the time of their examination.  Furthermore, the majority of the Corporation’s loans are secured by real estate in the State of New Jersey.  Accordingly, the collectability of a substantial portion of the carrying value of the Corporation’s loan portfolio is susceptible to changes in local market conditions and may be adversely affected should real estate values decline or the northern New Jersey area experience an adverse economic shock.  Future adjustments to the allowance for loan losses may be necessary due to economic, operating, regulatory and other conditions beyond the Corporation’s control.

Financial Condition

Total assets increased by $37.2 million, or 6.1%, from $611.8 million at December 31, 2008 to $649.0 million at March 31, 2009.  Securities available for sale and securities held to maturity increased $16.6 million and $22.0 million, respectively.  The overall increase in securities was primarily attributable to the initial investing and leveraging of the $10.0 million of funds received under the Capital Purchase Program principally in mortgage-backed securities.  The cash flows from the amortization of the mortgage-backed securities will be utilized to continue to fund loan growth.  Net loans decreased $2.6 million due, in part, to the sale of $2.0 million of loan participations.

Deposits totaled $515.5 million at March 31, 2009, an increase of $8.9 million, or 1.8%, from $506.5 million at December 31, 2008.  The Corporation introduced its Power Rate Checking to customers during the first quarter of 2009.  This free checking account rewards customers with a high rate of interest for meeting three simple qualifications that assist the Bank in reducing our account related expenses.  A new online business product is being rolled out in the second quarter of 2009.

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These products and services will allow us to continue to attract new personal and business core deposits.  A $13.6 million increase in other borrowings reflects funds utilized to accomplish the leveraging of the $10 million of CPP funds.

Results of Operations for the Three Months Ended March 31, 2009 and 2008

General

The Corporation reported net income of $1.2 million, or $0.20 diluted earnings per common share for the three months ended March 31, 2009, compared to $1.1 million, or $0.19 diluted earnings per common share for the comparable prior year period.

Net Interest Income

Net interest income for the three months ended March 31, 2009 was $5.6 million compared to $5.2 million recorded in the prior year period.  The increase in the current year period is primarily attributable to a decline in the cost of interest bearing liabilities.  The net interest rate spread and net yield on interest earning assets for the three months ended March 31, 2009 were 3.42% and 3.87%, respectively, compared to 3.23% and 3.94% for the three months ended March 31, 2008.  The  net yield on interest earning assets during the current year period reflects both a decline in loan interest rates and yields on securities as well as a decline in the interest rates on deposits and borrowings.

The following table reflects the components of the Corporation’s net interest income for the three months ended March 31, 2009 and 2008 including, (1) average assets, liabilities, and stockholders’ equity based on average daily balances, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, and (4) net yield on interest-earning assets.  Nontaxable income from investment securities and loans is presented on a tax-equivalent basis assuming a statutory tax rate of 34% for the periods presented.  This was accomplished by adjusting non-taxable income upward to make it equivalent to the level of taxable income required to earn the same amount after taxes.

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Analysis of Net Interest Income (Unaudited)
For the Three Months Ended March 31,
	2009										2008
								Average									Average
					Interest			Rates						Interest			Rates
	Average				Income/			Earned/			Average			Income/			Earned/
	Balance				Expense			Paid			Balance			Expense			Paid
	(Dollars in thousands)
Assets
Interest-earning assets:
Loans (1) (2)		$	436,926		$	6,619			6.14	%	$	424,449		$	7,196			6.88	%
Taxable investment securities (1)			134,749			1,597			4.81			95,002			1,232			5.26
Tax-exempt investment securities (1) (2)			28,938			390			5.47			25,698			341			5.38
Other interest-earning assets			84			3			9.66			222			6			10.96
Total interest-earning assets			600,697			8,609			5.81			545,371			8,775			6.52
Non-interest-earning assets:
Allowance for loan losses			(5,214	)								(4,488	)
Other assets			35,413									33,062
Total assets		$	630,896								$	573,945
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand deposits		$	167,280		$	517			1.25	%	$	155,341		$	870			2.27	%
Savings deposits			40,377			58			0.58			36,398			69			0.77
Time deposits			211,891			1,797			3.44			175,882			1,971			4.54
Repurchase agreements			15,162			189			5.06			16,683			143			3.48
FHLB borrowing			46,139			230			2.02			38,958			318			3.31
Subordinated debenture			7,217			84			4.72			7,217			124			6.97
Total interest-bearing liabilities			488,066			2,875			2.39			430,479			3,495			3.29
Non-interest-bearing liabilities:
Demand deposits			88,792									97,183
Other liabilities			4,562									4,838
Stockholders' equity			49,476									41,445
Total liabilities and stockholders' equity		$	630,896								$	573,945
Net interest income (taxable equivalent basis)						5,734									5,280
Tax Equivalent adjustment						(136	)								(118	)
Net interest income					$	5,598								$	5,162
Net interest spread (taxable equivalent basis)									3.42	%								3.23	%
Net yield on interest-earning
assets (taxable equivalent basis) (3)									3.87	%								3.94	%
_______________________
(1)    For purpose of these calculations, nonaccruing loans are included in the average balance. Loans and total interest-earning assets are net of unearned income. Securities are included at amortized cost.
(2)   The tax equivalent adjustments are based on a marginal tax rate of 34%.
(3)   Net interest income (taxable equivalent basis) divided by average interest-earning assets.

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For the three months ended March 31, 2009, total interest income on a tax equivalent basis decreased $166,000, or 1.9%, when compared to the three months ended March 31, 2008 primarily due to a decrease in the total yield on interest-earning assets, partially offset by an increase in the average earning assets.  The average rate earned on interest-earning assets was 5.81% for the three months ended March 31, 2009 compared to an average rate of 6.52% for the same prior year period.  The average yield on the loan portfolio decreased 74 basis points when comparing the three months ended March 31, 2009 to the three months ended March 31, 2008.  The decline in short-term interest rates during 2008 resulted in a Prime rate of 3.25% at March 31, 2009 compared to a Prime rate of 5.25% a year earlier.  The decline in short-term rates resulted in loans resetting during the past year at lower interest rates, thereby contributing to the decline in yields on earning assets.  Average interest-earning assets increased $55.3 million for the three months ended March 31, 2009 when compared to the prior year period.  The increase is primarily attributable to an increase in loans due to demand and an increase in taxable investment securities as a result of the previously mentioned leverage strategy.  Average loans increased $12.5 million to an average of $436.9 million for the three months ended March 31, 2009, from an average of $424.4 million for the comparable period in 2008.  Taxable investment securities of $134.7 million for the three months ended March 31, 2009 represent an increase of $39.7 million when compared to the same prior year period.

Interest paid on deposits and borrowed money decreased $620,000, or 17.7% for the three months ended March 31, 2009 compared to the same period for 2008.  The decline is due to a decrease in rates paid on deposits and borrowings, partially offset by an increase in average interest-bearing liabilities.  The average balance of total interest-bearing deposits and borrowings increased $57.6 million for the three months ended March 31, 2009 from the comparable 2008 period.  In addition to the Corporation’s expanding customer base, the increase in average interest-bearing liabilities was a result of increased borrowings to complete the leveraging of the $10 million of CPP funds.  For the three months ended March 31, 2009, the total cost for interest-bearing liabilities declined to 2.39% representing a 90 basis point decline when compared to the same prior year period.

Provision for Loan Losses

The Corporation maintains an allowance for loan losses at a level considered by management to be adequate to cover the probable incurred losses associated with its loan portfolio.  On an ongoing basis, management analyzes the adequacy of this allowance by considering the nature and volume of the Corporation’s loan activity, financial condition of the borrower, fair market value of the underlying collateral, and changes in general market conditions.  Additions to the allowance for loan losses are charged to operations in the appropriate period.  Actual loan losses, net of recoveries, serve to reduce the allowance.  The appropriate level of the allowance for loan losses is based on estimates, and ultimate losses may vary from the current estimates.

The loan loss provision totaled $150,000 for the three months ended March 31, 2009.  For the three months ended March 31, 2008 the provision for loan losses was $100,000.  Nonaccrual loans increased from $4.2 million at December 31, 2008 to $6.6 million at March 31, 2009.  The allowance for loan losses related to the impaired loans increased from $481,000 at December 31, 2008 to $655,000 million at March 31, 2009.  The current period loan loss provision primarily reflects the increase in impaired loans.  The Corporation monitors its loan portfolio and intends to continue to provide for loan loss reserves based on its ongoing periodic review of the loan portfolio and general market conditions.

See “Asset Quality” section for summary of allowance for loan losses and nonperforming assets.

Noninterest Income

For the three ended March 31, 2009, noninterest income was $707,000 compared to $976,000 for the prior year period.  As previously reported, on December 31, 2008, the Corporation sold its merchant servicing portfolio and, as a result, a decline of $251,000 in noninterest income as well as a $217,000 decline in noninterest expense is reflected for the three months ended March 31, 2009. Gains on sales of mortgage loans were $11,000 for the three months ended March 31, 2009, a decrease when compared to $55,000 for the three months ended March 31, 2008.  When compared to the prior year, the three months ended March 31, 2009 reflects a decrease in mortgage activity due to the challenging real estate market.  This decrease in activity resulted in a decline in the volume of loans sold and ultimately, a decline in gains on mortgages sold.  Mortgage loan application activity increased during the first quarter of 2009 and such activity should ultimately translate into additional gain on sales of mortgage loans.

Noninterest Expense

Noninterest expenses for the three months ended March 31, 2009 was $4.4 million and $4.5 million for the comparable prior year period.  As previously reported, on December 31, 2008, the Corporation sold its merchant servicing portfolio and, as a result, a $217,000 decline in noninterest expense as well as a decline of $251,000 in noninterest income is reflected for the three months ended March 31, 2009. FDIC insurance premiums increased $97,000 for the three months

16

ended March 31, 2009 when compared to the three months ended March 31, 2008, reflecting a general increase in the assessment of insurance as well as in increase in deposits.

Income Tax Expense

Income tax expense totaled $560,000 for the three months ended March 31, 2009 compared to an income tax expense of $498,000 for the three months ended March 31, 2008.  The effective tax rate for the three months ended March 31, 2009 was 32.1% compared to 31.9% for the three months ended March 31, 2008.

Asset Quality

The Corporation’s principal earning assets are its loans to businesses and individuals located in northern New Jersey.  Inherent in the lending function is the risk of deterioration in the borrowers’ ability to repay their loans under their existing loan agreements.  Risk elements include nonaccrual loans, past due and restructured loans, potential problem loans, loan concentrations and other real estate owned.  The following table shows the composition of nonperforming assets at the end of the last four quarters:

	March 31,			December 31,			September 30,			June 30,
	2009			2008			2008			2008
Nonaccrual loans (1)	$	6,592		$	4,230		$	6,884		$	451
Loans past due 90 days or more and accruing (2)		414			353			268			840
Total nonperforming loans		7,006			4,583			7,152			1,291
Restructured loans		2,375			1,855			-			-
Total nonperforming loans	$	9,381		$	6,438		$	7,152		$	1,291
Allowance for loan losses	$	5,324		$	5,166		$	5,930		$	4,768
Nonperforming loans to total loans		2.15	%		1.46	%		1.61	%		0.29	%
Nonperforming loans to total assets		1.45	%		1.05	%		1.17	%		0.21	%
Allowance for loan losses to total loans		1.22	%		1.18	%		1.34	%		1.09	%
Allowance for loan losses to
nonperforming loans		56.75	%		80.24	%		82.91	%		369.33	%

(1)  Generally represents loans to which the payments of principal or interest are in arrears for a period of more than 90 days.  Interest previously accrued on these loans and not yet paid is reversed and charged against income during the current period.  Interest earned thereafter is only included in income to the extent that it is received in cash.

(2)  Represents loans to which payments of principal or interest are contractually past due 90 days or more but which are currently accruing income at the contractually stated rates.  A determination is made to continue accruing income on those loans which are sufficiently collateralized and on which management believes all interest and principal owed will be collected.

The nonaccrual loans are comprised of 24 loans, primarily commercial mortgage, residential mortgage and commercial loans.  While the Corporation maintains strong underwriting requirements, the increase is reflective of the current economic and real estate environment.

As of March 31, 2009, there were $17.8 million of other loans not included in the above table, where credit conditions of borrowers caused management to have concerns about the possibility of the borrowers not complying with the present terms and conditions of repayment and which may result in disclosure of such loans at a future date.  These loans have been considered by management in conjunction with the analysis of the adequacy of the allowance for loan losses.

The Corporation’s lending activities are concentrated in loans secured by real estate located in northern New Jersey.  Accordingly, the collectability of a substantial portion of the Corporation’s loan portfolio is susceptible to changes in real estate market conditions in northern New Jersey.

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Interest Rate Sensitivity

The Corporation’s primary exposure to market risk arises from changes in market interest rates (“interest rate risk”).  The Corporation’s profitability is largely dependent upon its ability to manage interest rate risk.  Interest rate risk can be defined as the exposure of the Corporation’s net interest income to adverse movements in interest rates.

The Corporation manages its interest rate risk by utilizing an asset/liability simulation model and by measuring and managing its interest sensitivity gap.  The simulation model analyzes the sensitivity of net interest income to movements in interest rates.  The simulation model projects net interest income, net income, net margin, and capital to asset ratios based on various interest rate scenarios over a twelve-month period.  The model is based on the actual maturity and repricing characteristics of all rate sensitive assets and liabilities.  Management incorporates into the model certain assumptions regarding prepayments of certain assets and liabilities.  Assumptions have been built into the model for prepayments for assets and decay rates for nonmaturity deposits such as savings and interest bearing demand.  The model assumes an immediate rate shock to interest rates without management’s ability to proactively change the mix of assets or liabilities.  According to reports generated for the quarter ended March 31, 2009, an immediate interest rate increase of 200 basis points would have resulted in a decrease in net interest income of 8.5%, or $2.1 million, while an immediate decrease of 200 basis points would have resulted in a decrease in net interest income of 2.5%, or $626,000.  Management has a goal to maintain a percentage change of no more than 17.5% given a 200 basis point change in interest rates.  Management cannot provide any assurance about the actual effect of changes in interest rates on the Corporation’s net interest income.

The Corporation does not have any material exposure to foreign currency exchange rate risk or commodity price risk.  The Corporation did not enter into any market sensitive instruments for trading purposes nor did it engage in any hedging transactions utilizing derivative financial instruments during the three months ended March 31, 2009.

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These instruments include commitments to extend credit and standby letters of credit.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statement of condition.  Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  The Corporation evaluates each customer’s creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the counter-party.  Standby letters of credit are conditional commitments issued by the Corporation to guarantee payment or performance of a customer to a third party up to a stipulated amount and with specified terms and conditions.  Commitments to extend credit and standby letters of credit are not recorded on the Corporation’s consolidated balance sheet until the instrument is exercised.

Capital Adequacy

The Corporation is subject to capital adequacy guidelines promulgated by the Board of Governors of the Federal Reserve System (“FRB”).  The Bank is subject to similar capital adequacy requirements imposed by the Federal Deposit Insurance Corporation.  The FRB has issued regulations to define the adequacy of capital based upon the sensitivity of assets and off-balance sheet exposures to risk factors.   Four categories of risk weights (0%, 20%, 50%, and 100%) were established to be applied to different types of balance sheet assets and off-balance sheet exposures.  The aggregate of the risk-weighted items (risk-based assets) is the denominator of the ratio, the numerator is risk-based capital.  Under the regulations, risk-based capital has been classified into two categories.  Tier 1 capital includes common and qualifying perpetual preferred stockholders’ equity less goodwill.  Tier 2 capital includes mandatory convertible debt, allowance for loan losses, subject to certain limitations, and certain subordinated and term debt securities.  Total qualifying capital consists of Tier 1 capital and Tier 2 capital; however; the amount of Tier 2 capital may not exceed the amount of Tier 1 capital.  At March 31, 2009, the minimum risk-based capital requirements to be considered adequately capitalized were 4% for Tier 1 capital and 8% for total capital.

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Federal banking regulators have also adopted leverage capital guidelines to supplement the risk-based measures.  The leverage ratio is determined by dividing Tier 1 capital as defined under the risk-based guidelines by average total assets (non risk-adjusted) for the preceding quarter.  At March 31, 2009 the minimum leverage ratio requirement to be considered well capitalized was 4%.  The following table reflects the Corporation’s capital ratios at March 31, 2009.

	Required	Actual	Excess
Leverage Ratio	4.00%	9.44%	5.44%
Risk-based Capital
Tier 1	4.00%	12.52%	8.52%
Total	8.00%	13.64%	5.64%

Liquidity and Capital Resources

The Corporation’s primary sources of funds are deposits, amortization and prepayments of loans and mortgage-backed securities, maturities of investment securities and funds provided from operations.  While scheduled loan and mortgage-backed securities amortization and maturities of investment securities are a relatively predictable source of funds, deposit flow and prepayments on loans and mortgage-backed securities are greatly influenced by market interest rates, economic conditions and competition.  The Corporation’s liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities.

The primary source of cash from operating activities is net income.  Liquidity management is both a daily and long-term function of business management.  Excess liquidity is generally invested in short-term investments, such as federal funds sold.

Cash and cash equivalents decreased $1.0 million during the first three months of 2009.  Net operating and financing activities provided $361,000 and $31.9 million, respectively, and investing activities used $33.3 million.

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ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable to smaller reporting companies.

ITEM 4T.  Controls and Procedures

(a) Evaluation of internal controls and procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our internal controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can only provide reasonable assurance with respect to financial statement preparation.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting as of March 31, 2009.  In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on our assessment using those criteria, our management (including our Chief Executive Officer and Chief Financial Officer) concluded that our internal control over financial reporting was effective as of March 31, 2009.

(c) Changes in internal controls.

There were no significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses during the quarter ended March 31, 2009 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Stewardship Financial Corporation

Part II -- Other Information

Item 1.	Legal Proceedings
	None.
Item 1A.	Risk Factors
	Not applicable to smaller reporting companies.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	None.
Item 3.	Defaults Upon Senior Securities
	None.
Item 4.	Submission of Matters to a Vote of Security Holders
	None.
Item 5.	Other Information
	None.
Item 6.	Exhibits
	See Exhibit Index following this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Stewardship Financial Corporation
Date:   May 15, 2009	By:	/s/ Paul Van Ostenbridge
		Paul Van Ostenbridge
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:   May 15, 2009	By:	/s/ Claire M. Chadwick
		Claire M. Chadwick
		Senior Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Exhibits
3(i).1	Restated Certificate of Incorporation of Stewardship Financial Corporation
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial 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

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EX-3.I1

RESTATED

CERTIFICATE OF INCORPORATION

OF

STEWARDSHIP FINANCIAL CORPORATION

Pursuant to the provisions of Section 14A:9-5 of the New Jersey Business Corporation Act, the undersigned corporation hereby executes the following Restated Certificate of Incorporation:

ARTICLE I

Corporate Name

The name of the Corporation is STEWARDSHIP FINANCIAL CORPORATION (the “Corporation”).

ARTICLE II

Registered Agent and Registered Office

The address of the Corporation’s current registered office is:

Stewardship Financial Corporation

630 Godwin Avenue

Midland Park, New Jersey  07432

The name of the Corporation’s current registered agent at that address is:

Paul Van Ostenbridge

ARTICLE III

Corporate Purpose

The purpose or purposes for which the Corporation is organized is to engage in any activities for which corporations may be organized under the New Jersey Business Corporation Act.

ARTICLE IV

Board of Directors and Number of Directors

(a)           The number of directors shall be governed by the By-laws of the Corporation.  The number of directors constituting the current board of directors is eleven (11) and the names and addresses of the directors are as follows:

Harold Dyer	630 Godwin Avenue
	Midland Park, New Jersey  07432
William C. Hanse, Esq., Chairman	630 Godwin Avenue
	Midland Park, New Jersey  07432
Margo L. Lane	630 Godwin Avenue
	Midland Park, New Jersey  07432

Arie Leegwater	630 Godwin Avenue
	Midland Park, New Jersey  07432
John L. Steen	630 Godwin Avenue
	Midland Park, New Jersey  07432
Robert J. Turner	630 Godwin Avenue
	Midland Park, New Jersey  07432
William J. Vander Eems	630 Godwin Avenue
	Midland Park, New Jersey  07432
Paul Van Ostenbridge	630 Godwin Avenue
	Midland Park, New Jersey  07432
Abraham Van Wingerden	630 Godwin Avenue
	Midland Park, New Jersey  07432
Michael A. Westra	630 Godwin Avenue
	Midland Park, New Jersey  07432
Howard R. Yeaton	630 Godwin Avenue
	Midland Park, New Jersey  07432

(b)           The Board of Directors shall be divided into three (3) classes, as nearly identical in number as the then total number of directors constituting the entire board permits, with the term of office of one class expiring each year.  At the first annual meeting of shareholders, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting.  Any vacancies in the Board of Directors for any reason, and any directorships resulting from any increase in the number of directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified.  At each annual meeting of shareholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting.

(c)           None of the present or future directors of the Corporation may be removed without cause by the shareholders of the Corporation.  The term “cause” as used herein is defined to mean (i) conviction of the director of a felony, (ii) declaration by order of a court that the director is of unsound mind; (iii) gross abuse of trust which is proven by clear and convincing evidence to have been committed in bad faith.  The Board of Directors shall have the power to remove directors and to suspend directors pending a final determination that cause exists for removal.

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ARTICLE V

Capital Stock

(a)           The total authorized capital stock of the Corporation shall be 12,500,000 shares, consisting of 10,000,000 shares of Common Stock and 2,500,000 shares of Preferred Stock which may be issued in one or more classes or series.  The shares of Common Stock shall constitute a single class and shall be without nominal or par value.  The shares of Preferred Stock of each class or series shall be without nominal or par value, except that the amendment authorizing the initial issuance of any class or series, adopted by the Board of Directors as provided herein, may provide that shares of any class or series shall have a specified par value per share, in which event all of the shares of such class or series shall have the par value per share so specified.

(b)           The Board of Directors of the Corporation is expressly authorized from time to time to adopt and to cause to be executed and filed without further approval of the shareholders amendments to this Certificate of Incorporation authorizing the issuance of one or more classes or series of Preferred Stock for such consideration as the Board of Directors may fix.  In an amendment authorizing any class or series of Preferred Stock, the Board of Directors is expressly authorized to determine:

(1)           The distinctive designation of the class or series and the number of shares which will constitute the class or series, which number may be increased or decreased (but not below the number of shares then outstanding in that class or above the total shares authorized herein) from time to time by action of the Board of Directors;

(2)           The dividend rate on the shares of the class or series, whether dividends will be cumulative, and, if so, from what date or dates;

(3)           The price or prices at which, and the terms and conditions on which, the shares of the class or series may be redeemed at the option of the Corporation;

(4)           Whether or not the shares of the class or series will be entitled to the benefit of a retirement or sinking fund to be applied to the purchase or redemption of such shares and, if so entitled, the amount of such fund and the terms and provisions relative to the operation thereof;

(5)           Whether or not the shares of the class or series will be convertible into, or exchangeable for, any other shares of stock of the Corporation or other securities, and if so convertible or exchangeable, the conversion price or prices, or the rates of exchange, and any adjustments thereof, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

(6)           The rights of the shares of the class or series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

(7)           Whether or not the shares of the class or series will have priority over, parity with, or be junior to the shares of any other class or series in any respect, whether or not the shares of the class or series will be entitled to the benefit of limitations restricting the issuance of shares of any other class or series having priority over or on parity with the shares of

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such class or series and whether or not the shares of the class or series are entitled to restrictions on the payment of dividends on, the making of other distributions in respect of, and the purchase or redemption of shares of any other class or series of Preferred Stock or Common Stock ranking junior to the shares of the class or series;

(8)           Whether the class or series will have voting rights, in addition to any voting rights provided by law, and if so, the terms of such voting rights; and

(9)           Any other preferences, qualifications, privileges, options and other relative or special rights and limitations of that class or series.

(c)           The following is a statement of the designation and number of shares of the series of Preferred Stock designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series A,” and the voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series.

(1)           There is hereby created out of the authorized and unissued shares of preferred stock of the Corporation a series of preferred stock, no par value per share, designated as the “Fixed Rate Cumulative Perpetual Preferred Stock, Series A” (the “Designated Preferred Stock”).  The authorized number of shares of Designated Preferred Stock shall be 10,000.

(2)           The Standard Provisions contained in Annex A attached hereto are incorporated herein by reference in their entirety and shall be deemed to be a part of this Section (c) of Article V to the same extent as if such provisions had been set forth in full herein.

(3)           The following terms are used in this Section (c) of Article V (including the Standard Provisions in Annex A hereto) as defined below:

(i)           “Common Stock” means the common stock, no par value per share, of the Corporation.

(ii)           “Dividend Payment Date” means February 15, May 15, August 15 and November 15 of each year.

(iii)           “Junior Stock” means the Common Stock and any other class or series of stock of the Corporation the terms of which expressly provide that it ranks junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation.

(iv)           “Liquidation Amount” means $1,000 per share of Designated Preferred Stock.

(v)           “Minimum Amount” means $2,500,000.

(vi)           “Parity Stock” means any class or series of stock of the Corporation (other than Designated Preferred Stock) the terms of which do not expressly provide that such class or series will rank senior or junior to Designated Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Corporation (in each case without regard to whether dividends accrue cumulatively or non-cumulatively).

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(vii)           “Signing Date” means the Original Issue Date.

(4)           Holders of shares of Designated Preferred Stock will be entitled to one vote for each such share on any matter on which holders of Designated Preferred Stock are entitled to vote, including any action by written consent.

ARTICLE VI

Limitation of Liability

Subject to the following, a director or officer of the Corporation shall not be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders.  The preceding sentence shall not relieve a director or officer from liability for any breach of duty based upon an act or omission (i) in breach of such person’s duty of loyalty to the Corporation or its shareholders, (ii) not in good faith or involving a knowing violation of law, or (iii) resulting in receipt by such person of an improper personal benefit.  If the New Jersey Business Corporation Act is amended to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of a director or officer or both of the Corporation shall be eliminated or limited to the fullest extent permitted by the New Jersey Business Corporation Act as so amended.  Any amendment to this Certificate of Incorporation, or change in law which authorizes this paragraph shall not adversely affect any then existing right or protection of a director or officer of the Corporation.

ARTICLE VII

Indemnification

The Corporation shall indemnify its officers, directors, employees and agents and former officers, directors, employees and agents, and any other persons serving at the request of the Corporation as an officer, director, employee or agent of another corporation, association, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) incurred in connection with any pending or threatened action, suit, or proceeding, whether civil, criminal, administrative or investigative, with respect to which such officer, director, employee, agent or other person is a party, or is threatened to be made a party, to the full extent permitted by the New Jersey Business Corporation Act.  The indemnification provided herein (i) shall not be deemed exclusive of any other right to which any person seeking indemnification may be entitled under any by-law, agreement, or vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity, and (ii) shall inure to the benefit of the heirs, executors, and the administrators of any such person.  The Corporation shall have the power, but shall not be obligated, to purchase and maintain insurance on behalf of any person or persons enumerated above against any liability asserted against or incurred by them or any of them arising out of their status as corporate directors, officers, employees, or agents whether or not the Corporation would have the power to indemnify them against such liability under the provisions of this Article.

The Corporation shall, from time to time, reimburse or advance to any person referred to in this Article the funds necessary for payment of expenses, including attorneys’ fees, incurred in connection with any action, suit or proceeding referred to in this Article, upon receipt of a written undertaking by or on behalf of such person to repay such amount(s) if a judgment or other final adjudication adverse to the director or officer establishes that the director’s or

5

officer’s acts or omissions (i) constitute a breach of the director’s or officer’s duty of loyalty to the Corporation or its shareholders, (ii) were not in good faith, (iii) involved a knowing violation of law, (iv) resulted in the director or officer receiving an improper personal benefit, or (v) were otherwise of such a character that New Jersey law would require that such amount(s) be repaid.

ARTICLE VIII

Advance Notice of Nomination of Directors

Advance notice of nomination for the election of directors, other than by the Board of Directors or a committee thereof, shall be given within the time and in the manner provided in the Corporation’s By-laws.

ARTICLE IX

Certain Required Votes of Shareholders

(a)           No merger, consolidation, nor any action which would result in the disposition of all or substantially all of the assets of the Corporation shall be valid unless first approved by the affirmative vote, cast in person or by proxy, of the holders of record of eighty percent (80%) of the outstanding shares of the capital stock of the Corporation entitled to vote thereon; provided, however, that if any such action has been approved prior to the vote of shareholders by a majority of the Corporation’s Board of Directors acting at a meeting duly called for that purpose, the affirmative vote of the holders of but a majority of the outstanding shares of capital stock then entitled to vote on such matters shall be required.

(b)           This Article IX may not be amended except by the affirmative vote, cast in person or by proxy, of the holders of record of eighty percent (80%) of the outstanding shares of the capital stock of the Corporation entitled to vote thereon acting at a meeting duly called for that purpose.

ARTICLE X

Power of Board to Oppose Certain Transactions

(a)           The Board of Directors may, if it deems it advisable, oppose a tender or other offer for the Corporation’s securities, whether the offer is in cash or in the securities of a corporation or otherwise, or any other proposed Business Combination (as defined below).  When considering whether to oppose an offer, the Board of Directors may, but is not legally obligated to, consider any relevant factors; by way of illustration, but not limitation, the Board of Directors may, but shall not be legally obligated to, consider any and all of the following:

(1)           Whether the offer price is acceptable based on the historical and present operating results or financial condition of the Corporation, or based on the current value of the Corporation in a freely negotiated transaction.

(2)           Whether a more favorable price could be obtained for the Corporation’s securities in the future.

(3)           The impact which an acquisition of the Corporation would have on the employees, creditors, customers and suppliers of the Corporation and any subsidiary and on the communities which they serve.

6

(4)           The reputation and business practices of the offeror and its management and affiliates as they would affect the employees, creditors, customers and suppliers of the Corporation and its subsidiaries and the future value of the Corporation’s stock.

(5)           The value of the securities, if any, which the offeror is offering in exchange for the Corporation’s securities, based on an analysis of the worth of the Corporation as compared to the corporation or other entity whose securities are being offered.

(6)           Any antitrust or other legal and regulatory issues that are raised by the offer.

(7)           Any other relevant factors, including the long-term as well as the short-term interests of the Corporation and its shareholders, whether or not such other factors are monetary or non-monetary in nature, or are shareholder or non-shareholder considerations.

(b)           If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose including, but not limited to, any or all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the Corporation’s securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; establishing employee stock ownership plans; and obtaining a more favorable offer from another individual or entity.

(c)           “Business Combination” as used herein shall mean any of the following proposed transactions, when entered into by the Corporation or a subsidiary of the Corporation with, or upon a proposal by or on behalf of, a related entity or person:

(1)           the merger or consolidation of the Corporation or any subsidiary of the Corporation;

(2)           the sale, exchange, transfer or other disposition (in one or a series of transactions) of substantially all of the assets of the Corporation or any subsidiary of the Corporation; or

(3)           any offer for the exchange of securities of another entity for the securities of the Corporation.

(d)           Nothing contained herein shall be deemed to limit or restrict the powers of the Board of Directors, or to enlarge the duties of the Board of Directors, as provided in Section 14A:6-1(2) of the New Jersey Business Corporation Act or otherwise in New Jersey law, or to create director liability for taking any action authorized hereunder.

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IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed by a duly authorized officer on the 22nd day of April, 2009.

STEWARDSHIP FINANCIAL CORPORATION
By:	/s/ Paul Van Ostenbridge
	Paul Van Ostenbridge
	President and Chief Executive Officer

8

ANNEX A

STANDARD PROVISIONS

Section 1.            General Matters.  Each share of Designated Preferred Stock shall be identical in all respects to every other share of Designated Preferred Stock.  The Designated Preferred Stock shall be perpetual, subject to the provisions of Section 5 of these Standard Provisions that form a part of Section (c) of Article V.  The Designated Preferred Stock shall rank equally with Parity Stock and shall rank senior to Junior Stock with respect to the payment of dividends and the distribution of assets in the event of any dissolution, liquidation or winding up of the Corporation.

Section 2.             Standard Definitions.  As used herein with respect to Designated Preferred Stock:

(a)           “Applicable Dividend Rate” means (i) during the period from the Original Issue Date to, but excluding, the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 5% per annum and (ii) from and after the first day of the first Dividend Period commencing on or after the fifth anniversary of the Original Issue Date, 9% per annum.

(b)           “Appropriate Federal Banking Agency” means the “appropriate Federal banking agency” with respect to the Corporation as defined in Section 3(q) of the Federal Deposit Insurance Act (12 U.S.C.  Section 1813(q)), or any successor provision.

(c)           “Business Combination” means a merger, consolidation, statutory share exchange or similar transaction that requires the approval of the Corporation’s shareholders.

(d)           “Business Day” means any day except Saturday, Sunday and any day on which banking institutions in the State of New York generally are authorized or required by law or other governmental actions to close.

(e)           “Bylaws” means the bylaws of the Corporation, as they may be amended from time to time.

(f)           “Charter” means the Corporation’s certificate or articles of incorporation, articles of association, or similar organizational document.

(g)           “Dividend Period” has the meaning set forth in Section 3(a).

(h)           “Dividend Record Date” has the meaning set forth in Section 3(a).

(i)           “Liquidation Preference” has the meaning set forth in Section 4(a).

(j)           “Original Issue Date” means the date on which shares of Designated Preferred Stock are first issued.

(k)           “Preferred Director” has the meaning set forth in Section 7(b).

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(l)           “Preferred Stock” means any and all series of preferred stock of the Corporation, including the Designated Preferred Stock.

(m)           “Qualified Equity Offering” means the sale and issuance for cash by the Corporation to persons other than the Corporation or any of its subsidiaries after the Original Issue Date of shares of perpetual Preferred Stock, Common Stock or any combination of such stock, that, in each case, qualify as and may be included in Tier 1 capital of the Corporation at the time of issuance under the applicable risk-based capital guidelines of the Corporation’s Appropriate Federal Banking Agency (other than any such sales and issuances made pursuant to agreements or arrangements entered into, or pursuant to financing plans which were publicly announced, on or prior to October 13, 2008).

(n)           “Share Dilution Amount” has the meaning set forth in Section 3(b).

(o)           “Standard Provisions” mean these Standard Provisions that form a part of Section (c) of Article V relating to the Designated Preferred Stock.

(p)           “Successor Preferred Stock” has the meaning set forth in Section 5(a).

(q)           “Voting Parity Stock” means, with regard to any matter as to which the holders of Designated Preferred Stock are entitled to vote as specified in Sections 7(a) and 7(b) of these Standard Provisions that form a part of Section (c) of Article V, any and all series of Parity Stock upon which like voting rights have been conferred and are exercisable with respect to such matter.

Section 3.             Dividends.

(a)           Rate.  Holders of Designated Preferred Stock shall be entitled to receive, on each share of Designated Preferred Stock if, as and when declared by the Board of Directors or any duly authorized committee of the Board of Directors, but only out of assets legally available therefor, cumulative cash dividends with respect to each Dividend Period (as defined below) at a rate per annum equal to the Applicable Dividend Rate on (i) the Liquidation Amount per share of Designated Preferred Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend Period on such share of Designated Preferred Stock, if any.  Such dividends shall begin to accrue and be cumulative from the Original Issue Date, shall compound on each subsequent Dividend Payment Date (i.e., no dividends shall accrue on other dividends unless and until the first Dividend Payment Date for such other dividends has passed without such other dividends having been paid on such date) and shall be payable quarterly in arrears on each Dividend Payment Date, commencing with the first such Dividend Payment Date to occur at least 20 calendar days after the Original Issue Date.  In the event that any Dividend Payment Date would otherwise fall on a day that is not a Business Day, the dividend payment due on that date will be postponed to the next day that is a Business Day and no additional dividends will accrue as a result of that postponement.  The period from and including any Dividend Payment Date to, but excluding, the next Dividend Payment Date is a “Dividend Period”, provided that the initial Dividend Period shall be the period from and including the Original Issue Date to, but excluding, the next Dividend Payment Date.

Dividends that are payable on Designated Preferred Stock in respect of any Dividend Period shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

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The amount of dividends payable on Designated Preferred Stock on any date prior to the end of a Dividend Period, and for the initial Dividend Period, shall be computed on the basis of a 360-day year consisting of twelve 30-day months, and actual days elapsed over a 30-day month.

Dividends that are payable on Designated Preferred Stock on any Dividend Payment Date will be payable to holders of record of Designated Preferred Stock as they appear on the stock register of the Corporation on the applicable record date, which shall be the 15th calendar day immediately preceding such Dividend Payment Date or such other record date fixed by the Board of Directors or any duly authorized committee of the Board of Directors that is not more than 60 nor less than 10 days prior to such Dividend Payment Date (each, a “Dividend Record Date”).  Any such day that is a Dividend Record Date shall be a Dividend Record Date whether or not such day is a Business Day.

Holders of Designated Preferred Stock shall not be entitled to any dividends, whether payable in cash, securities or other property, other than dividends (if any) declared and payable on Designated Preferred Stock as specified in this Section 3 (subject to the other provisions of Section (c) of Article V).

(b)           Priority of Dividends.  So long as any share of Designated Preferred Stock remains outstanding, no dividend or distribution shall be declared or paid on the Common Stock or any other shares of Junior Stock (other than dividends payable solely in shares of Common Stock) or Parity Stock, subject to the immediately following paragraph in the case of Parity Stock, and no Common Stock, Junior Stock or Parity Stock shall be, directly or indirectly,  purchased, redeemed or otherwise acquired for consideration by the Corporation or any of its subsidiaries unless all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been or are contemporaneously declared and paid in full (or have been declared and a sum sufficient for the payment thereof has been set aside for the benefit of the holders of shares of Designated Preferred Stock on the applicable record date).  The foregoing limitation shall not apply to (i) redemptions, purchases or other acquisitions of shares of Common Stock or other Junior Stock in connection with the administration of any employee benefit plan in the ordinary course of business (including purchases to offset the Share Dilution Amount (as defined below) pursuant to a publicly announced repurchase plan) and consistent with past practice, provided that any purchases to offset the Share Dilution Amount shall in no event exceed the Share Dilution Amount; (ii) purchases or other acquisitions by a broker-dealer subsidiary of the Corporation solely for the purpose of market-making, stabilization or customer facilitation transactions in Junior Stock or Parity Stock in the ordinary course of its business; (iii) purchases by a broker-dealer subsidiary of the Corporation of capital stock of the Corporation for resale pursuant to an offering by the Corporation of such capital stock underwritten by such broker-dealer subsidiary; (iv) any dividends or distributions of rights or Junior Stock in connection with a shareholders’ rights plan or any redemption or repurchase of rights pursuant to any shareholders’ rights plan; (v) the acquisition by the Corporation or any of its subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial ownership of any other persons (other than the Corporation or any of its subsidiaries), including as trustees or custodians; and (vi) the exchange or conversion of Junior Stock for or into other Junior Stock or of Parity Stock for or into other Parity Stock (with the same or lesser aggregate liquidation amount) or Junior Stock, in each case, solely to the extent required pursuant to binding contractual agreements entered into prior to the

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Signing Date or any subsequent agreement for the accelerated exercise, settlement or exchange thereof for Common Stock.  “Share Dilution Amount” means the increase in the number of diluted shares outstanding (determined in accordance with generally accepted accounting principles in the United States, and as measured from the date of the Corporation’s consolidated financial statements most recently filed with the Securities and Exchange Commission prior to the Original Issue Date) resulting from the grant, vesting or exercise of equity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction.

When dividends are not paid (or declared and a sum sufficient for payment thereof set aside for the benefit of the holders thereof on the applicable record date) on any Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within a Dividend Period related to such Dividend Payment Date) in full upon Designated Preferred Stock and any shares of Parity Stock, all dividends declared on Designated Preferred Stock and all such Parity Stock and payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) shall be declared pro rata so that the respective amounts of such dividends declared shall bear the same ratio to each other as all accrued and unpaid dividends per share on the shares of Designated Preferred Stock (including, if applicable as provided in Section 3(a) above, dividends on such amount) and all Parity Stock payable on such Dividend Payment Date (or, in the case of Parity Stock having dividend payment dates different from the Dividend Payment Dates, on a dividend payment date falling within the Dividend Period related to such Dividend Payment Date) (subject to their having been declared by the Board of Directors or a duly authorized committee of the Board of Directors out of legally available funds and including, in the case of Parity Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to each other.  If the Board of Directors or a duly authorized committee of the Board of Directors determines not to pay any dividend or a full dividend on a Dividend Payment Date, the Corporation will provide written notice to the holders of Designated Preferred Stock prior to such Dividend Payment Date.

Subject to the foregoing, and not otherwise, such dividends (payable in cash, securities or other property) as may be determined by the Board of Directors or any duly authorized committee of the Board of Directors may be declared and paid on any securities, including Common Stock and other Junior Stock, from time to time out of any funds legally available for such payment, and holders of Designated Preferred Stock shall not be entitled to participate in any such dividends.

Section 4.             Liquidation Rights.

(a)           Voluntary or Involuntary Liquidation.  In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of Designated Preferred Stock shall be entitled to receive for each share of Designated Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to shareholders of the Corporation, subject to the rights of any creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Common Stock and any other stock of the Corporation ranking junior to Designated Preferred Stock as to such distribution, payment in full in an amount equal to the sum

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of (i) the Liquidation Amount per share and (ii) the amount of any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount), whether or not declared, to the date of payment (such amounts collectively, the “Liquidation Preference”).

(b)           Partial Payment.  If in any distribution described in Section 4(a) above the assets of the Corporation or proceeds thereof are not sufficient to pay in full the amounts payable with respect to all outstanding shares of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution, holders of Designated Preferred Stock and the holders of such other stock shall share ratably in any such distribution in proportion to the full respective distributions to which they are entitled.

(c)           Residual Distributions.  If the Liquidation Preference has been paid in full to all holders of Designated Preferred Stock and the corresponding amounts payable with respect of any other stock of the Corporation ranking equally with Designated Preferred Stock as to such distribution has been paid in full, the holders of other stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

(d)           Merger, Consolidation and Sale of Assets Not Liquidation.  For purposes of this Section 4, the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Designated Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

Section 5.             Redemption.

(a)           Optional Redemption.  Except as provided below, the Designated Preferred Stock may not be redeemed prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date.  On or after the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, out of funds legally available therefor, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date fixed for redemption.

Notwithstanding the foregoing, prior to the first Dividend Payment Date falling on or after the third anniversary of the Original Issue Date, the Corporation, at its option, subject to the approval of the Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time and from time to time, the shares of Designated Preferred Stock at the time outstanding, upon notice given as provided in Section 5(c) below, at a redemption price equal to the sum of (i) the Liquidation Amount per share and (ii) except as otherwise provided below, any accrued and unpaid dividends (including, if applicable as provided in Section 3(a) above, dividends on such amount) (regardless of whether any dividends are actually declared) to, but excluding, the date

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fixed for redemption; provided that (x) the Corporation (or any successor by Business Combination) has received aggregate gross proceeds of not less than the Minimum Amount (plus the “Minimum Amount” as defined in the relevant certificate of designations for each other outstanding series of preferred stock of such successor that was originally issued to the United States Department of the Treasury (the “Successor Preferred Stock”) in connection with the Troubled Asset Relief Program Capital Purchase Program) from one or more Qualified Equity Offerings (including Qualified Equity Offerings of such successor), and (y) the aggregate redemption price of the Designated Preferred Stock (and any Successor Preferred Stock) redeemed pursuant to this paragraph may not exceed the aggregate net cash proceeds received by the Corporation (or any successor by Business Combination) from such Qualified Equity Offerings (including Qualified Equity Offerings of such successor).

The redemption price for any shares of Designated Preferred Stock shall be payable on the redemption date to the holder of such shares against surrender of the certificate(s) evidencing such shares to the Corporation or its agent.  Any declared but unpaid dividends payable on a redemption date that occurs subsequent to the Dividend Record Date for a Dividend Period shall not be paid to the holder entitled to receive the redemption price on the redemption date, but rather shall be paid to the holder of record of the redeemed shares on such Dividend Record Date relating to the Dividend Payment Date as provided in Section 3 above.

(b)           No Sinking Fund.  The Designated Preferred Stock will not be subject to any mandatory redemption, sinking fund or other similar provisions.  Holders of Designated Preferred Stock will have no right to require redemption or repurchase of any shares of Designated Preferred Stock.

(c)           Notice of Redemption. Notice of every redemption of shares of Designated Preferred Stock shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation.  Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption.  Any notice mailed as provided in this Subsection shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Designated Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Designated Preferred Stock.  Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any other similar facility, notice of redemption may be given to the holders of Designated Preferred Stock at such time and in any manner permitted by such facility.  Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of Designated Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

(d)           Partial Redemption.  In case of any redemption of part of the shares of Designated Preferred Stock at the time outstanding, the shares to be redeemed shall be selected either pro rata or in such other manner as the Board of Directors or a duly authorized committee thereof may determine to be fair and equitable.  Subject to the provisions hereof, the Board of Directors or a duly authorized committee thereof shall have full power and authority to prescribe the terms

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and conditions upon which shares of Designated Preferred Stock shall be redeemed from time to time.  If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

(e)           Effectiveness of Redemption.  If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest.  Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

(f)           Status of Redeemed Shares.  Shares of Designated Preferred Stock that are redeemed, repurchased or otherwise acquired by the Corporation shall revert to authorized but unissued shares of Preferred Stock (provided that any such cancelled shares of Designated Preferred Stock may be reissued only as shares of any series of Preferred Stock other than Designated Preferred Stock).

Section 6.             Conversion.  Holders of Designated Preferred Stock shares shall have no right to exchange or convert such shares into any other securities

Section 7.             Voting Rights.

(a)           General.  The holders of Designated Preferred Stock shall not have any voting rights except as set forth below or as otherwise from time to time required by law.

(b)           Preferred Stock Directors.  Whenever, at any time or times, dividends payable on the shares of Designated Preferred Stock have not been paid for an aggregate of six quarterly Dividend Periods or more, whether or not consecutive, the authorized number of directors of the Corporation shall automatically be increased by two and the holders of the Designated Preferred Stock shall have the right, with holders of shares of any one or more other classes or series of  Voting Parity Stock outstanding at the time, voting together as a class, to elect two directors (hereinafter the “Preferred Directors” and each a “Preferred Director”) to fill such newly created directorships at the Corporation’s next annual meeting of shareholders (or at a special meeting called for that purpose prior to such next annual meeting) and at each subsequent annual meeting of shareholders until all accrued and unpaid dividends for all past Dividend Periods, including the latest completed Dividend Period (including, if applicable as provided in Section 3(a) above, dividends on such amount), on all outstanding shares of Designated Preferred Stock have been declared and paid in full at which time such right shall terminate with respect to the Designated Preferred Stock, except as herein or by law expressly provided, subject to revesting

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in the event of each and every subsequent default of the character above mentioned; provided that it shall be a qualification for election for any Preferred Director that the election of such Preferred Director shall not cause the Corporation to violate any corporate governance requirements of any securities exchange or other trading facility on which securities of the Corporation may then be listed or traded that listed or traded companies must have a majority of independent directors.  Upon any termination of the right of the holders of shares of Designated Preferred Stock and Voting Parity Stock as a class to vote for directors as provided above, the Preferred Directors shall cease to be qualified as directors, the term of office of all Preferred Directors then in office shall terminate immediately and the authorized number of directors shall be reduced by the number of Preferred Directors elected pursuant hereto.  Any Preferred Director may be removed at any time, with or without cause, and any vacancy created thereby may be filled, only by the affirmative vote of the holders a majority of the shares of Designated Preferred Stock at the time outstanding voting separately as a class together with the holders of shares of Voting Parity Stock, to the extent the voting rights of such holders described above are then exercisable.  If the office of any Preferred Director becomes vacant for any reason other than removal from office as aforesaid, the remaining Preferred Director may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

(c)           Class Voting Rights as to Particular Matters.  So long as any shares of Designated Preferred Stock are outstanding, in addition to any other vote or consent of shareholders required by law or by the Charter, the vote or consent of the holders of at least 66 2/3% of the shares of Designated Preferred Stock at the time outstanding, voting as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

(i)           Authorization of Senior Stock.  Any amendment or alteration of Section (c) of Article V for the Designated Preferred Stock or any other provision of the Charter to authorize or create or increase the authorized amount of, or any issuance of, any shares of, or any securities convertible into or exchangeable or exercisable for shares of, any class or series of capital stock of the Corporation ranking senior to Designated Preferred Stock with respect to either or both the payment of dividends and/or the distribution of assets on any liquidation, dissolution or winding up of the Corporation;

(ii)          Amendment of Designated Preferred Stock.  Any amendment, alteration or repeal of any provision of Section (c) of Article V for the Designated Preferred Stock or any other provision of the Charter (including, unless no vote on such merger or consolidation is required by Section 7(c)(iii) below, any amendment, alteration or repeal by means of a merger, consolidation or otherwise) so as to adversely affect the rights, preferences, privileges or voting powers of the Designated Preferred Stock; or

(iii)         Share Exchange, Reclassifications, Mergers and Consolidations.  Any consummation of a binding share exchange or reclassification involving the Designated Preferred Stock, or of a merger or consolidation of the Corporation with another corporation or other entity, unless in each case (x) the shares of Designated Preferred Stock remain outstanding or, in the case of any such merger or consolidation with respect to which the Corporation is not the surviving or resulting entity, are converted into or exchanged for preference securities of the surviving or resulting entity or its ultimate parent, and (y) such shares remaining outstanding or such preference securities, as the

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case may be, have such rights, preferences, privileges and voting powers, and limitations and restrictions thereof, taken as a whole, as are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers, and limitations and restrictions thereof, of Designated Preferred Stock immediately prior to such consummation, taken as a whole;

provided, however, that for all purposes of this Section 7(c), any increase in the amount of the authorized Preferred Stock, including any increase in the authorized amount of Designated Preferred Stock necessary to satisfy preemptive or similar rights granted by the Corporation to other persons prior to the Signing Date, or the creation and issuance, or an increase in the authorized or issued amount, whether pursuant to preemptive or similar rights or otherwise, of any other series of Preferred Stock, or any securities convertible into or exchangeable or exercisable for any other series of Preferred Stock, ranking equally with and/or junior to Designated Preferred Stock with respect to the payment of dividends (whether such dividends are cumulative or non-cumulative) and the distribution of assets upon liquidation, dissolution or winding up of the Corporation will not be deemed to adversely affect the rights, preferences, privileges or voting powers, and shall not require the affirmative vote or consent of, the holders of outstanding shares of the Designated Preferred Stock.

(d)           Changes after Provision for Redemption.  No vote or consent of the holders of Designated Preferred Stock shall be required pursuant to Section 7(c) above if, at or prior to the time when any such vote or consent would otherwise be required pursuant to such Section, all outstanding shares of the Designated Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to Section 5 above.

(e)           Procedures for Voting and Consents.  The rules and procedures for calling and conducting any meeting of the holders of Designated Preferred Stock (including, without limitation, the fixing of a record date in connection therewith), the solicitation and use of proxies at such a meeting, the obtaining of written consents and any other aspect or matter with regard to such a meeting or such consents shall be governed by any rules of the Board of Directors or any duly authorized committee of the Board of Directors, in its discretion, may adopt from time to time, which rules and procedures shall conform to the requirements of the Charter, the Bylaws, and applicable law and the rules of any national securities exchange or other trading facility on which Designated Preferred Stock is listed or traded at the time.

Section 8.             Record Holders.  To the fullest extent permitted by applicable law, the Corporation and the transfer agent for Designated Preferred Stock may deem and treat the record holder of any share of Designated Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary.

Section 9.             Notices.  All notices or communications in respect of Designated Preferred Stock shall be sufficiently given if given in writing and delivered in person or by first class mail, postage prepaid, or if given in such other manner as may be permitted in Section (c) of Article V or any other provisions of the Charter or Bylaws or by applicable law.  Notwithstanding the foregoing, if shares of Designated Preferred Stock are issued in book-entry form through The Depository Trust Company or any similar facility, such notices may be given to the holders of Designated Preferred Stock in any manner permitted by such facility.

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Section 10.           No Preemptive Rights.  No share of Designated Preferred Stock shall have any rights of preemption whatsoever as to any securities of the Corporation, or any warrants, rights or options issued or granted with respect thereto, regardless of how such securities, or such warrants, rights or options, may be designated, issued or granted.

Section 11.         Replacement Certificates.  The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation.  The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be reasonably required by the Corporation.

Section 12.           Other Rights.  The shares of Designated Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Charter or as provided by applicable law.

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CERTIFICATE REQUIRED TO BE FILED WITH

THE RESTATED CERTIFICATE OF INCORPORATION

OF

STEWARDSHIP FINANCIAL CORPORATION

Pursuant to N.J.S.A.14A:9-5(5), Stewardship Financial Corporation, a corporation organized under the laws of the State of New Jersey, hereby certifies that:

1.           The name of this corporation is: STEWARDSHIP FINANCIAL CORPORATION (the “Corporation”).

2.           The Restated Certificate of Incorporation was adopted by the Board of Directors of the Corporation at a meeting duly called and held on April 21, 2009.  The Restated Certificate of Incorporation restates and integrates and does not further amend the provisions of the certificate of incorporation of the Corporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of the Restated Certificate of Incorporation.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to the Restated Certificate of Incorporation of the Corporation to be executed by a duly authorized officer of the Corporation on the 22nd day of April, 2009.

STEWARDSHIP FINANCIAL CORPORATION
By:	/s/ Paul Van Ostenbridge
	Paul Van Ostenbridge
	President and Chief Executive Officer

EX-31.1

Exhibit 31.1

Certification Pursuant to 18 U.S.C. § 1350 as adopted pursuant

to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Paul Van Ostenbridge, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stewardship Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))  and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2009

/s/ Paul Van Ostenbridge

Paul Van Ostenbridge

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to 18 U.S.C. § 1350 as adopted pursuant

to Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Claire M. Chadwick, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Stewardship Financial Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))  and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 15, 2009

/s/ Claire M. Chadwick                                                      

Claire M. Chadwick

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. § 1350 as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Stewardship Financial Corporation (the “Company”), certifies that:

(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 15, 2009	/s/ Paul Van Ostenbridge
	Paul Van Ostenbridge
	President and Chief Executive Officer
Dated: May 15, 2009	/s/ Claire M. Chadwick
	Claire M. Chadwick
	Senior Vice President and
	Chief Financial Officer

This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.