<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A
                                 AMENDMENT NO. 1


[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
          For the transition period from _____________ to _____________

                        Commission File Number: 000-51385

                            COLONIAL BANKSHARES, INC.
            --------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)

           FEDERAL                                     90-0183739
-------------------------------         ---------------------------------------
(State or Other Jurisdiction of         (I.R.S. Employer Identification Number)
Incorporation or Organization)

85 WEST BROAD STREET, BRIDGETON, NEW JERSEY                       08302
-------------------------------------------                   --------------
  (Address of Principal Executive Office)                       (Zip Code)

                                 (856) 451-5800
            --------------------------------------------------------
                 (Issuer's Telephone Number including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      NONE
                                      ----

           Securities Registered Pursuant to Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $0.10 PER SHARE
                     ---------------------------------------
                                (Title of Class)

        Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve months (or for
such shorter period that the Registrant was required to file reports) and (2)
has been subject to such requirements for the past 90 days.

(1)  YES  X  .    NO     .
        -----       -----

(2)  YES  X  .    NO     .
        -----       -----

        Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. [X]

        The Registrant's revenues for the fiscal year ended December 31, 2005
were $15.7 million.

        Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). [ ] YES [X] NO

        Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ]

        As of March 15, 2006, there were 4,521,696 shares issued and outstanding
of the Registrant's Common Stock, including 2,441,716 shares owned by Colonial
Bankshares, MHC. The aggregate value of the voting stock held by non-affiliates
of the Registrant, computed by reference to the closing price of the Common
Stock as of March 15, 2006 was $20.3 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

        None

<PAGE>

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

        The table below sets forth certain information, as of January 1, 2006,
regarding the members of the Board of Directors of Colonial Bankshares, Inc.,
and Executive Officers who are not Directors, including the terms of office of
board members.

<TABLE>
<CAPTION>
                                                                                     CURRENT        SHARES
                                 POSITION(S) HELD WITH                 DIRECTOR       TERM       BENEFICIALLY     PERCENT
           NAME                COLONIAL BANKSHARES, INC.      AGE      SINCE (1)     EXPIRES        OWNED         OF CLASS
---------------------------  -----------------------------  -------  -----------  ------------  --------------  ------------
<S>                          <C>                               <C>       <C>           <C>         <C>               <C>
                                                          NOMINEES

Frank M. Hankins, Jr.        Chairman of the Board             87        1947          2006        38,500 (2)         *
Gregory J. Facemyer, CPA     Director                          50        1994          2006        20,000 (3)         *

                                                   CONTINUING BOARD MEMBERS

Edward J. Geletka            President, Chief Executive        44        2001          2007        19,106 (4)         *
                               Officer and Director
Richard S. Allen             Director                          48        2001          2007        15,000 (5)         *
James Quinn                  Director                          60        1998          2007        20,000 (6)         *
Albert A. Fralinger, Jr.     Vice Chairman of the Board        73        1971          2008        25,000 (7)         *
John Fitzpatrick, CPA        Director                          42        2005          2008           300             *

                                                      EXECUTIVE OFFICERS
                                                    WHO ARE NOT DIRECTORS

L. Joseph Stella, III, CPA   Executive Vice President and      48         N/A           N/A        10,934 (8)         *
                               Chief Financial Officer
Richard W. Dapp              Senior Vice President and         51         N/A           N/A         1,400             *
                               Chief Credit Officer
William F. Whelan            Senior Vice President             53         N/A           N/A           300             *

All Directors and Executive Officers as a Group (10 persons)                                      150,540            3.3%
</TABLE>

---------------------------------------

*    Less than 1%.
(1)  Includes service with Colonial Bank, FSB and Colonial Bankshares, Inc., a
     federal corporation.
(2)  Includes 8,500 shares held in trust for Mr. Hankins' grandchildren.
(3)  Includes 5,000 shares held in Mr. Facemyer's profit sharing plan.
(4)  Includes 5,910 shares held in Mr. Geletka's account in Colonial Bank, FSB's
     401(k) Plan, 1,096 shares allocated to Mr. Geletka under Colonial Bank,
     FSB's ESOP, and 2,500 shares held by Mr. Geletka's spouse.
(5)  The 15,000 shares are held jointly with Mr. Allen's spouse.
(6)  Includes 10,000 shares held by Mr. Quinn's spouse.
(7)  Includes 10,000 shares held by Mr. Fralinger's spouse.
(8)  Includes 9,193 shares held in Mr. Stella's account in Colonial Bank, FSB's
     401(k) Plan, 841 shares allocated to Mr. Stella under Colonial Bank, FSB's
     ESOP and 900 shares held jointly with Mr. Stella's spouse.

        The business experience for the past five years for each of our
directors and executive officers is as follows:

        FRANK M. HANKINS, JR. is the retired Chairman of H. H. Hankins &
Brothers Lumber in Bridgeton, New Jersey.

        ALBERT A. FRALINGER, JR. is the Chairman and Chief Financial Officer of
Fralinger Engineering, a civil engineering firm that he founded in 1960.

        EDWARD J. GELETKA has served as the President and Chief Executive
Officer of Colonial Bank, FSB since 2000, and has been employed by Colonial
Bank, FSB in a variety of positions since 1987.

                                       1
<PAGE>

        RICHARD S. ALLEN has been the President of Allen Associates, Insurance
Services, since 1993. Mr. Allen has been employed by Allen Associates since
1982.

        GREGORY J. FACEMYER, CPA, has been a self-employed certified public
accountant since 1980. Mr. Facemyer is also a Commissioner of the Cumberland
County Utilities Authority.

        JOHN FITZPATRICK, CPA, is the President of Fitzpatrick & McIlvaine, CPAs
PC of Pitman, New Jersey, which he founded in 1992.

        JAMES QUINN is the owner of Quinn Broadcasting, Inc., which he founded
in 1977. Mr. Quinn has also served as the mayor of Millville, New Jersey since
1997.

        L. JOSEPH STELLA, III, CPA has served as Executive Vice President and
Chief Financial Officer of Colonial Bank, FSB since March 1999.

        RICHARD W. DAPP has served as Senior Vice President and Chief Credit
Officer of Colonial Bank, FSB since July 2004. From November 2003 to July 2004,
Mr. Dapp served as Vice President/Chief Commercial Lending Officer for Franklin
Savings Bank, Pilesgrove, New Jersey. From June 2001 to November 2002, Mr. Dapp
served as Cumberland County Regional Vice President for Commerce Bank, NA,
Vineland, New Jersey.

        WILLIAM F. WHELAN was appointed Senior Vice President of Colonial Bank,
FSB in July 2005. Mr. Whelan was previously the Chief Executive Officer of St.
Joseph's Carpenter Society, a charitable organization that constructs housing
units, and worked for that organization from 2001 until 2005. From 1974 until
2001, Mr. Whelan worked for financial institutions in numerous positions.

AUDIT COMMITTEE

        The Audit Committee is comprised of Directors Facemyer (who serves as
Chairman), Fitzpatrick and Hankins. The Board of Directors has determined that
each of Messrs. Facemyer and Fitzpatrick qualifies as an "audit committee
financial expert." Each member of the Audit Committee is "independent" in
accordance with the listing standards of the National Association of Securities
Dealers.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Our Executive Officers and Directors and beneficial owners of greater
than 10% of the outstanding shares of common stock are required to file reports
with the Securities and Exchange Commission disclosing beneficial ownership and
changes in beneficial ownership of our common stock. Securities and Exchange
Commission rules require disclosure if an executive officer, director or 10%
beneficial owner fails to file these reports on a timely basis. Based on our
review of ownership reports required to be filed for the year ended December 31,
2005, no Executive Officer, Director or 10% beneficial owner of our shares of
common stock failed to file ownership reports on a timely basis.

CODE OF ETHICS

        Colonial Bankshares has adopted a Code of Ethics that applies to
Colonial Bankshares' principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar
functions. The Code of Ethics was filed as Exhibit 14 to Colonial Bankshares,
Inc.'s Annual Report on Form 10-KSB as filed with the U.S. Securities and
Exchange Commission on March 30, 2006. A copy of the Code will be furnished
without charge upon written request to the Secretary, Colonial Bankshares, Inc.,
85 West Broad Street, Bridgeton, NJ 08302.

                                       2
<PAGE>

ITEM 10.   EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

        Each of the individuals who currently serves as a director of Colonial
Bankshares, Inc. also serves as a director of Colonial Bank, FSB and earns
director fees in that capacity, although directors who are also employees of
Colonial Bank, FSB do not receive director fees. Each non-employee director of
Colonial Bank, FSB is paid an annual retainer fee of $7,500. The Chairman of the
Board is paid a fee of $1,800 per board meeting, the Vice Chairman of the Board
is paid a fee of $1,500 per board meeting and all other non-employee directors
are paid a fee of $1,250 per board meeting. In addition, each non-employee
director participates in Colonial Bank, FSB's bonus program. Bonuses are
calculated as a percentage of the director's annual compensation. During the
year ended December 31, 2005, payments under this plan were $3,050, $2,665,
$2,344, $2,344 and $2,344 for Chairman Hankins, Vice Chairman Fralinger and
Directors Allen, Facemyer and Quinn, respectively.

EXECUTIVE COMPENSATION

        SUMMARY COMPENSATION TABLE. The following table sets forth for the year
ended December 31, 2005, certain information as to the total remuneration paid
to our Chief Executive Officer and each other executive officer who received
salary and bonus for 2005 of $100,000 or more (together, "Named Executive
Officers").

<TABLE>
<CAPTION>
                                                                                            LONG-TERM COMPENSATION
                                                                             -------------------------------------------------
                                          ANNUAL COMPENSATION                          AWARDS                 PAYOUTS
                           ------------------------------------------------  ------------------------  -----------------------
                              YEAR                             OTHER ANNUAL   RESTRICTED     OPTIONS/              ALL OTHER
    NAME AND PRINCIPAL        ENDED                            COMPENSATION      STOCK         SARS      LTIP     COMPENSATION
        POSITION            12/31 (1)    SALARY       BONUS         (2)         AWARDS         (#)      PAYOUTS        (3)
-------------------------  ----------  ----------  ----------  ------------  ------------  ----------  ---------  ------------
<S>                            <C>      <C>          <C>        <C>           <C>               <C>     <C>         <C>
Edward J. Geletka,
  President and Chief
  Executive Officer            2005     $150,028     $29,610    $       --    $       --        --      $     --    $  19,426

L. Joseph Stella, III,
  CPA, Executive
  Vice President and
  Chief Financial              2005     $115,036     $22,700    $       --    $       --        --      $     --    $  16,096
  Officer

Richard  W. Dapp,
  Senior Vice
  President and Chief
  Credit Officer               2005     $100,000      $4,935    $       --    $       --        --      $     --    $   1,234
</TABLE>

------------------------------------------

(1)  Summary compensation information is excluded for the years ended December
     31, 2004 and 2003, as Colonial Bankshares, Inc. was not a public company
     during those periods.
(2)  Colonial Bank, FSB provides certain of its executive officers with non-cash
     benefits and perquisites. Management believes that the aggregate value of
     these benefits for the year ended December 31, 2005 did not, in the case of
     the named executive officers, exceed $50,000 or 10% of the aggregate salary
     and annual bonus reported for them in the Summary Compensation Table.
(3)  Represents payments under the Phantom Stock Appreciation Rights Incentive
     Agreements, payments made in lieu of unused sick pay, employer matching
     funds under the Colonial Bank, FSB 401(k) Savings Plan and premiums paid
     for life insurance.

        EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. Colonial Bank, FSB implemented
an employee stock ownership plan in connection with Colonial Bankshares, Inc.'s
initial public offering, effective as of January 1, 2005. Employees with at
least one year of employment with Colonial Bank, FSB are eligible to
participate. As part of the offering, the employee stock ownership plan trust
borrowed funds from Colonial Bankshares, Inc. and used those funds to purchase
166,398 shares of the common stock. The shares of common stock purchased by the
employee stock ownership plan are the collateral for the loan. The loan will be
repaid principally from Colonial Bank, FSB through discretionary contributions
to the employee stock ownership plan over a period of fifteen years. The loan
documents provide that the loan may be repaid over a shorter period, without
penalty for prepayments. The interest rate for the loan will be equal to 6.00%
for the term of the loan. Shares purchased by the employee stock ownership plan
are held in a suspense account for allocation among participants as the loan is
repaid.

                                       3
<PAGE>

        Contributions to the employee stock ownership plan and shares released
from the suspense account in an amount proportional to the repayment of the
employee stock ownership plan loan are allocated among employee stock ownership
plan participants on the basis of compensation in the year of allocation.
Benefits under the plan become fully vested upon completion of five years of
credited service, with credit given to participants for years of credited
service with Colonial Bank, FSB prior to the adoption of the plan. A
participant's interest in his account under the plan also fully vest in the
event of termination of service due to a participant's early or normal
retirement, death, disability, or upon a change in control (as defined in the
plan). Vested benefits are payable in the form of shares of common stock and/or
cash. Colonial Bank, FSB's contributions to the employee stock ownership plan
are discretionary, subject to the loan terms and tax law limits. Therefore,
benefits payable under the employee stock ownership plan cannot be estimated.
Pursuant to SOP 93-6, we are required to record compensation expense each year
in an amount equal to the fair market value of the shares released from the
suspense account. The employee stock ownership plan will terminate in the event
of a change in control.

        OTHER EQUITY COMPENSATION PLANS. Colonial Bankshares, Inc. does not have
any equity compensation programs other than its employee stock ownership plan.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
           RELATED STOCKHOLDER MATTERS

        Persons and groups who beneficially own in excess of 5% of the shares of
common stock are required to file certain reports with Colonial Bankshares, Inc.
and the Securities and Exchange Commission regarding such ownership. The
following table sets forth, as of January 1, 2006, the shares of common stock
beneficially owned by each person who was known to us as the beneficial owner of
more than 5% of the outstanding shares of common stock.

<TABLE>
<CAPTION>
                                               AMOUNT OF SHARES
                                               OWNED AND NATURE         PERCENT OF SHARES
       NAME AND ADDRESS OF                       OF BENEFICIAL           OF COMMON STOCK
        BENEFICIAL OWNERS                        OWNERSHIP (1)              OUTSTANDING
     ----------------------                  ----------------------    --------------------
<S>                                                <C>                        <C>
     Colonial Bankshares, MHC                      2,441,716                  54.00%
     85 West Broad Street
     Bridgeton, New Jersey 08302

     Grace and White, Inc.                           294,000(2)                6.50%
     515 Madison Ave., Suite 1700
     New York, New York 10022
</TABLE>

     -------------------------------------------
     (1)  Under regulations promulgated pursuant to the Securities Exchange Act
          of 1934, shares of common stock are deemed to be beneficially owned by
          a person if he or she directly or indirectly has or shares (i) voting
          power, which includes the power to vote or to direct the voting of the
          shares, or (ii) investment power, which includes the power to dispose
          or to direct the disposition of the shares. Unless otherwise
          indicated, the named beneficial owner has sole voting and dispositive
          power with respect to the shares.
     (2)  Based on information contained in a Schedule 13D/A filed on 1/31/2006
          with information as of 12/31/2005.

        Information with respect to share ownership of Directors and Executive
Officers is included in "ITEM 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act," above.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        In the ordinary course of business, Colonial Bank, FSB makes loans
available to its directors, officers and employees. These loans are made in the
ordinary course of business on substantially the same terms, including interest
rate and collateral, as comparable loans to other borrowers. Management believes
that these loans neither involve more than the normal risk of collectibility nor
present other unfavorable features.

        Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an
issuer from: (1) extending or maintaining credit; (2) arranging for the
extension of credit; or (3) renewing an extension of credit in the form of a
personal loan for an officer or director. There are several exceptions to this
general prohibition, one of which is applicable to Colonial Bankshares, Inc.
Sarbanes-Oxley does not apply to loans made by a depository institution

                                       4
<PAGE>

that is insured by the Federal Deposit Insurance Corporation and is subject to
the insider lending restrictions of the Federal Reserve Act. All loans to
Colonial Bankshares, Inc.'s directors and officers are made in conformity with
the Federal Reserve Act and applicable regulations.

ITEM 13.   EXHIBITS

        3.1     Charter of Colonial Bankshares, Inc.*
        3.2     Bylaws of Colonial Bankshares, Inc.*
        4       Form of Common Stock Certificate of Colonial Bankshares, Inc.*
        10      Form of Employee Stock Ownership Plan*
        13      Portions of Annual Report to Stockholders**
        14      Code of Ethics**
        21      Subsidiaries of Registrant*
        23.1    Consent of Independent Registered Public Accounting Firm**
        31.1    Certification of Chief Executive Officer pursuant to Rule
                13a-14(a) of the Securities Exchange Act of 1934, as amended, as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002
        31.2    Certification of Chief Financial Officer pursuant to Rule
                13a-14(a) of the Securities Exchange Act of 1934, as amended, as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002
        32      Certification of Chief Executive Officer and Chief Financial
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002

------------------------------
*       Incorporated by reference to the Registration Statement on Form SB-2 of
        Colonial Bankshares (file no. 333-123583), originally filed with the
        Securities and Exchange Commission on March 25, 2005.
**      Incorporated by reference to the Annual Report on Form 10-KSB of
        Colonial Bankshares, Inc. (file no. 0-51385), originally filed with the
        Securities and Exchange Commission on March 30, 2006.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        Set forth below is certain information concerning aggregate fees billed
for professional services rendered by Beard Miller Company LLP during the years
ended December 31, 2005 and 2004:

        AUDIT FEES. The aggregate fees billed to us by Beard Miller Company LLP
for professional services rendered by Beard Miller Company LLP for the audit of
our annual financial statements, review of the financial statements included in
our Quarterly Reports on Form 10-Q and services that are normally provided by
Beard Miller Company LLP in connection with statutory and regulatory filings and
engagements were $148,700 and $40,300 during the years ended December 31, 2005
and 2004, respectively.

        AUDIT RELATED FEES. There were no fees billed to us by Beard Miller
Company LLP for assurance and related services rendered by Beard Miller Company
LLP that are reasonably related to the performance of the audit of and review of
the financial statements and that are not already reported in "--Audit Fees,"
above, during the years ended December 31, 2005 and 2004, respectively.

        TAX FEES. The aggregate fees billed to us by Beard Miller Company LLP
for professional services rendered by Beard Miller Company LLP for tax
preparation, tax consultation and tax compliance were $10,000 and $3,500 during
the years ended December 31, 2005 and 2004, respectively.

        ALL OTHER FEES. There were no fees billed to us by Beard Miller Company
LLP during the years ended December 31, 2005 and 2004, respectively that are not
described above.

        The Audit Committee preapproves all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for us
by Beard Miller Company LLP, subject to the de minimus exceptions for non-audit
services described in Section 10A(i)(1)(B) of the Securities Exchange Act of
1934, as amended, which are approved by the Audit Committee prior to the
completion of the audit. The Audit Committee pre-approved 100% of the audit
related fees and tax fees described above during the years ended December 31,
2005 and 2004.

                                       5
<PAGE>

                                   SIGNATURES

        Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                             COLONIAL BANKSHARES, INC.


Date: April 27, 2006                     By: /s/ Edward J. Geletka
                                             -----------------------------------
                                             Edward J. Geletka
                                             President, Chief Executive Officer
                                             and Director
                                             (Duly Authorized Representative)

        Pursuant to the requirements of the Securities Exchange of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S>                                                                           <C>
           Signatures                                    Title                              Date
           ----------                                    -----                              -----

/s/ Edward J. Geletka                         President, Chief Executive                April 27, 2006
--------------------------------              Officer and Director (Principal
Edward J. Geletka                             Executive Officer)


/s/ L. Joseph Stella, III                     Executive Vice President and              April 27, 2006
--------------------------------              Chief Financial Officer
L. Joseph Stella, III                         (Principal Financial and
                                              Accounting Officer)


/s/ Frank M. Hankins                          Chairman of the Board                     April 27, 2006
--------------------------------
Frank M. Hankins


/s/ Albert A. Fralinger                       Vice Chairman of the Board                April 27, 2006
--------------------------------
Albert A. Fralinger


/s/ Richard S. Allen                          Director                                  April 27, 2006
--------------------------------
Richard S. Allen


/s/ Gregory J. Facemyer                       Director                                  April 27, 2006
--------------------------------
Gregory J. Facemyer


/s/ John Fitzpatrick                          Director                                  April 27, 2006
--------------------------------
John Fitzpatrick


/s/ James Quinn                               Director                                  April 27, 2006
--------------------------------
James Quinn
</TABLE>