----

----

| x      | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  |
|--------|-------------------------------------------------------------------------------------|
|   |                                                                                |
|   | For the quarterly period ended  March 31, 2010                            |
|   |                                                                                |
| o      | TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|   |                                                                                |
|   | For the transition period from ___________________ to ___________________ |
|   |                                                                                |
|   | Commission file number 0-51385                                                      |

| United States of America                                       | 90-0183739                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|                                                           |                                 |
| 2745 S. Delsea Drive                                           |                                 |
| Vineland, New Jersey                                           | 08360                                |
| (Address of principal executive offices)                       | (Zip code)                           |

| (1) | x | Yes | o | No |
|-----|---|-----|---|----|

|   | Large accelerated filer | o | Accelerated filer         | o |
|--------|-------------------------|---|---------------------------|---|
|   | Non-accelerated filer   | o | Smaller reporting company | x |

----

| PART I   | FINANCIAL INFORMATION                                                                       | PAGE   |
|----------|---------------------------------------------------------------------------------------------|--------|
|     |                                                                                        |   |
| Item 1   | Consolidated Statements of Financial Condition (Unaudited)                                  | 2      |
|     | Consolidated Statements of Income (Unaudited)                                               | 3      |
|     | Consolidated Statements of Stockholders’ Equity (Unaudited)                           | 4      |
|     | Consolidated Statements of Cash Flows (Unaudited)                                           | 5      |
|     | Notes to Consolidated Financial Statements (Unaudited)                                      | 6      |
|     |                                                                                        |   |
| Item 2   | Management’s Discussion and Analysis of Financial Condition And Results of Operations | 23     |
|     |                                                                                        |   |
| Item 3   | Quantitative and Qualitative Disclosures About Market Risk                                  | 32     |
|     |                                                                                        |   |
| Item 4.  | Controls and Procedures                                                                     | 32     |
|     |                                                                                        |   |
| PART II  | OTHER INFORMATION                                                                           |   |
|     |                                                                                        |   |
| Item 1   | Legal Proceedings                                                                           | 33     |
|     |                                                                                        |   |
| Item 1A. | Risk Factors                                                                                | 34     |
|     |                                                                                        |   |
| Item 2   | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 34     |
|     |                                                                                        |   |
| Item 3   | Defaults Upon Senior Securities                                                             | 34     |
|     |                                                                                        |   |
| Item 4   | (Reserved)                                                                                  | 34     |
|     |                                                                                        |   |
| Item 5   | Other Information                                                                           | 34     |
|     |                                                                                        |   |
| Item 6   | Exhibits                                                                                    | 34     |
|     |                                                                                        |   |
|     | Signatures                                                                                  | 35     |

----

----

|                                                                                                                                                                |   | March 31,2010                                          |    |   | December 31,2009 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|---------|--------|------------------|--------|
|                                                                                                                                                                |   |                                                   |    |   |             |   |
|                                                                                                                                                                |   | (Dollars in thousands, except shareand per share data) |    |
| Assets                                                                                                                                                              |   |                                                   |    |   |             |   |
| Cash and amounts due from banks                                                                                                                                     |   | $                                                      | 14,391  |   |             | $      | 15,882 |   |
| Investment securities available for sale                                                                                                                            |   |                                                   | 165,674 |   |             |   | 166,378 |   |
| Investment securities held to maturity (fair value at March 31, 2010 - $34,806; at December 31, 2009 - $41,395)                                                     |   |                                                   | 34,326  |   |             |   | 41,032 |   |
| Loans receivable, net of allowance for loan losses of $3,016 at March 31, 2010 and $2,606 at December 31, 2009                                                      |   |                                                   | 328,418 |   |             |   | 321,607 |   |
| Loans available for sale                                                                                                                                            |   |                                                   | 853     |   |             |   | - |   |
| Federal Home Loan Bank stock, at cost                                                                                                                               |   |                                                   | 1,493   |   |             |   | 1,731 |   |
| Office properties and equipment, net                                                                                                                                |   |                                                   | 11,290  |   |             |   | 11,387 |   |
| Bank-owned life insurance                                                                                                                                           |   |                                                   | 2,803   |   |             |   | 2,777 |   |
| Accrued interest receivable                                                                                                                                         |   |                                                   | 2,414   |   |             |   | 2,272 |   |
| Other assets                                                                                                                                                        |   |                                                   | 6,189   |   |             |   | 5,475 |   |
| Total Assets                                                                                                                                                        |   | $                                                      | 567,851 |   |             | $      | 568,541 |   |
|                                                                                                                                                                |   |                                                   |    |   |             |   |   |   |
| Liabilities and Stockholders’ Equity                                                                                                                          |   |                                                   |    |   |             |   |   |   |
| Liabilities                                                                                                                                                         |   |                                                   |    |   |             |   |   |   |
| Deposits:                                                                                                                                                           |   |                                                   |    |   |             |   |   |   |
| Noninterest-bearing                                                                                                                                                 |   | $                                                      | 16,930  |   |             | $      | 21,111 |   |
| Interest-bearing                                                                                                                                                    |   |                                                   | 487,097 |   |             |   | 479,255 |   |
| Total deposits                                                                                                                                                      |   |                                                   | 504,027 |   |             |   | 500,366 |   |
| Federal Home Loan Bank short-term borrowings                                                                                                                        |   |                                                   | 2,000   |   |             |   | 7,300 |   |
| Federal Home Loan Bank long-term borrowings                                                                                                                         |   |                                                   | 14,000  |   |             |   | 14,000 |   |
| Advances from borrowers for taxes and insurance                                                                                                                     |   |                                                   | 676     |   |             |   | 661 |   |
| Accrued interest payable and other liabilities                                                                                                                      |   |                                                   | 591     |   |             |   | 697 |   |
| Total Liabilities                                                                                                                                                   |   |                                                   | 521,294 |   |             |   | 523,024 |   |
|                                                                                                                                                                |   |                                                   |    |   |             |   |   |   |
| Commitments and Contingencies                                                                                                                                       |   |                                                   |    |   |             |   |   |   |
| Stockholders’ Equity                                                                                                                                          |   |                                                   |    |   |             |   |   |   |
| Preferred stock, 1,000,000 shares authorized and unissued                                                                                                           |   |                                                   | -       |   |             |   | - |   |
| Common stock, par value $0.10 per share; authorized 10,000,000 shares; issued 4,521,696 shares;outstanding 4,440,246 shares at March 31, 2010 and December 31, 2009 |   |                                                   | 452     |   |             |   | 452 |   |
| Additional paid-in capital                                                                                                                                          |   |                                                   | 20,720  |   |             |   | 20,628 |   |
| Unearned shares held by Employee Stock Ownership Plan (“ESOP”)                                                                                          |   |                                                   | (1,084  | )      |             |   | (1,084 | ) |
| Treasury stock, at cost, 134,625 shares at March 31, 2010 and December 31, 2009                                                                                     |   |                                                   | (1,596  | )      |             |   | (1,596 | ) |
| Retained earnings                                                                                                                                                   |   |                                                   | 24,826  |   |             |   | 23,879 |   |
| Accumulated other comprehensive income                                                                                                                              |   |                                                   | 3,239   |   |             |   | 3,238 |   |
| Total Stockholders’ Equity                                                                                                                                    |   |                                                   | 46,557  |   |             |   | 45,517 |   |
| Total Liabilities and Stockholders’ Equity                                                                                                                    |   | $                                                      | 567,851 |   |             | $      | 568,541 |   |

----

----

|                                                        |   | Three Months EndedMarch 31,                            |      |
|-------------------------------------------------------------|--------|--------------------------------------------------------|-----------|
|                                                        |   | 2010                                                   |      |   | 2009 |   |
|                                                        |   | (Dollars in thousands, except shareand per share data) |      |
| Interest Income                                             |   |                                                   |      |   |   |   |
| Loans, including fees                                       |   | $                                                      | 4,901     |   |   | $ | 4,591 |   |
| Mortgage-backed securities                                  |   |                                                   | 1,278     |   |   |   | 1,531 |   |
| Securities:                                                 |   |                                                   |      |   |   |   |   |   |
| Taxable                                                     |   |                                                   | 422       |   |   |   | 580 |   |
| Tax-exempt                                                  |   |                                                   | 175       |   |   |   | 127 |   |
| Total Interest Income                                       |   |                                                   | 6,776     |   |   |   | 6,829 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Interest Expense                                            |   |                                                   |      |   |   |   |   |   |
| Deposits                                                    |   |                                                   | 2,350     |   |   |   | 3,265 |   |
| Borrowings                                                  |   |                                                   | 127       |   |   |   | 342 |   |
| Total Interest Expense                                      |   |                                                   | 2,477     |   |   |   | 3,607 |   |
| Net Interest Income                                         |   |                                                   | 4,299     |   |   |   | 3,222 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Provision for Loan Losses                                   |   |                                                   | 460       |   |   |   | 195 |   |
| Net Interest Income after Provision for Loan Losses         |   |                                                   | 3,839     |   |   |   | 3,027 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Non-Interest Income                                         |   |                                                   |      |   |   |   |   |   |
| Fees and service charges                                    |   |                                                   | 306       |   |   |   | 282 |   |
| Gain on sale of loans                                       |   |                                                   | 20        |   |   |   | 8 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Impairment charge on investment securities                  |   |                                                   | (20       | ) |   |   | (97 | ) |
| Portion of loss recognized in other comprehensive income    |   |                                                   | -         |   |   |   | - |   |
| Net impairment losses recognized in earnings                |   |                                                   | (20       | ) |   |   | (97 | ) |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Net (loss) gain on sales and calls of investment securities |   |                                                   | (42       | ) |   |   | 157 |   |
| Earnings on life insurance                                  |   |                                                   | 26        |   |   |   | 26 |   |
| Other                                                       |   |                                                   | -         |   |   |   | - |   |
| Total Non-Interest Income                                   |   |                                                   | 290       |   |   |   | 376 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Non-Interest Expenses                                       |   |                                                   |      |   |   |   |   |   |
| Compensation and benefits                                   |   |                                                   | 1,450     |   |   |   | 1,341 |   |
| Occupancy and equipment                                     |   |                                                   | 454       |   |   |   | 373 |   |
| FDIC insurance premium                                      |   |                                                   | 194       |   |   |   | 391 |   |
| Data processing                                             |   |                                                   | 228       |   |   |   | 202 |   |
| Office supplies                                             |   |                                                   | 26        |   |   |   | 46 |   |
| Professional fees                                           |   |                                                   | 111       |   |   |   | 127 |   |
| Advertising                                                 |   |                                                   | 37        |   |   |   | 42 |   |
| Other                                                       |   |                                                   | 322       |   |   |   | 274 |   |
| Total Non-Interest Expenses                                 |   |                                                   | 2,822     |   |   |   | 2,796 |   |
| Income before Income Tax Expense                            |   |                                                   | 1,307     |   |   |   | 607 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Income Tax expense                                          |   |                                                   | 360       |   |   |   | 164 |   |
| Net Income                                                  |   | $                                                      | 947       |   |   | $ | 443 |   |
|                                                        |   |                                                   |      |   |   |   |   |   |
| Per Share Data (See Note 3):                                |   |                                                   |      |   |   |   |   |   |
| Earnings per share – basic                            |   | $                                                      | 0.22      |   |   | $ | 0.10 |   |
| Earnings per share – diluted                          |   | $                                                      | 0.22      |   |   | $ | 0.10 |   |
| Weighted average number of shares outstanding – basic |   |                                                   | 4,278,688 |   |   |   | 4,271,718 |   |
| Weighted average number of shares outstanding - diluted     |   |                                                   | 4,278,688 |   |   |   | 4,271,718 |   |

----

----

|                                                                                       |   | CommonStock                               |   |   | AdditionalPaid-inCapital |   |   | UnearnedSharesHeld byESOP |   |   | RetainedEarnings |   |   | TreasuryStock |   |   | Accumu-latedOtherCompre-hensiveIncome(Loss) |   |   | TotalStock-holders’Equity |   |
|--------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|--------|--------------------------|--------|--------|---------------------------|--------|--------|------------------|--------|--------|---------------|--------|--------|---------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                                       |   | (Dollars in thousands, except share data) |   |
| Balance, January 1, 2010                                                                   |   | $                                         | 452    |   |                     | $      | 20,628 |                      |   | $      | (1,084           | )      |   | $             | 23,879 |   |                                        | $      | (1,596 | )                               |   | $ | 3,238 |   |   | $ | 45,517 |   |
| Comprehensive income:                                                                      |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Net income                                                                                 |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | 947    |   |                                        |   | -      |                            |   |   | - |   |   |   | 947 |   |
| Net change in unrealized gain on securities available for sale, net of $8 tax expense      |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | 1 |   |   |   | 1 |   |
| Total Comprehensive income                                                                 |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 948 |   |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (restricted stock awards)                                 |   |                                      | -      |   |                     |   | 55     |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 55 |   |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (stock options)                                           |   |                                      | -      |   |                     |   | 37     |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 37 |   |
| Balance, March 31, 2010                                                                    |   | $                                         | 452    |   |                     | $      | 20,720 |                      |   | $      | (1,084           | )      |   | $             | 24,826 |   |                                        | $      | (1,596 | )                               |   | $ | 3,239 |   |   | $ | 46,557 |   |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Balance, January 1, 2009                                                                   |   | $                                         | 452    |   |                     | $      | 20,290 |                      |   | $      | (1,200           | )      |   | $             | 22,439 |   |                                        | $      | (1,559 | )                               |   | $ | 208 |   |   | $ | 40,630 |   |
| Comprehensive income:                                                                      |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Net income                                                                                 |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | 443    |   |                                        |   | -      |                            |   |   | - |   |   |   | 443 |   |
| Net change in unrealized gain on securities available for sale, net of tax expense of $485 |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | 929 |   |   |   | 929 |   |
| Total Comprehensive income                                                                 |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 1,372 |   |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Treasury stock purchased (20,500 shares)                                                   |   |                                      | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | (19    | )                               |   |   | - |   |   |   | (19 | ) |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (restricted stock awards)                                 |   |                                      | -      |   |                     |   | 55     |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 55 |   |
|                                                                                       |   |                                      |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (stock options)                                           |   |                                      | -      |   |                     |   | 37     |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 37 |   |
| Balance, March 31, 2009                                                                    |   | $                                         | 452    |   |                     | $      | 20,382 |                      |   | $      | (1,200           | )      |   | $             | 22,882 |   |                                        | $      | (1,578 | )                               |   | $ | 1,137 |   |   | $ | 42,075 |   |

----

----

|                                                                           |   | Three Months EndedMarch 31, |    |
|--------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                           |   | 2010                        |    |   | 2009 |   |
|                                                                           |   | (Dollars in thousands)      |    |
| Cash Flows from Operating Activities:                                          |   |                        |    |
| Net income                                                                     |   | $                           | 947     |   |   | $ | 443 |   |
| Adjustments to reconcile net income to net cash used in operating activities:  |   |                        |    |   |   |   |   |   |
| Provision for loan losses                                                      |   |                        | 460     |   |   |   | 195 |   |
| Depreciation expense                                                           |   |                        | 173     |   |   |   | 155 |   |
| Stock-based compensation expense                                               |   |                        | 92      |   |   |   | 92 |   |
| Impairment charge on investment securities                                     |   |                        | 20      |   |   |   | 97 |   |
| Net earnings on bank-owned life insurance                                      |   |                        | (26     | ) |   |   | (26 | ) |
| Loans originated for sale                                                      |   |                        | (2,321  | ) |   |   | (1,468 | ) |
| Proceeds from sale of loans                                                    |   |                        | 1,488   |   |   |   | 725 |   |
| Gain on sale of loans                                                          |   |                        | (20     | ) |   |   | (8 | ) |
| Net amortization of loan costs                                                 |   |                        | 24      |   |   |   | (5 | ) |
| Net loss (gain) on sales and calls of investment securities                    |   |                        | 42      |   |   |   | (157 | ) |
| Accretion of premium and discount on investment securities, net                |   |                        | (82     | ) |   |   | (131 | ) |
| (Increase) decrease in accrued interest receivable                             |   |                        | (142    | ) |   |   | 140 |   |
| Increase in other assets                                                       |   |                        | (714    | ) |   |   | (847 | ) |
| (Decrease) increase in accrued interest payable and other liabilities          |   |                        | (106    | ) |   |   | 535 |   |
| Net cash used in operating activities                                          |   |                        | (165    | ) |   |   | (260 | ) |
| Cash Flows from Investing Activities:                                          |   |                        |    |   |   |   |   |   |
| Proceeds from sales of investment securities available-for-sale                |   |                        | 739     |   |   |   | 351 |   |
| Proceeds from sales of mortgage-backed securities available-for-sale           |   |                        | 1,435   |   |   |   | - |   |
| Proceeds from calls and maturities of investment securities available-for-sale |   |                        | 13,999  |   |   |   | 13,507 |   |
| Proceeds from calls and maturities of investment securities held-to-maturity   |   |                        | 6,842   |   |   |   | 2,447 |   |
| Purchase of investment securities available-for-sale                           |   |                        | (16,493 | ) |   |   | (17,502 | ) |
| Purchase of investment securities held-to-maturity                             |   |                        | (1,018  | ) |   |   | (3,398 | ) |
| Purchase of mortgage-backed securities available-for-sale                      |   |                        | (6,968  | ) |   |   | (4,508 | ) |
| Purchase of office properties and equipment                                    |   |                        | (76     | ) |   |   | (286 | ) |
| Principal repayments from investment securities                                |   |                        | 559     |   |   |   | 414 |   |
| Principal repayments from mortgage-backed securities                           |   |                        | 8,336   |   |   |   | 6,060 |   |
| Net decrease of Federal Home Loan Bank stock                                   |   |                        | 238     |   |   |   | 4 |   |
| Net increase in loans receivable                                               |   |                        | (7,295  | ) |   |   | (101 | ) |
| Net cash provided by (used for) investing activities                           |   |                        | 298     |   |   |   | (3,012 | ) |
| Cash Flows from Financing Activities:                                          |   |                        |    |   |   |   |   |   |
| Net increase in deposits                                                       |   |                        | 3,661   |   |   |   | 6,287 |   |
| Decrease in Federal Home Loan Bank short-term borrowings, net                  |   |                        | (5,300  | ) |   |   | - |   |
| Repayment of Federal Home Loan Bank long-term borrowings                       |   |                        | -       |   |   |   | (86 | ) |
| Increase in advances from borrowers for taxes and insurance                    |   |                        | 15      |   |   |   | 76 |   |
| Acquisition of treasury stock                                                  |   |                        | -       |   |   |   | (19 | ) |
| Net cash (used for) provided by financing activities                           |   |                        | (1,624  | ) |   |   | 6,258 |   |
| Increase (decrease) in cash and cash equivalents                               |   |                        | (1,491  | ) |   |   | 2,986 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               |   |                        | 15,882  |   |   |   | 23,407 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                     |   | $                           | 14,391  |   |   | $ | 26,393 |   |
|                                                                           |   |                        |    |   |   |   |   |   |
|                                                                           |   |                        |    |   |   |   |   |   |
| Supplemental Cash Flow Disclosures:                                            |   |                        |    |   |   |   |   |   |
| Cash paid:                                                                     |   |                        |    |   |   |   |   |   |
| Interest                                                                       |   | $                           | 2,517   |   |   | $ | 3,611 |   |
| Income taxes                                                                   |   | $                           | 656     |   |   | $ | 380 |   |
|                                                                           |   |                        |    |   |   |   |   |   |

----

| 1.     | Organization and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Colonial Bankshares, Inc. (the “Company”) was organized in January 2003 to serve as the mid-tier stock holding company of Colonial Bank, FSB (the “Bank”).  The Company is a federally chartered corporation and owns 100% of the outstanding common stock of the Bank.  The Bank is a federally chartered capital stock savings bank.  Colonial Bankshares, MHC, a federally chartered mutual holding company, is the parent of the Company and owns approximately 55% of the Company’s outstanding common stock.  The Bank has established a Delaware corporation, CB Delaware Investments, Inc. (the “Operating Subsidiary”) whose purpose is to invest in and manage securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The consolidated financial statements include the accounts of the Company, the Bank and the Operating Subsidiary.  All material intercompany transactions and balances have been eliminated.  The Company prepares its financial statements on the accrual basis and in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) as set by the Financial Accounting Standards Board (“FASB”).  The unaudited information furnished herein reflects all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  They do not include all of the information and footnotes required by US GAAP for complete financial statements.  Operating results for the three months ended March 31, 2010 (unaudited) are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.  The balance sheet at December 31, 2009 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, evaluation of other-than-temporary impairment of investment securities, the potential impairment of Federal Home Loan Bank (“FHLB”) stock, our ability to realize deferred tax assets and measurements of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The Bank maintains its executive office and main branch in Vineland, New Jersey with branches in Bridgeton, Mantua, Millville, Upper Deerfield, Vineland, Sewell and Cedarville New Jersey.  The Bank’s principal business consists of attracting customer deposits and investing these deposits primarily in single-family residential, commercial and consumer loans and investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

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|   | On February 18, 2010, the Boards of Directors of  Colonial Bankshares MHC (the “Mutual Holding Company”), and the Bank each unanimously adopted a Plan of Conversion and Reorganization of the Mutual Holding Company (the “Plan”) pursuant to which the Mutual Holding Company will undertake a “second-step” conversion and cease to exist.  The Bank will reorganize from a two-tier mutual holding company structure to a fully public stock holding company structure.  The Mutual Holing Company currently owns approximately 55.0% of the shares of the common stock of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Pursuant to the Plan, (i) the Bank will become a wholly owned subsidiary of a to-be-formed stock corporation (“New Holding Company”), (ii) the shares of common stock of the Company held by persons other than the Mutual Holding Company (whose shares will be cancelled) will be converted into shares of common stock of the New Holding Company pursuant to an exchange ratio designed to preserve the percentage ownership interest of such persons (excluding shares purchased in the stock offering described below and cash received in lieu of fractional shares), and (iii) the New Holding Company will offer and sell shares of common stock representing the ownership interest of the Mutual Holding Company in a subscription offering.  The Plan is subject to regulatory approval as well as the approval of the Mutual Holding Company’s members (depositors and certain borrowers of the Bank) and the Company’s stockholders (including the approval of a majority of the Company’s outstanding shares of common stock held by persons other than the Mutual Holding Company).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 2.     | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | In February 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-08, Technical Correction to Various Topics, thereby amending the codification.  This ASU resulted from a review by the FASB of its standards to determine if any provisions are outdated, contain inconsistencies, or need clarifications to reflect the FASB’s original intent.  The FASB believes the amendments do not fundamentally change U. S. GAAP.  However, certain clarifications on embedded derivatives and hedging reflected in Topic 815, Derivatives and Hedging, may cause a change in the application of the guidance in Subtopic 815-15.  Accordingly, the FASB provided special transition provisions for those amendments.  The ASU contains various effective dates.  The clarifications of the guidance on embedded derivatives and hedging (Subtopic 815-15) are effective for fiscal years beginning after December 15, 2009.  The amendments to the guidance on accounting for income taxes in a reorganization (Subtopic 852-740) applies to organizations for which the date of the reorganization is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.  All other amendments are effective as of the first reporting period (including interim periods) beginning after the date this ASU was issued (February 2, 2010).  The adoption of this FASB ASU did not have a material impact on the consolidated financial statements. |

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|   | In February 2010, the FASB issued ASU 2010-10, Consolidation (Topic 810): Amendments for Certain Investment Funds.  The amendments to the consolidation requirements of Topic 810 resulting from the issuance of FASB Statement No. 167 are deferred for a reporting entity’s interest in an entity (1) that has all the attributes of an investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies.  The deferral does not apply in situations in which a reporting entity has the explicit or implicit obligation to fund losses of an entity that could potentially be significant to the entity.  The deferral also does not apply to interest in securitization entities, asset-backed financing entities, or entities formerly considered qualifying special-purpose entities.  In addition, the deferral applies to a reporting entity’s interest in an entity that is required to comply or operate in accordance with requirements similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.  An entity that qualifies for the deferral will continue to be assessed under the overall guidance on the consolidation of variable interest entities in Subtopic 810-10 (before the FASB Statement No. 167 amendments) or other applicable consolidation guidance, such as the guidance for the consolidation of partnerships in Subtopic 810-20.  The amendments in this update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009, and for interim periods within that first annual reporting period.  The adoption of this FASB ASU did not have a material impact on the consolidated financial statements. |
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|   | In February 2010, the FASB issued ASU 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.  This update provides amendments to Subtopic 815-15, Derivatives and Hedging-Embedded Derivatives, as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | ●                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Subtopic 815-15 is amended to clarify the scope exception under paragraphs 815-15-15-8 through 15-9, for embedded credit derivative features related to the transfer of credit risk in the form of subordination of one financial instrument to another.  The amendments address how to determine which embedded credit derivative features, including those in collateralized debt obligation and synthetic collateralized debt obligation, are considered to be embedded derivatives that should not be analyzed under Section 815-15-25 for potential bifurcation and separate accounting. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|   | ●                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | The embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to the application of Section 815-15-25.  Thus, only the embedded credit derivative feature between the financial instruments created by subordination is not subject to the application of Section 815-15-25 and should not be analyzed under that Section for potential bifurcation from the host contract and separate accounting as a derivative. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
|   | The amendments in this update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010.  The Company does not anticipate the adoption of this FASB ASU will have a material impact on the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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| 3.     | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | There are no convertible securities which would affect the net income (numerator) in calculating basic and diluted earnings per share; therefore, for these calculations, the net income for the three months ended March 31, 2010 is $947,000 and the net income for the three months ended March 31, 2009 is $443,000.  Basic and diluted earnings per share data are based on the weighted-average number of common shares outstanding during each period.  Diluted earnings per share are further adjusted for potential common shares that were dilutive and outstanding during the period.  Potential common shares consist of stock options outstanding and non-vested stock grants under the stock-based incentive plans.  The dilutive effect of potential common shares is computed using the treasury stock method.  The following table sets forth the composition of the weighted average common shares (denominator) used in the basic and diluted earnings per share computation.  At March 31, 2010 and 2009, there were 231,918 and 249,643 anti-dilutive non-vested awards and options, respectively, excluded from the computation of diluted earnings per share because the option price was greater than the average market price. |

|                                                               |   | For the Three Months EndedMarch 31, |      |
|--------------------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                               |   | 2010                                |      |   | 2009 |   |
| Net Income                                                         |   | $                                   | 947,000   |   |   | $ | 443,000 |   |
|                                                               |   |                                |      |   |   |   |   |   |
| Weighted average common shares issues                              |   |                                | 4,521,696 |   |   |   | 4,521,696 |   |
| Average unearned ESOP shares                                       |   |                                | (108,383  | ) |   |   | (119,986 | ) |
| Average treasury stock shares                                      |   |                                | (134,625  | ) |   |   | (129,992 | ) |
| Weighted average common shares outstanding-basic                   |   |                                | 4,278,688 |   |   |   | 4,271,718 |   |
| Effect of dilutive non-vested shares and stock options outstanding |   |                                | -         |   |   |   | - |   |
| Weighted average common shares outstanding-diluted                 |   |                                | 4,278,688 |   |   |   | 4,271,718 |   |
| Basic earnings per share                                           |   | $                                   | 0.22      |   |   | $ | 0.10 |   |
| Diluted earnings per share                                         |   | $                                   | 0.22      |   |   | $ | 0.10 |   |

| 4.     | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The Company’s Board of Directors and stockholders have adopted the 2006 Colonial Bankshares, Inc. Stock-Based Incentive Plan (the “2006 Plan”).  The 2006 Plan provides for the grant of shares of common stock and the grant of stock options to officers, employees and directors of the Company.  Under the 2006 Plan, the Company may grant options to purchase 221,563 shares of Company stock and may grant up to 88,625 shares of common stock as restricted stock awards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The 2006 Plan enables the Board of Directors to grant stock options to executives, other key employees and nonemployee directors.  The options granted under the 2006 Plan may be either non-qualified stock options (NQOs) or incentive stock options (ISOs).  Only NQOs may be granted to nonemployee directors under the 2006 Plan and ISOs may be granted to employees.  The Company has reserved 221,563 shares of common stock for issuance upon the exercise of options granted under the 2006 Plan.  The 2006 Plan will terminate ten years from the date of adoption.  Options may not be granted with an exercise price that is less than 100% of the fair market value of the Company’s common stock on the date of grant.  Options may not be granted with a term longer than 10 years.  Stock options granted under the 2006 Plan are subject to limitations under Section 422 of the Internal Revenue Code.  The number of shares available under the 2006 Plan, the number of shares subject to outstanding options and the exercise price of outstanding options will be adjusted to reflect any stock dividend, stock split, merger, reorganization or other event generally affecting the number of the Company’s outstanding shares.  At March 31, 2010, there were 25,095 options available for grant under the 2006 Plan. |

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|   | On October 19, 2006, 88,625 shares of restricted stock were awarded.  The restricted shares awarded had a grant date fair value of $12.47 per share.  The restricted stock awarded vests 20% annually beginning October 19, 2007.  For the three months ended March 31, 2010, $55,000 in compensation expense was recognized in regard to these restricted stock awards with a related tax benefit of $19,000.  As of March 31, 2010, there was $341,000 of unrecognized compensation expense related to the restricted stock awards which is expected to be recognized over a period of 1.50 years. |
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Activity in issued but unvested award shares during the three months ended March 31, 2010 was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

| Award Shares                    |   | Number of Shares |   |   | WeightedAverage GrantDate Fair Value |   |
|---------------------------------|--------|------------------|--------|--------|--------------------------------------|--------|
| Restricted, beginning of period |   |             | 35,450 |   |                                 | $      | 12.47 |   |
| Granted                         |   |             | -      |   |                                 |   | - |   |
| Forfeitures                     |   |             | -      |   |                                 |   | - |   |
| Vested                          |   |             | -      |   |                                 |   | - |   |
| Restricted stock, end of period |   |             | 35,450 |   |                                 | $      | 12.47 |   |

|   | On October 19, 2006, options to purchase 196,468 shares of common stock at $12.47 per share were awarded.  The options awarded vest 20% annually beginning October 19, 2007.  The following is a summary of the Company’s stock option activity for the three months ended March 31, 2010: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | Shares |    |   | Weighted AverageExercisePrice |   |
|------------------------------------------|--------|--------|---------|--------|-------------------------------|--------|
| Options outstanding, beginning of period |   |   | 196,468 |   |                          | $      | 12.47 |   |
| Granted                                  |   |   | -       |   |                          |   | - |   |
| Exercised                                |   |   | -       |   |                          |   | - |   |
| Forfeitures                              |   |   | -       |   |                          |   | - |   |
| Options outstanding, end of period       |   |   | 196,468 |   |                          | $      | 12.47 |   |
| Exercisable at end of period             |   |   | 117,882 |   |                          | $      | 12.47 |   |

|   | The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for options granted in 2006:  dividend yield of 0%, risk-free interest rate of 4.79%, expected life of 6.5 years, and expected volatility of 15.00%.  The calculated fair value of options granted in 2006 was $3.79 per option.  The weighted average contractual term of options outstanding and exercisable were 6.50 years at March 31, 2010 and 7.50 years at March 31, 2009. |
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|   | Stock-based compensation expense related to stock options for the three months ended March 31, 2010, was $37,000 with a related tax benefit of $13,000.  As of March 31, 2010, there was approximately $230,000 of unrecognized compensation cost related to unvested stock options granted in 2006.  The cost will be recognized in a straight line method over a period of 1.50 years.  At March 31, 2009, there was approximately $379,000 of unrecognized compensation cost related to unvested stock options granted in 2006.                                                                                                                          |
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The Company has an Employee Stock Ownership Plan (“ESOP”) for the benefit of employees who meet the eligibility requirements as defined in the plan.  The ESOP trust purchased 166,398 shares of common stock in the initial public offering using proceeds of a loan from the Company.  The Bank will make cash contributions to the ESOP on an annual basis sufficient to enable the ESOP to make the required loan payments to the Company.  The loan bears an interest rate of 6.00% with principal and interest payable annually in equal installments over 15 years.  The loan is secured by the shares of the stock purchased. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | As the debt is repaid, shares are released from the collateral and allocated to qualified employees.  Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Statements of Financial Condition.  As shares are released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations.  The compensation expense is recorded on a monthly basis.  The Company’s contribution expense for the ESOP was $22,000 for the three months ended March 31, 2010, respectively.   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The following table presents the components of the ESOP shares:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|                           |   | March 31, 2010 |    |   | March 31, 2009 |   |
|--------------------------------|--------|----------------|---------|--------|----------------|--------|
| Shares released for allocation |   |           | 58,015  |   |           |   | 46,412 |   |
| Unreleased shares              |   |           | 108,383 |   |           |   | 119,986 |   |
| Total ESOP shares              |   |           | 166,398 |   |           |   | 166,398 |   |

| 5.     | Comprehensive Income                                                                                                                                                                                                                   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                   |
|   | Comprehensive income for the Company consists of net income and unrealized gains and losses on available for sale securities.  Other comprehensive income for the three months ended March 31, 2010 and 2009 was as follows: |

|                                                                      |   | Three Months EndedMarch 31, |   |
|---------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                      |   | 2010                        |   |   | 2009 |   |
| Other comprehensive income:                                               |   |                        |   |   |   |   |
| Unrealized holding gains (loss) on available for sale securities          |   | $                           | (53    | ) |   | $ | 1,474 |   |
| Reclassification for impairment charge on investment securities           |   |                        | 20     |   |   |   | 97 |   |
| Reclassification adjustment for net (gains)/losses realized in net income |   |                        | 42     |   |   |   | (157 | ) |
| Net unrealized gains                                                      |   |                        | 9      |   |   |   | 1,414 |   |
| Income tax expense                                                        |   |                        | 8      |   |   |   | 485 |   |
| Net of tax amount                                                         |   | $                           | 1      |   |   | $ | 929 |   |

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| 6.     | Contingent Liabilities and Guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | In the normal course of business, there are various outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit that are not reflected in the accompanying financial statements.  No material losses are anticipated as a result of those transactions on either a completed or uncompleted basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit.  Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  Generally, all letters of credit, when issued, have expiration dates within one year.  The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers.  The Company generally holds collateral and/or personal guarantees supporting those commitments.  The Company had $3.6 million of standby letters of credit outstanding as of March 31, 2010.  Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payment required under the corresponding guarantees. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | In October 2009, the Bank completed an agreement to sponsor a not-for-profit corporation for a Federal Home Loan Bank of New York Affordable Housing Program (“AHP”) Grant in the amount of $275,000.  If the non-for-profit corporation does not comply with terms of the agreement, the Bank may be required to repay the grant to the Federal Home Loan Bank of New York.  The term of the recapture agreement is 15 years.  The Bank expects the not-for-profit corporation to adhere to all requirements of the grant and does not expect to be required to pay back any of the AHP grant.                                                                                                                                                                                                                                                                                                                                                                                          |

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| 7.     | Investment Securities                            |
|--------|--------------------------------------------------|
|   |                                             |
|   | Investment securities are summarized as follows: |

|                         |   | Amortized Cost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | Fair Value |   |
|------------------------------|--------|----------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|------------|--------|
|                         |   | (In thousands) |    |
| Available for Sale:          |   |           |    |   |                 |   |   |                  |   |   |       |   |
| March 31, 2010               |   |           |    |   |                 |   |   |                  |   |   |       |   |
| U. S. Government obligations |   | $              | 30,969  |   |                 | $      | 164    |                  |   | $      | (18        | )      |   | $ | 31,115 |   |
| Corporate debt obligations   |   |           | 9,866   |   |                 |   | 303    |                  |   |   | (67        | )      |   |   | 10,102 |   |
| Mutual funds                 |   |           | 1,321   |   |                 |   | 56     |                  |   |   | -          |   |   |   | 1,377 |   |
| Municipal debt obligations   |   |           | 2,815   |   |                 |   | 59     |                  |   |   | (22        | )      |   |   | 2,852 |   |
| SBA pools                    |   |           | 4,616   |   |                 |   | 42     |                  |   |   | (30        | )      |   |   | 4,628 |   |
| Mortgage-backed securities   |   |           | 111,107 |   |                 |   | 4,500  |                  |   |   | (7         | )      |   |   | 115,600 |   |
|                         |   | $              | 160,694 |   |                 | $      | 5,124  |                  |   | $      | (144       | )      |   | $ | 165,674 |   |
|                         |   |           |    |   |                 |   |   |                  |   |   |       |   |   |   |   |   |

| December 31, 2009            |   |   |    |   |   |   |   |   |   |   |   |   |
|------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| U. S. Government obligations |   | $      | 28,973  |   |   | $      | 169    |   |   | $      | -      |   |   | $ | 29,142 |   |
| Corporate debt obligations   |   |   | 10,563  |   |   |   | 232    |   |   |   | (123   | )      |   |   | 10,672 |   |
| Mutual funds                 |   |   | 1,561   |   |   |   | 64     |   |   |   | -      |   |   |   | 1,625 |   |
| Municipal debt obligations   |   |   | 2,817   |   |   |   | 49     |   |   |   | (36    | )      |   |   | 2,830 |   |
| SBA pools                    |   |   | 5,231   |   |   |   | 29     |   |   |   | (39    | )      |   |   | 5,221 |   |
| Mortgage-backed securities   |   |   | 112,262 |   |   |   | 4,643  |   |   |   | (17    | )      |   |   | 116,888 |   |
|                         |   | $      | 161,407 |   |   | $      | 5,186  |   |   | $      | (215   | )      |   | $ | 166,378 |   |
|                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to Maturity:            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2010               |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate debt obligations   |   | $      | 3,447   |   |   | $      | 193    |   |   | $      | -      |   |   | $ | 3,640 |   |
| Municipal debt obligations   |   |   | 28,386  |   |   |   | 226    |   |   |   | (91    | )      |   |   | 28,521 |   |
| Mortgage-backed securities   |   |   | 2,493   |   |   |   | 152    |   |   |   | -      |   |   |   | 2,645 |   |
|                         |   | $      | 34,326  |   |   | $      | 571    |   |   | $      | (91    | )      |   | $ | 34,806 |   |
|                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate debt obligations   |   | $      | 5,209   |   |   | $      | 90     |   |   | $      | (7     | )      |   | $ | 5,292 |   |
| Municipal debt obligations   |   |   | 33,173  |   |   |   | 220    |   |   |   | (93    | )      |   |   | 33,300 |   |
| Mortgage-backed securities   |   |   | 2,650   |   |   |   | 153    |   |   |   | -      |   |   |   | 2,803 |   |
|                         |   | $      | 41,032  |   |   | $      | 463    |   |   | $      | (100   | )      |   | $ | 41,395 |   |

|   | All of the Company’s mortgage-backed securities at March 31, 2010 and December 31, 2009 have been issued by government agencies or government sponsored enterprises.                                                                                                                                                                                                                                                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | The amortized cost and estimated fair value of investment securities at March 31, 2010, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Mortgage-backed securities are calculated as being due in their final stated maturity date. |

----

|                                  |   | Held to Maturity |   |   | Available for Sale |   |
|---------------------------------------|--------|------------------|--------|--------|--------------------|--------|
|                                  |   | AmortizedCost    |   |   | Fair Value         |   |   | AmortizedCost |   |   | Fair Value |   |
|                                  |   | (In thousands)   |   |
| Due in one year or less               |   | $                | 23,373 |   |               | $      | 23,388 |   |   | $ | 7,551 |   |   | $ | 7,681 |   |
| Due after one year through five years |   |             | 1,630  |   |               |   | 1,698 |   |   |   | 42,502 |   |   |   | 42,865 |   |
| Due after five year through ten years |   |             | 3,089  |   |               |   | 3,323 |   |   |   | 19,973 |   |   |   | 20,353 |   |
| Due thereafter                        |   |             | 6,234  |   |               |   | 6,397 |   |   |   | 90,668 |   |   |   | 94,775 |   |
|                                  |   | $                | 34,326 |   |               | $      | 34,806 |   |   | $ | 160,694 |   |   | $ | 165,674 |   |

|   | At March 31, 2010 and December 31, 2009, $82.5 million and $90.2 million, respectively, of securities were pledged as collateral to secure certain deposits and FHLB advances.                                                                       |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                 |
|   | Gross gains and losses of $14,000 and $56,000, respectively, for the three months ended March 31, 2010, and $161,000 and $4,000, respectively, for the three months ended March 31, 2009, were realized on sales and calls of investment securities. |
|   |                                                                                                                                                                                                                                                 |
|   | The following table shows the Company’s available for sale investments’ gross unrealized losses and fair value, and length of time that individual securities have been in a continuous unrealized loss position:                        |

| At March, 2010               |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                         |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                         |   | (In thousands)      |   |
| U. S. Government obligations |   | $                   | 12,477 |   |              | $      | 18     |       |   | $ | - |   |   | $ | - |   |   | $ | 12,477 |   |   | $ | 18 |   |
| Corporate debt obligations   |   |                | -      |   |              |   | -      |       |   |   | 1,398 |   |   |   | 67 |   |   |   | 1,398 |   |   |   | 67 |   |
| Municipal debt obligations   |   |                | 556    |   |              |   | 12     |       |   |   | 305 |   |   |   | 10 |   |   |   | 861 |   |   |   | 22 |   |
| SBA pools                    |   |                | -      |   |              |   | -      |       |   |   | 2,072 |   |   |   | 30 |   |   |   | 2,072 |   |   |   | 30 |   |
| Mortgage-backed securities   |   |                | 4,730  |   |              |   | 6      |       |   |   | 88 |   |   |   | 1 |   |   |   | 4,818 |   |   |   | 7 |   |
| Total                        |   | $                   | 17,763 |   |              | $      | 36     |       |   | $ | 3,863 |   |   | $ | 108 |   |   | $ | 21,626 |   |   | $ | 144 |   |

| At December 31, 2009       |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|----------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                       |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                       |   | (In thousands)      |   |
| Corporate debt obligations |   | $                   | 766    |   |              | $      | 16     |       |   | $ | 1,357 |   |   | $ | 107 |   |   | $ | 2,123 |   |   | $ | 123 |   |
| Municipal debt obligations |   |                | 846    |   |              |   | 36     |       |   |   | - |   |   |   | - |   |   |   | 846 |   |   |   | 36 |   |
| SBA pools                  |   |                | -      |   |              |   | -      |       |   |   | 2,278 |   |   |   | 39 |   |   |   | 2,278 |   |   |   | 39 |   |
| Mortgage-backed securities |   |                | 1,350  |   |              |   | 15     |       |   |   | 2,064 |   |   |   | 2 |   |   |   | 3,414 |   |   |   | 17 |   |
| Total                      |   | $                   | 2,962  |   |              | $      | 67     |       |   | $ | 5,699 |   |   | $ | 148 |   |   | $ | 8,661 |   |   | $ | 215 |   |

----

|   | The following table shows the Company’s held to maturity investments’ gross unrealized losses and fair value, and length of time that individual securities have been in a continuous unrealized loss position: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| At March 31, 2010          |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|----------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                       |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                       |   | (In thousands)      |   |
| Municipal debt obligations |   | $                   | 1,327  |   |              | $      | 83     |       |   | $ | 391 |   |   | $ | 8 |   |   | $ | 1,718 |   |   | $ | 91 |   |
| Total                      |   | $                   | 1,327  |   |              | $      | 83     |       |   | $ | 391 |   |   | $ | 8 |   |   | $ | 1,718 |   |   | $ | 91 |   |

| At December 31, 2009       |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|----------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                       |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                       |   | (In thousands)      |   |
| Corporate debt obligations |   | $                   | 462    |   |              | $      | 7      |       |   | $ | - |   |   | $ | - |   |   | $ | 462 |   |   | $ | 7 |   |
| Municipal debt obligations |   |                | 1,306  |   |              |   | 85     |       |   |   | 391 |   |   |   | 8 |   |   |   | 1,697 |   |   |   | 93 |   |
| Total                      |   | $                   | 1,768  |   |              | $      | 92     |       |   | $ | 391 |   |   | $ | 8 |   |   | $ | 2,159 |   |   | $ | 100 |   |

|   | The Company’s investment in mortgage-backed securities consists of government sponsored enterprise (GSE) securities.  The change in market value is attributable to changes in interest rates and widening credit spreads, and not due to underlying credit deterioration.  The contractual cash flows for the investments are performing as expected.  As the change in market value is attributable to changes in interest rates and credit spread and not underlying credit deterioration, and because the Company has the intent to hold the securities and will not more likely than not be required to sell the securities before recovery occurs, the Company does not consider the investments to be other-than-temporarily impaired at March 31, 2010.                                                                                                                                                                                      |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | The Company’s investment in U. S. Government agency securities and SBA loan pools consist of debt obligations of government sponsored enterprises and pools of loans from the Small Business Administration.  All principal and interest payments are current in regards to the investments.  The contractual cash flows of these investments are guaranteed by an agency of the United States government.  The change in market value is attributable to current interest rate levels relative to the Company’s cost and not credit quality.  As the change in market value is attributable to changes in interest rates and not underlying credit deterioration, and because the Company has the intent to hold the securities and will not more likely than not be required to sell the securities before recovery occurs, the Company does not consider the investments to be other-than-temporarily impaired at March 31, 2010. |

----

|   | The Company’s investment in corporate bonds consists of debt obligations of corporations mostly in the financial and insurance sectors of the economy.  All interest payments are current in regards to all the corporate investments.  In the first quarter of 2010, the Company continued the previously disclosed write-down of the AMBAC corporate bond due to its downgrade to below investment grade by rating companies, Moody’s and Standard and Poor’s, by an additional amount of $20,000, to its estimated fair market value.  In regards to the other corporate investments, as the Company has the intent to hold the investments and will not more likely than not be required to sell the securities before recovery occurs and because the other corporate bonds are still rated investment grade by one of the rating companies, Moody’s and Standard and Poor’s, the Company does not consider the other corporate investments to be other-than-temporarily impaired at March 31, 2010. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | The Company’s investment in municipal bonds consist of general obligations and revenue obligations of municipalities in the United States and bond anticipation notes of entities located in New Jersey.  The change in market value is attributable to the changes in interest rates relative to the Company’s cost and because the Company has the intent to hold the investments and will not more likely than not be required to sell the securities before recovery occurs, the Company does not consider the investments to be other-than-temporarily impaired at March 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | For the three months ended March 31, 2010, the Company redeemed $250,000 of the AMF mutual fund, respectively, at a pre-tax gain of approximately $9,000 or an after-tax gain of $5,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 8.     | Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | The components of loans at March 31, 2010 and December 31, 2009 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

|                                  |   | At March 31, 2010      |    |   | At December 31, 2009 |   |
|---------------------------------------|--------|------------------------|---------|--------|----------------------|--------|
|                                  |   | Amount                 |    |   | Percent              |   |   | Amount |   |   | Percent |   |
|                                  |   | (Dollars in thousands) |    |
| Real estate loans:                    |   |                   |    |   |                 |   |   |   |   |   |   |   |
| One- to four-family residential       |   | $                      | 151,202 |   |                 |   | 45.6 | % |   | $ | 151,352 |   |   |   | 46.6 | % |
| Home equity loans and lines of credit |   |                   | 38,136  |   |                 |   | 11.5 |   |   |   | 37,892 |   |   |   | 11.7 |   |
| Multi-family                          |   |                   | 3,697   |   |                 |   | 1.1 |   |   |   | 4,108 |   |   |   | 1.3 |   |
| Commercial                            |   |                   | 108,372 |   |                 |   | 32.7 |   |   |   | 97,075 |   |   |   | 29.9 |   |
| Construction                          |   |                   | 9,035   |   |                 |   | 2.7 |   |   |   | 14,093 |   |   |   | 4.3 |   |
| Commercial                            |   |                   | 19,344  |   |                 |   | 5.8 |   |   |   | 17,864 |   |   |   | 5.5 |   |
| Consumer and other                    |   |                   | 2,066   |   |                 |   | 0.6 |   |   |   | 2,223 |   |   |   | 0.7 |   |
| Total loans receivable                |   | $                      | 331,852 |   |                 |   | 100.0 | % |   | $ | 324,607 |   |   |   | 100.0 | % |
| Deferred loan fees                    |   |                   | (418    | )      |                 |   |   |   |   |   | (394 | ) |   |   |   |   |
| Allowance for loan losses             |   |                   | (3,016  | )      |                 |   |   |   |   |   | (2,606 | ) |   |   |   |   |
| Total loans receivable, net           |   | $                      | 328,418 |   |                 |   |   |   |   | $ | 321,607 |   |   |   |   |   |

|   | Our loans are originated and administered through our loan policies.  We originate one- to four-family residential real estate loans, home equity loans and lines of credit, commercial real estate loans, commercial business loans, construction loans, consumer loans and multi-family loans.  We offer fixed-rate, adjustable-rate and balloon loans that amortize with monthly loan payments. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | We have not originated or purchased any sub-prime or Alt-A loans.  We have not originated or purchased payment-option ARMs or negative amortizing loans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Nonaccrual loans amounted to approximately $2.4 million and $5.3 million at March 31, 2010 and December 31, 2009, respectively.  At March 31, 2010, the nonaccrual loans were comprised of $1.7 million of one- to-four family residential loans, $217,000 of home equity loans, $295,000 of commercial loans and $252,000 of construction loans.  At March 31, 2010, the valuation allowances established for the nonaccrual loans totaled $215,000 for one- to-four family residential loans, and $100,000 for the construction loans, respectively.                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Loans are reviewed on a regular basis, and generally are placed on nonaccrual status when either principal or interest is 90 days or more past due or if we believe that there is sufficient reason to question the borrower’s ability to continue to meet contractual principal or interest payment obligations.  We currently obtain updated appraisals and title searches on all collateral-dependent loans secured by real estate that are 90 days or more past due and placed on non-accrual status.  All appraisals are reviewed by our Chief Credit Officer, but we do not modify or adjust the value of appraisals we receive. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | As of March 31, 2010, the Bank had restructured 10 loans totaling approximately $5.1 million.  Seven of the loans are commercial real estate, construction, land and multi-family loans with an outstanding principal balance of $4.6 million, two of the loans are one-to-four family loans with an outstanding principal balance of $541,000 and one of the loans is a consumer loan.                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | During the quarter ended March 31, 2010, two commercial real estate loans were restructured totaling $320,000.  For these two loans the loan term was extended and the interest rate was lowered to assist in the borrower’s cash flow.                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | As of March 31, 2010, all of the restructured loans were current in terms of the restructured payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | At March 31, 2010, impaired loans totaled $264,000 which consisted of one construction loan in the amount of $252,000 with a $100,000 valuation allowance and one commercial real estate loan in the amount of $12,000 with no valuation allowance.                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | At December 31, 2009, impaired loans totaled $1.0 million which consisted of four commercial real estate loans in the amount of $535,000 with no valuation allowances, one construction loan in the amount of $235,000 with no valuation allowance, one construction loan in the amount of $252,000 with a valuation allowance of $100,000 and one non-mortgage commercial loan in the amount of $15,000 with a $7,000 valuation allowance.                                                                                                                                                                                                                      |

----

| 9.     | Deposits                                                                                      |
|--------|-----------------------------------------------------------------------------------------------|
|   |                                                                                          |
|   | Deposit accounts, by type, at March 31, 2010 and December 31, 2009 are summarized as follows: |

|                         |   | At March 31, 2010      |    |   | At December 31, 2009 |   |
|------------------------------|--------|------------------------|---------|--------|----------------------|--------|
|                         |   | Balance                |    |   | Percent              |   |   | Wtd.Avg.Rate |   |   | Balance |   |   | Percent |   |   | Wtd.Avg.Rate |   |
|                         |   | (Dollars in thousands) |    |
|                         |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposit type:                |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing demand. |   | $                      | 16,930  |   |                 |   | 3.36 | % |   |   | - | % |   | $ | 21,111 |   |   |   | 4.22 | % |   |   | - | % |
| Savings                      |   |                   | 105,320 |   |                 |   | 20.90 |   |   |   | 1.62 |   |   |   | 90,957 |   |   |   | 18.18 |   |   |   | 2.63 |   |
| NOW accounts                 |   |                   | 107,532 |   |                 |   | 21.32 |   |   |   | 0.79 |   |   |   | 98,810 |   |   |   | 19.74 |   |   |   | 0.85 |   |
| Super NOW accounts           |   |                   | 23,212  |   |                 |   | 4.61 |   |   |   | 1.47 |   |   |   | 19,755 |   |   |   | 3.95 |   |   |   | 1.47 |   |
| Money market deposit         |   |                   | 63,296  |   |                 |   | 12.56 |   |   |   | 1.01 |   |   |   | 63,005 |   |   |   | 12.59 |   |   |   | 1.63 |   |
| Total transaction accounts   |   |                   | 316,290 |   |                 |   | 62.75 |   |   |   | 1.12 |   |   |   | 293,638 |   |   |   | 58.68 |   |   |   | 1.55 |   |
|                         |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificates of deposit      |   |                   | 187,737 |   |                 |   | 37.25 |   |   |   | 2.77 |   |   |   | 206,728 |   |   |   | 41.32 |   |   |   | 2.91 |   |
|                         |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits               |   | $                      | 504,027 |   |                 |   | 100.00 | % |   |   | 1.74 | % |   | $ | 500,366 |   |   |   | 100.00 | % |   |   | 2.11 | % |

| 10.    | Federal Home Loan Bank Borrowings                                                                                                                                         |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                      |
|   | The following table sets forth information concerning advances from the Federal Home Loan Bank (“FHLB”) of New York, at March 31, 2010 and December 31, 2009: |

| Maturity         |   | InterestRate |   |   | March 31, 2010    |   |   | December 31, 2009 |   |
|------------------|--------|--------------|--------|--------|------------------------|--------|--------|-------------------|--------|
|             |   |         |   |   | (Dollars in thousands) |   |
| January 4, 2010  |   |         | 0.32   | %      |                   | $      | -      |              |   | $ | 5,300 |   |
| June 3, 2010     |   |         | 0.59   |   |                   |   | 2,000  |              |   |   | 2,000 |   |
| June 23, 2010    |   |         | 3.88   |   |                   |   | 3,000  |              |   |   | 3,000 |   |
| October 18, 2010 |   |         | 4.70   |   |                   |   | 4,000  |              |   |   | 4,000 |   |
| April 20, 2011   |   |         | 1.22   |   |                   |   | 2,000  |              |   |   | 2,000 |   |
| June 23, 2011    |   |         | 4.31   |   |                   |   | 3,000  |              |   |   | 3,000 |   |
| October 22, 2012 |   |         | 2.12   |   |                   |   | 2,000  |              |   |   | 2,000 |   |
|             |   |         |   |   |                   | $      | 16,000 |              |   | $ | 21,300 |   |

|   | At March 31, 2010, the Bank had a borrowing capacity of $123.7 million available from the FHLB of New York, which is based on the amount of FHLB of New York stock held or levels of other assets, including investment securities, which are available for collateral.  At March 31, 2010, the Bank had $16.0 million in outstanding borrowings from the FHLB of New York. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 11.    | Fair Value Measurements                                                                                                                                                                                                                                                                                                                                                |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                   |   |
|   | FASB ASC 820 Topic establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). |
|   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                   | Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
|   |                                                                                                                                                                                                                                                                                                                                                                   |   |
|   |                                                                                                                                                                                                                                                                                                                                                                   | Level 2: Quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. |
|   |                                                                                                                                                                                                                                                                                                                                                                   |   |
|   |                                                                                                                                                                                                                                                                                                                                                                   | Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). |
|   |                                                                                                                                                                                                                                                                                                                                                                   |   |
|   | An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                   |
|   | For assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2010 and December 31, 2009 are as follows:                                                                                                                                                                              |

|                                |   | March 31,2010 |    |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   | (Level 2)Significant ObservableOther Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|-------------------------------------|--------|---------------|---------|--------|----------------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|----------------------------------------|--------|
| U. S. Government obligations        |   | $             | 31,115  |   |                                                     | $      | -      |                                        |   | $      | 31,115                                 |   |   | $ | - |   |
| Corporate debt obligations          |   |          | 10,102  |   |                                                     |   | -      |                                        |   |   | 10,102                                 |   |   |   | - |   |
| Mutual funds                        |   |          | 1,377   |   |                                                     |   | 1,377  |                                        |   |   | -                                      |   |   |   | - |   |
| Municipal debt obligations          |   |          | 2,852   |   |                                                     |   | -      |                                        |   |   | 2,852                                  |   |   |   | - |   |
| SBA pools                           |   |          | 4,628   |   |                                                     |   | -      |                                        |   |   | 4,628                                  |   |   |   | - |   |
| Mortgage-backed securities          |   |          | 115,600 |   |                                                     |   | -      |                                        |   |   | 115,600                                |   |   |   | - |   |
| Total securities available-for-sale |   | $             | 165,674 |   |                                                     | $      | 1,377  |                                        |   | $      | 164,297                                |   |   | $ | - |   |

----

|                                |   | December 31,2009 |    |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   | (Level 2)SignificantObservableOther Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|-------------------------------------|--------|------------------|---------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------|--------|
| U. S. Government obligations        |   | $                | 29,142  |   |                                                     | $      | -      |                                       |   | $      | 29,142                                 |   |   | $ | - |   |
| Corporate debt obligations          |   |             | 10,672  |   |                                                     |   | -      |                                       |   |   | 10,672                                 |   |   |   | - |   |
| Mutual funds                        |   |             | 1,625   |   |                                                     |   | 1,625  |                                       |   |   | -                                      |   |   |   | - |   |
| Municipal debt obligations          |   |             | 2,830   |   |                                                     |   | -      |                                       |   |   | 2,830                                  |   |   |   | - |   |
| SBA pools                           |   |             | 5,221   |   |                                                     |   | -      |                                       |   |   | 5,221                                  |   |   |   | - |   |
| Mortgage-backed securities          |   |             | 116,888 |   |                                                     |   | -      |                                       |   |   | 116,888                                |   |   |   | - |   |
| Total securities available-for-sale |   | $                | 166,378 |   |                                                     | $      | 1,625  |                                       |   | $      | 164,753                                |   |   | $ | - |   |

|   | For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2010 and December 31, 2009 are as follow: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           |   | March 31,2010 |   |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   | (Level 2)significantObservableOther Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|----------------|--------|---------------|--------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------|--------|
| Impaired loans |   | $             | 164    |   |                                                     | $      | -      |                                       |   | $      | -                                      |   |   | $ | 164 |   |

|           |   | December 31,2009 |   |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   |  (Level 2)significantObservableOther Inputs |   |   | (Level 3) Significant Unobservable Inputs |   |
|----------------|--------|------------------|--------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------------|--------|--------|-------------------------------------------|--------|
| Impaired loans |   | $                | 172    |   |                                                     | $      | -      |                                             |   | $      | -                                         |   |   | $ | 172 |   |

|   | The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at March 31, 2010 and December 31, 2009: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Cash and Amounts Due From Banks (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The carrying amounts reported in the balance sheet for cash and amounts due from banks approximate those assets’ fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

----

|   | Investment Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Loans Receivable (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Impaired Loans (Generally Carried at Fair Value)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Impaired loans are those in which the Company has measured impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.  At March 31, 2010 and December 31, 2009, the fair value consists of the loan balances of $264,000 and $279,000, respectively, net of a valuation allowance of $100,000 and $107,000, respectively.. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Federal Home Loan Bank Stock (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The carrying amount of restricted investment in Company stock approximates fair value, and considers the limited marketability of such securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Accrued Interest Receivable and Payable (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Deposit Liabilities (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Short-Term Borrowings (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | The carrying amounts of short-term borrowings approximate their fair values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

----

|   | Long-Term Borrowings (Carried at Cost)                                                                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Fair values of FHLB advances are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party. |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Off-Balance Sheet Financial Instruments (Disclosed at Cost)                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|   | The carrying amount and estimated fair value of the Company’s assets and liabilities at March 31, 2010 and December 31, 2009 are as follows:                                                                                                                                                                                                                                    |

|                                               |   | March 31, 2010 |    |   | December 31, 2009 |   |
|----------------------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                               |   | CarryingAmount |    |   | Fair Value        |   |   | CarryingAmount |   |   | Fair Value |   |
|                                               |   | (In thousands) |    |
|                                               |   |           |    |   |              |   |   |   |   |   |   |   |
| Assets:                                            |   |           |    |   |              |   |   |   |   |   |   |   |
| Cash and amounts due from banks                    |   | $              | 14,391  |   |              | $      | 14,391 |   |   | $ | 15,882 |   |   | $ | 15,882 |   |
| Investment securities available-for-sale           |   |           | 165,674 |   |              |   | 165,674 |   |   |   | 166,378 |   |   |   | 166,378 |   |
| Corporate debt obligations held-to-maturity        |   |           | 3,447   |   |              |   | 3,640 |   |   |   | 5,209 |   |   |   | 5,292 |   |
| Municipal debt obligations held-to-maturity        |   |           | 28,386  |   |              |   | 28,521 |   |   |   | 33,173 |   |   |   | 33,300 |   |
| Mortgage-backed securities held-to-maturity        |   |           | 2,493   |   |              |   | 2,645 |   |   |   | 2,650 |   |   |   | 2,803 |   |
| Federal Home Loan Bank stock                       |   |           | 1,493   |   |              |   | 1,493 |   |   |   | 1,731 |   |   |   | 1,731 |   |
| Loans receivable, net                              |   |           | 328,418 |   |              |   | 343,676 |   |   |   | 321,607 |   |   |   | 334,147 |   |
| Accrued interest receivable                        |   |           | 2,414   |   |              |   | 2,414 |   |   |   | 2,272 |   |   |   | 2,272 |   |
|                                               |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                       |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   |           | 504,027 |   |              |   | 509,578 |   |   |   | 500,366 |   |   |   | 505,687 |   |
| Federal Home Loan Bank short-term borrowings       |   |           | 2,000   |   |              |   | 2,000 |   |   |   | 7,300 |   |   |   | 7,300 |   |
| Federal Home Loan Bank long-term borrowings        |   |           | 14,000  |   |              |   | 14,280 |   |   |   | 14,000 |   |   |   | 14,237 |   |
| Accrued interest payable                           |   |           | 128     |   |              |   | 128 |   |   |   | 168 |   |   |   | 168 |   |
|                                               |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance sheet financial instruments:           |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to extend credit and letters of credit |   |           | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |

----

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

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| Item 3.  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | Not applicable, as the Company is a Smaller Reporting Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 4.  | Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (a)      | Evaluation of disclosure controls and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report.   Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits 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)      | Changes in internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | There were no changes made in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Item 4T. | Controls and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|     | Not applicable, as the Company is a Smaller Reporting Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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| Item 1. | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|    | Colonial Bank, FSB and its Senior Vice President, Richard W. Dapp, have been named as defendants in a lawsuit, Renewable Energy Resources, LLC, Dennis Bracall, Sr. v. Mauro Conte, Conte’s Pasta Company, Inc., Richard Dapp, Colonial Bank, FSB, XYZ Entities, John Does, filed December 11, 2009 in the Superior Court of New Jersey, Atlantic County Law Division.  The plaintiffs allege to have entered into an agreement with defendant Conte’s Pasta Company, Inc. pursuant to which the plaintiffs would install a solar electric energy system for Conte’s Pasta Company, Inc.  The plaintiffs also allege that Conte’s Pasta Company, Inc. discussed the financing for its project with Richard W. Dapp, who is Senior Vice President and Chief Credit Officer for Colonial Bank, FSB.  The plaintiffs further allege that Mr. Dapp informed defendant Mauro Conte, the president and principal of Conte’s Pasta Company, Inc. that the plaintiffs were unreliable and had a bad business reputation, and that Mr. Dapp refused to submit the financing proposal to Colonial Bank, FSB’s board of directors for approval and, as a result, Conte’s Pasta Company, Inc. determined to breach its contract with the plaintiffs.  The plaintiffs seek judgment for compensatory damages, pre-judgment interest, punitive damages, attorney fees and costs and other just and equitable relief. |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|    | Colonial Bank, FSB vigorously disputes these allegations.  No trial date has been set.  At this time, we are unable to predict an outcome, favorable or unfavorable, or to estimate the amount of any potential loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|    | As of March 31, 2010, we were not involved in any other pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, which, in the aggregate, involve amounts that we believe are immaterial to our consolidated financial condition, results of operations and cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

----

| Item 1A. | Risk Factors                                                                               |
|----------|--------------------------------------------------------------------------------------------|
|     |                                                                                       |   |
|     | Not applicable, as Colonial Bankshares, Inc. is a “Smaller Reporting Company.” |
|     |                                                                                       |   |
| Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                                |
|     |                                                                                       |   |
|     | (a)                                                                                        | Not applicable |
|     | (b)                                                                                        | Not applicable |
|     | (c)                                                                                        | Purchases of Equity Securities |
|     |                                                                                       |   |
|     |                                                                                       | The Company had no repurchases of its common stock during the quarter ended March 31, 2010.  On March 24, 2008, the Company announced a repurchase program for 100,454 shares.  As of March 31, 2010, 46,000 shares had been repurchased under this plan. |
|     |                                                                                       |   |

| Item 3. | Defaults Upon SeniorSecurities |
|---------|--------------------------------|
|    |                           |   |
|    | None                           |
|    |                           |   |
| Item 4. | (Reserved)                     |
|    |                           |   |
| Item 5. | Other Information              |
|    |                           |   |
|    | None                           |   |
|    |                           |   |
| Item 6. | Exhibits                       |
|    |                           |   |
|    | Exhibit 31.1                   | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
|    |                           |   |
|    | Exhibit 31.2                   | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
|    |                           |   |
|    | Exhibit 32                     | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 |

----

|                          | COLONIAL BANKSHARES, INC.                            |   |
|-------------------------------|------------------------------------------------------|--------|
|                          | Registrant                                           |   |
|                          |                                                 |   |
|                          |                                                 |   |
|                          |                                                 |   |
| Date:  May 14, 2010 | By:  /s/ Edward J. Geletka                 |   |
|                          | Edward J. Geletka                                    |   |
|                          | President and Chief Executive Officer                |   |
|                          | (Principal Executive Officer)                        |   |
|                          |                                                 |   |
|                          |                                                 |   |
| Date:  May 14, 2010 | By:  /s/ L. Joseph Stella, III, CPA        |   |
|                          | L. Joseph Stella, III, CPA                           |   |
|                          | Executive Vice President and Chief Financial Officer |
|                          | (Principal Accounting and Financial Officer)         |   |