----

----

| x      | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  |
|--------|-------------------------------------------------------------------------------------|
|   |                                                                                |
|   | For the quarterly period ended  September 30, 2009                        |
|   |                                                                                |
| 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)                           |

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

----

| PART I   | FINANCIAL INFORMATION                                                                       | PAGE   |
|----------|---------------------------------------------------------------------------------------------|--------|
|     |                                                                                        |   |
| Item 1   | Unaudited Consolidated Statements of Financial Condition                                    | 2      |
|     | Unaudited Consolidated Statements of Income                                                 | 3      |
|     | Unaudited Consolidated Statements of Stockholders’ Equity                             | 4      |
|     | Unaudited Consolidated Statements of Cash Flows                                             | 5      |
|     | Notes to Unaudited Consolidated Financial Statements                                        | 6      |
|     |                                                                                        |   |
| Item 2   | Management’s Discussion and Analysis of Financial Condition And Results of Operations | 25     |
|     |                                                                                        |   |
| Item 3   | Quantitative and Qualitative Disclosures About Market Risk                                  | 35     |
|     |                                                                                        |   |
| Item 4T. | Controls and Procedures                                                                     | 35     |
|     |                                                                                        |   |
| PART II  | OTHER INFORMATION                                                                           |   |
|     |                                                                                        |   |
| Item 1   | Legal Proceedings                                                                           | 36     |
|     |                                                                                        |   |
| Item 1A. | Risk Factors                                                                                | 36     |
|     |                                                                                        |   |
| Item 2   | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 37     |
|     |                                                                                        |   |
| Item 3   | Defaults Upon Senior Securities                                                             | 37     |
|     |                                                                                        |   |
| Item 4   | Submission of Matters to Vote of Security Holders                                           | 38     |
|     |                                                                                        |   |
| Item 5   | Other Information                                                                           | 38     |
|     |                                                                                        |   |
| Item 6   | Exhibits                                                                                    | 38     |
|     |                                                                                        |   |
|     | Signatures                                                                                  | 39     |

----

| Item 1. | Financial Statements |
|---------|----------------------|

----

|                                                                                                                                                                                             |   | September 30,2009                                      |    |   | December 31,2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|---------|--------|------------------|--------|
|                                                                                                                                                                                             |   |                                                   |    |   |             |   |
|                                                                                                                                                                                             |   | (Dollars in thousands, except shareand per share data) |    |
| Assets                                                                                                                                                                                           |   |                                                   |    |   |             |   |
| Cash and amounts due from banks                                                                                                                                                                  |   | $                                                      | 11,299  |   |             | $      | 23,407 |   |
| Investment securities available for sale                                                                                                                                                         |   |                                                   | 174,669 |   |             |   | 165,462 |   |
| Investment securities held to maturity (fair value at September 30, 2009 - $44,122; at December 31, 2008 - $16,332)                                                                              |   |                                                   | 43,480  |   |             |   | 16,897 |   |
| Loans receivable, net of allowance for loan losses of $2,331 at September 30, 2009 and $2,105 at December 31, 2008                                                                               |   |                                                   | 319,281 |   |             |   | 303,151 |   |
| Real estate owned                                                                                                                                                                                |   |                                                   | -       |   |             |   | 113 |   |
| Federal Home Loan Bank stock, at cost                                                                                                                                                            |   |                                                   | 2,420   |   |             |   | 1,991 |   |
| Office properties and equipment, net                                                                                                                                                             |   |                                                   | 11,516  |   |             |   | 11,563 |   |
| Bank-owned life insurance                                                                                                                                                                        |   |                                                   | 2,752   |   |             |   | 2,674 |   |
| Accrued interest receivable                                                                                                                                                                      |   |                                                   | 2,370   |   |             |   | 2,298 |   |
| Other assets                                                                                                                                                                                     |   |                                                   | 2,424   |   |             |   | 3,020 |   |
| Total Assets                                                                                                                                                                                     |   | $                                                      | 570,211 |   |             | $      | 530,576 |   |
|                                                                                                                                                                                             |   |                                                   |    |   |             |   |   |   |
| Liabilities and Stockholders’ Equity                                                                                                                                                       |   |                                                   |    |   |             |   |   |   |
| Liabilities                                                                                                                                                                                      |   |                                                   |    |   |             |   |   |   |
| Deposits:                                                                                                                                                                                        |   |                                                   |    |   |             |   |   |   |
| Noninterest-bearing                                                                                                                                                                              |   | $                                                      | 17,812  |   |             | $      | 18,146 |   |
| Interest-bearing                                                                                                                                                                                 |   |                                                   | 469,208 |   |             |   | 439,085 |   |
| Total deposits                                                                                                                                                                                   |   |                                                   | 487,020 |   |             |   | 457,231 |   |
| Federal Home Loan Bank short-term borrowings                                                                                                                                                     |   |                                                   | 14,620  |   |             |   | 3,000 |   |
| Federal Home Loan Bank long-term borrowings                                                                                                                                                      |   |                                                   | 22,000  |   |             |   | 28,227 |   |
| Advances from borrowers for taxes and insurance                                                                                                                                                  |   |                                                   | 856     |   |             |   | 620 |   |
| Accrued interest payable and other liabilities                                                                                                                                                   |   |                                                   | 1,410   |   |             |   | 868 |   |
| Total Liabilities                                                                                                                                                                                |   |                                                   | 525,906 |   |             |   | 489,946 |   |
|                                                                                                                                                                                             |   |                                                   |    |   |             |   |   |   |
| 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 4,422,521 shares at September 30, 2009 and 4,428,021 at December 31, 2008 |   |                                                   | 452     |   |             |   | 452 |   |
| Additional paid-in capital                                                                                                                                                                       |   |                                                   | 20,567  |   |             |   | 20,290 |   |
| Unearned shares held by Employee Stock Ownership Plan (“ESOP”)                                                                                                                       |   |                                                   | (1,200  | )      |             |   | (1,200 | ) |
| Treasury stock, at cost, 134,625 shares at September 30, 2009 and 129,125 shares at December 31, 2008                                                                                            |   |                                                   | (1,596  | )      |             |   | (1,559 | ) |
| Retained earnings                                                                                                                                                                                |   |                                                   | 23,417  |   |             |   | 22,439 |   |
| Accumulated other comprehensive income                                                                                                                                                           |   |                                                   | 2,665   |   |             |   | 208 |   |
| Total Stockholders’ Equity                                                                                                                                                                 |   |                                                   | 44,305  |   |             |   | 40,630 |   |
| Total Liabilities and Stockholders’ Equity                                                                                                                                                 |   | $                                                      | 570,211 |   |             | $      | 530,576 |   |

----

----

----

|                                                        |   | Three Months EndedSeptember 30,                              |      |   | Nine Months EndedSeptember 30, |   |
|-------------------------------------------------------------|--------|--------------------------------------------------------------|-----------|--------|--------------------------------|--------|
|                                                        |   | 2009                                                         |      |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                                        |   | (Dollars in thousands, except share and per share data) |      |
| Interest Income                                             |   |                                                         |      |   |                           |   |   |   |   |   |   |   |
| Loans, including fees                                       |   | $                                                            | 4,673     |   |                           | $      | 4,360 |   |   | $ | 13,852 |   |   | $ | 12,407 |   |
| Mortgage-backed securities                                  |   |                                                         | 1,401     |   |                           |   | 1,517 |   |   |   | 4,388 |   |   |   | 3,915 |   |
| Securities:                                                 |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                     |   |                                                         | 541       |   |                           |   | 959 |   |   |   | 1,704 |   |   |   | 3,268 |   |
| Tax-exempt                                                  |   |                                                         | 204       |   |                           |   | 140 |   |   |   | 495 |   |   |   | 443 |   |
| Total Interest Income                                       |   |                                                         | 6,819     |   |                           |   | 6,976 |   |   |   | 20,439 |   |   |   | 20,033 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Interest Expense                                            |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                    |   |                                                         | 3,099     |   |                           |   | 3,483 |   |   |   | 9,556 |   |   |   | 10,571 |   |
| Borrowings                                                  |   |                                                         | 248       |   |                           |   | 494 |   |   |   | 921 |   |   |   | 1,222 |   |
| Total Interest Expense                                      |   |                                                         | 3,347     |   |                           |   | 3,977 |   |   |   | 10,477 |   |   |   | 11,793 |   |
| Net Interest Income                                         |   |                                                         | 3,472     |   |                           |   | 2,999 |   |   |   | 9,962 |   |   |   | 8,240 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Provision for Loan Losses                                   |   |                                                         | 100       |   |                           |   | 148 |   |   |   | 295 |   |   |   | 148 |   |
| Net Interest Income after Provision for Loan Losses         |   |                                                         | 3,372     |   |                           |   | 2,851 |   |   |   | 9,667 |   |   |   | 8,092 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Income                                         |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Fees and service charges                                    |   |                                                         | 307       |   |                           |   | 284 |   |   |   | 888 |   |   |   | 826 |   |
| Gain on sale of loans                                       |   |                                                         | 7         |   |                           |   | - |   |   |   | 56 |   |   |   | 7 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Impairment charge on investment securities                  |   |                                                         | (568      | )      |                           |   | (326 | ) |   |   | (914 | ) |   |   | (844 | ) |
| Portion of loss recognized in other comprehensive income    |   |                                                         | -         |   |                           |   | - |   |   |   | - |   |   |   | - |   |
| Net impairment losses recognized in earnings                |   |                                                         | (568      | )      |                           |   | (326 | ) |   |   | (914 | ) |   |   | (844 | ) |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Net gain on sales and calls of investment securities        |   |                                                         | 10        |   |                           |   | 35 |   |   |   | 295 |   |   |   | 251 |   |
| Earnings on life insurance                                  |   |                                                         | 26        |   |                           |   | 24 |   |   |   | 78 |   |   |   | 72 |   |
| Other                                                       |   |                                                         | 7         |   |                           |   | 5 |   |   |   | 18 |   |   |   | 15 |   |
| Total Non-Interest Income                                   |   |                                                         | (211      | )      |                           |   | 22 |   |   |   | 421 |   |   |   | 327 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest Expenses                                       |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and benefits                                   |   |                                                         | 1,495     |   |                           |   | 1,383 |   |   |   | 4,329 |   |   |   | 4,066 |   |
| Occupancy and equipment                                     |   |                                                         | 391       |   |                           |   | 340 |   |   |   | 1,161 |   |   |   | 982 |   |
| FDIC insurance premium                                      |   |                                                         | 190       |   |                           |   | 122 |   |   |   | 787 |   |   |   | 244 |   |
| Data processing                                             |   |                                                         | 205       |   |                           |   | 206 |   |   |   | 588 |   |   |   | 582 |   |
| Office supplies                                             |   |                                                         | 33        |   |                           |   | 43 |   |   |   | 130 |   |   |   | 119 |   |
| Professional fees                                           |   |                                                         | 123       |   |                           |   | 95 |   |   |   | 384 |   |   |   | 296 |   |
| Other                                                       |   |                                                         | 314       |   |                           |   | 314 |   |   |   | 1,457 |   |   |   | 888 |   |
| Total Non-Interest Expenses                                 |   |                                                         | 2,751     |   |                           |   | 2,503 |   |   |   | 8,836 |   |   |   | 7,177 |   |
| Income before Income Tax Expense                            |   |                                                         | 410       |   |                           |   | 370 |   |   |   | 1,252 |   |   |   | 1,242 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Income Tax expense                                          |   |                                                         | 80        |   |                           |   | 86 |   |   |   | 274 |   |   |   | 267 |   |
| Net Income                                                  |   | $                                                            | 330       |   |                           | $      | 284 |   |   | $ | 978 |   |   | $ | 975 |   |
|                                                        |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Per Share Data (See Note 3):                                |   |                                                         |      |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per share – basic                            |   | $                                                            | 0.08      |   |                           | $      | 0.07 |   |   | $ | 0.23 |   |   | $ | 0.23 |   |
| Earnings per share – diluted                          |   | $                                                            | 0.08      |   |                           | $      | 0.07 |   |   | $ | 0.23 |   |   | $ | 0.23 |   |
| Weighted average number of shares outstanding – basic |   |                                                         | 4,267,085 |   |                           |   | 4,284,515 |   |   |   | 4,269,171 |   |   |   | 4,294,268 |   |
| Weighted average number of shares outstanding - diluted     |   |                                                         | 4,269,477 |   |                           |   | 4,292,875 |   |   |   | 4,269,171 |   |   |   | 4,297,028 |   |

----

----

----

|                                                                                                    |   | CommonStock            |   |   | AdditionalPaid-inCapital |   |   | UnearnedSharesHeld byESOP |   |   | RetainedEarnings |   |   | TreasuryStock |   |   | Accumu-latedOtherCompre-hensiveIncome(Loss) |   |   | TotalStock-holders’Equity |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------|--------|--------|--------------------------|--------|--------|---------------------------|--------|--------|------------------|--------|--------|---------------|--------|--------|---------------------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                    |   | (Dollars in thousands) |   |
| Balance, January 1, 2009                                                                                |   | $                      | 452    |   |                     | $      | 20,290 |                      |   | $      | (1,200           | )      |   | $             | 22,439 |   |                                        | $      | (1,559 | )                               |   | $ | 208 |   |   | $ | 40,630 |   |
| Comprehensive income:                                                                                   |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Net income                                                                                              |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | 978    |   |                                        |   | -      |                            |   |   | - |   |   |   | 978 |   |
| Net change in unrealized gain on securities available for sale, net of tax expense of  $1,373 |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | 2,457 |   |   |   | 2,457 |   |
| Total Comprehensive Income                                                                              |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 3,435 |   |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Treasury stock purchased (5,500 shares)                                                                 |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | (37    | )                               |   |   | - |   |   |   | (37 | ) |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (restricted stock awards)                                              |   |                   | -      |   |                     |   | 166    |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 166 |   |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (stock options)                                                        |   |                   | -      |   |                     |   | 111    |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 111 |   |
| Balance, September 30, 2009                                                                             |   | $                      | 452    |   |                     | $      | 20,567 |                      |   | $      | (1,200           | )      |   | $             | 23,417 |   |                                        | $      | (1,596 | )                               |   | $ | 2,665 |   |   | $ | 44,305 |   |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Balance, January 1, 2008                                                                                |   | $                      | 452    |   |                     | $      | 19,922 |                      |   | $      | (1,316           | )      |   | $             | 21,094 |   |                                        | $      | (1,189 | )                               |   | $ | 65 |   |   | $ | 39,028 |   |
| Comprehensive loss:                                                                                     |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Net income                                                                                              |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | 975    |   |                                        |   | -      |                            |   |   | - |   |   |   | 975 |   |
| Net change in unrealized loss on securities available for sale, net of tax benefit of $881              |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | (1,421 | ) |   |   | (1,421 | ) |
| Total Comprehensive Loss                                                                                |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | (446 | ) |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Treasury stock purchased (20,500 shares)                                                                |   |                   | -      |   |                     |   | -      |                      |   |   | -                |   |   |          | -      |   |                                        |   | (216   | )                               |   |   | - |   |   |   | (216 | ) |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (restricted stock awards)                                              |   |                   | -      |   |                     |   | 166    |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 166 |   |
|                                                                                                    |   |                   |   |   |                     |   |   |                      |   |   |             |   |   |          |   |   |                                        |   |   |                            |   |   |   |   |   |   |   |   |
| Stock-based compensation expense (stock options)                                                        |   |                   | -      |   |                     |   | 111    |                      |   |   | -                |   |   |          | -      |   |                                        |   | -      |                            |   |   | - |   |   |   | 111 |   |
| Balance, September 30, 2008                                                                             |   | $                      | 452    |   |                     | $      | 20,199 |                      |   | $      | (1,316           | )      |   | $             | 22,069 |   |                                        | $      | (1,405 | )                               |   | $ | (1,356 | ) |   | $ | 38,643 |   |

----

----

----

|                                                                              |   | Nine Months EndedSeptember 30, |    |
|-----------------------------------------------------------------------------------|--------|--------------------------------|---------|
|                                                                              |   | 2009                           |    |   | 2008 |   |
|                                                                              |   | (Dollars in thousands)         |    |
| Cash Flows from Operating Activities:                                             |   |                           |    |
| Net income                                                                        |   | $                              | 978     |   |   | $ | 975 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                           |    |   |   |   |   |   |
| Provision for loan losses                                                         |   |                           | 295     |   |   |   | 148 |   |
| Depreciation expense                                                              |   |                           | 493     |   |   |   | 432 |   |
| Stock-based compensation expense                                                  |   |                           | 277     |   |   |   | 277 |   |
| Impairment charge on investment securities                                        |   |                           | 914     |   |   |   | 844 |   |
| Net earnings on bank-owned life insurance                                         |   |                           | (78     | ) |   |   | (72 | ) |
| Loans originated for sale                                                         |   |                           | (4,817  | ) |   |   | (331 | ) |
| Proceeds from sale of loans                                                       |   |                           | 4,873   |   |   |   | 338 |   |
| Gain on sale of loans                                                             |   |                           | (56     | ) |   |   | (7 | ) |
| Gain on sale of foreclosed real estate                                            |   |                           | 5       |   |   |   | - |   |
| Net amortization of loan costs                                                    |   |                           | 78      |   |   |   | 29 |   |
| Net gain on sales and calls of investment securities                              |   |                           | (295    | ) |   |   | (251 | ) |
| Accretion of premium and discount on investment securities, net                   |   |                           | (371    | ) |   |   | (366 | ) |
| Increase in accrued interest receivable                                           |   |                           | (72     | ) |   |   | (175 | ) |
| Increase in other assets                                                          |   |                           | (777    | ) |   |   | (300 | ) |
| Increase in accrued interest payable and other liabilities                        |   |                           | 542     |   |   |   | 193 |   |
| Net cash provided by operating activities                                         |   |                           | 1,989   |   |   |   | 1,734 |   |
| Cash Flows from Investing Activities:                                             |   |                           |    |   |   |   |   |   |
| Proceeds from sales of investment securities available-for-sale                   |   |                           | 843     |   |   |   | 19,438 |   |
| Proceeds from sales of mortgage-backed securities available-for-sale              |   |                           | 1,674   |   |   |   | 2,911 |   |
| Proceeds from calls and maturities of investment securities available-for-sale    |   |                           | 35,729  |   |   |   | 30,173 |   |
| Proceeds from calls and maturities of investment securities held-to-maturity      |   |                           | 10,190  |   |   |   | 3,000 |   |
| Purchase of investment securities available-for-sale                              |   |                           | (46,751 | ) |   |   | (21,973 | ) |
| Purchase of investment securities held-to-maturity                                |   |                           | (37,848 | ) |   |   | (3,712 | ) |
| Purchase of mortgage-backed securities available-for-sale                         |   |                           | (20,036 | ) |   |   | (53,041 | ) |
| Purchase of office properties and equipment                                       |   |                           | (446    | ) |   |   | (1,544 | ) |
| Principal repayments from investment securities                                   |   |                           | 1,072   |   |   |   | 852 |   |
| Principal repayments from mortgage-backed securities                              |   |                           | 22,919  |   |   |   | 11,978 |   |
| Net increase of Federal Home Loan Bank stock                                      |   |                           | (429    | ) |   |   | (533 | ) |
| Maturity of interest-bearing time deposits in banks                               |   |                           | -       |   |   |   | 208 |   |
| Proceeds from sale of foreclosed real estate                                      |   |                           | 108     |   |   |   | - |   |
| Net increase in loans receivable                                                  |   |                           | (16,503 | ) |   |   | (49,893 | ) |
| Net cash used for investing activities                                            |   |                           | (49,478 | ) |   |   | (62,136 | ) |
| Cash Flows from Financing Activities:                                             |   |                           |    |   |   |   |   |   |
| Net increase in deposits                                                          |   |                           | 29,789  |   |   |   | 57,427 |   |
| Increase in Federal Home Loan Bank short-term borrowings, net                     |   |                           | 11,620  |   |   |   | 3,680 |   |
| Proceeds from Federal Home Loan Bank long-term borrowings                         |   |                           | -       |   |   |   | 6,000 |   |
| Repayment of Federal Home Loan Bank long-term borrowings                          |   |                           | (6,227  | ) |   |   | (247 | ) |
| Increase in advances from borrowers for taxes and insurance                       |   |                           | 236     |   |   |   | 157 |   |
| Acquisition of treasury stock                                                     |   |                           | (37     | ) |   |   | (216 | ) |
| Net cash provided by financing activities                                         |   |                           | 35,381  |   |   |   | 66,801 |   |
| Increase (decrease) in cash and cash equivalents                                  |   |                           | (12,108 | ) |   |   | 6,399 |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                  |   |                           | 23,407  |   |   |   | 15,978 |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        |   | $                              | 11,299  |   |   | $ | 22,377 |   |
|                                                                              |   |                           |    |   |   |   |   |   |
|                                                                              |   |                           |    |   |   |   |   |   |
| Supplemental Cash Flow Disclosures:                                               |   |                           |    |   |   |   |   |   |
| Cash paid:                                                                        |   |                           |    |   |   |   |   |   |
| Interest                                                                          |   | $                              | 10,681  |   |   | $ | 11,892 |   |
| Income taxes                                                                      |   | $                              | 800     |   |   | $ | 631 |   |
| Supplemental Schedule of Noncash Investing and Financing Activities:              |   |                           |    |   |   |   |   |   |
| Other real estate acquired in settlement of loans                                 |   | $                              | -       |   |   | $ | 155 |   |

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| 1.     | Organization and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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|   | 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 charteredcapital 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 is a wholly owned subsidiary of the Company.  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 acceptedin the United States of America (“US GAAP”) as set by the Financial Accounting Standards Board (“FASB”).  References to GAAP issued by the FASB in this report are to the “FASB Accounting Standards Codification”, sometimes referred to as the “Codification” or “ASC”.  The FASB finalized the Codification effective for periods ending on or after September 15, 2009.  Prior FASB Statements, Interpretation, Position, Emerging IssuesTask Force (“EITF”) consensuses, and American Institute of Certified Public Accountants (“AICPA”) Statements of Position are no longer being issued by the FASB.  The Codification does not change how the Company accounts for its transactions or the nature of related disclosures made.  However, when referring to guidance issued by the FASB, the Company refers to topics in the ASC rather than the specific FASB statement.  We have updated references to GAAP inthis report to reflect the guidance in the Codification.  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 and nine months ended September 30, 2009 (unaudited)are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The balance sheet at December 31, 2008 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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|   | 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 reportingperiod.  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 and our ability to realize deferred tax assets.                                                                  |
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|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | The Company has evaluated subsequent events for potential recognition and/or disclosure in this Quarterly Report on Form 10-Q through November 13, 2009, the date of this filing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
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| 2.     | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | In June 2009, the FASB issued guidance now codified as FASB ASC Topic 105 “Generally Accepted Accounting Principles”, as the single source of authoritative nongovernmental U. S. GAAP.  FASB ASC Topic 105 does not change current U. S. GAAP, but is intended tosimplify user access to all authoritative U. S. GAAP by providing all authoritative literature related to a particular topic in one place.  All existing accounting standard documents will be superseded and all other accounting literature not included in the FASB Codification will be considered non-authoritative.  These provisions of FASB ASC Topic 105 are effective for interim and annual periods ending after September 15, 2009.  The adoption of this guidance did not have an impacton its consolidated financial statements. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | In April 2009, the Financial Accounting Standards Board (“FASB”) issued guidance now codified as FASB Accounting Standards Codification (“ASC”) Topic 820-10, Fair Value Measurements and Disclosures.  FASB ASC Topic 820-10 clarifies the applicationof previous guidance when the volume and level of activity for the asset or liability has significantly decreased and guidance on identifying circumstances when a transaction may not be considered orderly.  This guidance is effective for interim and annual reporting periods ending after June 15, 2009.  The application of the provisions of FASB ASC Topic 820-10 did not have a material impact on the Company’s consolidated financial statements.                                                                                |

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|   | In April 2009, the FASB issued guidance now codified as FASB ASC Topic 320-10, Investments – Debt and Equity Securities.   FASB ASC Topic 320-10 amends the other-than-temporary impairment guidance in U. S. generally accepted accounting principles for debtsecurities.  FASB ASC Topic 320-10 expands disclosures about other-than-temporary impairment and requires that the annual disclosures in existing generally accepted accounting principles be made for interim reporting periods.  FASB ASC Topic 320-10 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement.  The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings.  Theamount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.  This guidance is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  The application of the provisions of FASB ASC Topic 320-10 did not have a material impact on the Company’s consolidated financial statements. |
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|   | In April 2009, the FASB issued guidance now codified as FASB ASC Topic 825-10,Financial Instruments.  FASB ASC Topic 825-10 amends previous guidance to require disclosures about fair value of financial instrumentsfor interim reporting periods of publicly traded companies as well as in annual financial statements.  This guidance also requires those disclosures in summarized financial information at interim reporting periods.  This FASB ASC Topic 825-10 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.  The application of the provisions of FASB ASC Topic 825-10 did not have a materialimpact on the Company’s consolidated financial statements, although additional interim disclosures have been provided.                                                                                                                                                                                                                                                                                                                                                                                                                   |
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|   | In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets.  This statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financialposition, financial performance and cash flows; and a transferors continuing involvement in transferred financial assets.  Specifically, among other aspects, SFAS 166 amends the guidance in FASB ASC Topic 820, by removing the concept of a qualifying special-purpose entity and removes the exception from applying the guidance in FASB ASC Topic 810-10 to variable interest entities that are qualifying special-purpose entities.  It also modifies the financial-components approach used in FASB ASCTopic 820.  SFAS 166 is effective for fiscal years beginning after November 15, 2009.  The Company has not determined the effect that the adoption of SFAS 166 will have on our consolidated financial position or results of operations.                                                                                                                                                                                                                        |
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|   | In June 2009, the FASB issued SFAS 167, Amendments to FASB Interpretation No. 46(R).  This statement amends the guidance in FASB Topic 810-10 to require an enterprise to determine whether it’s variable interest or interests give it a controlling financial interestin a variable interest entity.  The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interestentity.  SFAS 167 also amends FASB ASC 810-10 to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity.  SFAS 167 is effective for fiscal years beginning after November 15, 2009.  The Company does not anticipate the adoption of FASB ASC Topic 810 to have a material impact on its consolidated financial statements.                                                                |

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|   | In August 2009, the FASB issued ASU 2009-05, Measuring Liabilities at Fair Value, to amend FASB ASC Topic 820, Fair Value Measurements and Disclosures, to clarify how entities should estimate the fair value of liabilities.  FASBASC Topic 820, as amended, includes clarifying guidance for circumstances in which a quoted price in an active market is not available, the effect of the existence of liability transfer restriction, and the effect of quoted prices for the identical liability, including when the identical liability is traded as an asset.  The amended guidance in FASB ASC Topic 820 on measuring liabilities at fair value is effective for the first interim or annual reporting period beginning after August 28, 2009, withearlier application permitted.  The application of the provisions of FASB ASU 2009-05 did not have a material impact on the Company’s consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
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|   | In September 2009, the FASB issued ASU 2009-12, Investment in Certain Entities That Calculate Net Assets Value per Share (or Its Equivalent), to amend FASB ASC Topic 820, Fair Value Measurements and Disclosures.  Theamendments within ASU 2009-12 create a practical expedient to measure the fair value of an investment in the scope of the amendments in this ASU on the basis of the net assets value per share of the investment (or its equivalent) determined as of the reporting entity’s measurement date.  It also requires disclosures by major category of investment about the attributes of those investments, such as the nature of any restriction on the investor’s ability to redeem its investments at the measurementdate, any unfunded commitments, and the investment strategies of the investees.  It improves financial reporting by permitting use of a practical expedient, with appropriate disclosures, when measuring the fair value of an alternative investment that does not have a readily determinable fair value.  It also improves transparency by requiring additional disclosures about investment in the scope of the amendments in this ASU to enable users of financial statements to understand the nature andrisks of investments and whether the investments are probable of being sold at amounts different from net assets value per share.  The ASU is effective for interim and annual periods ending after December 15, 2009.  Early application is permitted in financial statements for earlier interim and annual periods that have not been issued.  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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|   | In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force (“EITF”) (ASC 605).  The objective of ASU 2009-13 is to address the accountingfor multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit.  ASU 2009-13 provides principles and application guidance on whether multiple deliverables exits, how the arrangement should be separated, and the consideration allocated.  It requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence orthird-party evidence of selling price.  It also eliminates the use of the residual method and requires an entity to allocate revenue using the relative selling price method.  ASU 2009-13 shall be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted.  The Company does not anticipate the adoption of this FASB ASU will have a material impact on the consolidatedfinancial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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|   | In October 2009, the FASB issued ASU 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing.  The ASU amends ASC Topic 470 and provides guidance for accounting and reporting for own-share lending arrangementsissued in contemplation of a convertible debt issuance.  At the date of issuance, a share-lending arrangement entered into on an entity’s own shares should be measured at fair value in accordance with Topic 820 and recognized as an issuance cost, with an offset to additional paid-in-capital.  Loaned shares are excluded from basic and diluted earnings per share unless default of the share-lending arrangement occurs.  The amendments also require several disclosures includinga description and the terms of the arrangement and the reason for entering into the arrangement.  The effective dates of the amendments are dependent upon the date the share-lending arrangement was entered into and include retrospective application for arrangements outstanding as of the beginning of fiscal years beginning on or after December 15, 2009.  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 nine months ended September 30, 2009 is $978 thousand and the net income for the nine months ended September 30, 2008 is $975 thousand.  Netincome for the three months ended September 30, 2009 is $330 thousand and the net income for the three months ended September 30, 2008 is $284 thousand.  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-vestedstock 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 September 30, 2009 and 2008, there were 196,468 anti-dilutive non-vested awards and options, respectively, excluded from the computation of diluted earnings per share becausethe option price was greater than the average market price. |

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|                                                               |   | For the Three Months EndedSeptember 30, |      |   | For the Nine Months EndedSeptember 30, |   |
|--------------------------------------------------------------------|--------|-----------------------------------------|-----------|--------|----------------------------------------|--------|
|                                                               |   | 2009                                    |      |   | 2008                                   |   |   | 2009 |   |   | 2008 |   |
| Net Income                                                         |   | $                                       | 330,000   |   |                                   | $      | 284,000 |   |   | $ | 978,000 |   |   | $ | 975,000 |   |
|                                                               |   |                                    |      |   |                                   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares issues                              |   |                                    | 4,521,696 |   |                                   |   | 4,521,696 |   |   |   | 4,521,696 |   |   |   | 4,521,696 |   |
| Average unearned ESOP shares                                       |   |                                    | (119,986  | )      |                                   |   | (131,589 | ) |   |   | (119,986 | ) |   |   | (131,589 | ) |
| Average treasury stock shares                                      |   |                                    | (134,625  | )      |                                   |   | (105,592 | ) |   |   | (132,539 | ) |   |   | (95,839 | ) |
| Weighted average common shares outstanding-basic                   |   |                                    | 4,267,085 |   |                                   |   | 4,284,515 |   |   |   | 4,269,171 |   |   |   | 4,294,268 |   |
| Effect of dilutive non-vested shares and stock options outstanding |   |                                    | 2,392     |   |                                   |   | 8,360 |   |   |   | - |   |   |   | 2,760 |   |
| Weighted average common shares outstanding-diluted                 |   |                                    | 4,269,477 |   |                                   |   | 4,292,875 |   |   |   | 4,269,171 |   |   |   | 4,297,028 |   |
| Basic earnings per share                                           |   | $                                       | 0.08      |   |                                   | $      | 0.07 |   |   | $ | 0.23 |   |   | $ | 0.23 |   |
| Diluted earnings per share                                         |   | $                                       | 0.08      |   |                                   | $      | 0.07 |   |   | $ | 0.23 |   |   | $ | 0.23 |   |

| 4.     | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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|   | 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 the2006 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 2006Plan 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.  Stockoptions 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 September 30, 2009, there were 25,095 options availablefor 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 and nine months ended September 30, 2009, $55 thousand and $166thousand, respectively, in compensation expense was recognized in regard to these restricted stock awards with a related tax benefit of $19 thousand and $56 thousand, respectively.  As of September 30, 2009, there was $451 thousand of unrecognized compensation expense related to the restricted stock awards which is expected to be recognized over a period of 2.00 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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|   | Activity in issued but unvested award shares during the nine months ended September 30, 2009 was as follows: |
|--------|--------------------------------------------------------------------------------------------------------------|

| Award Shares                    |   | Number ofShares |   |   | WeightedAverage GrantDate Fair Value |   |
|---------------------------------|--------|-----------------|--------|--------|--------------------------------------|--------|
| Restricted, beginning of period |   |            | 53,175 |   |                                 | $      | 12.47 |   |
| Granted                         |   |            | -      |   |                                 |   | - |   |
| Forfeitures                     |   |            | -      |   |                                 |   | - |   |
| Vested                          |   |            | -      |   |                                 |   | - |   |
| Restricted stock, end of period |   |            | 53,175 |   |                                 | $      | 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 nine months ended September 30, 2009: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | Shares |    |   | WeightedAverageExercisePrice |   |
|------------------------------------------|--------|--------|---------|--------|------------------------------|--------|
| 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             |   |   | 78,588  |   |                         | $      | 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 calculatedfair value of options granted in 2006 was $3.79 per option.  The weighted average contractual term of options outstanding and exercisable were 7.00 years at September 30, 2009 and 8.00 years at September 30, 2008.                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Stock-based compensation expense related to stock options for the three and nine months ended September 30, 2009, were $37 thousand and $111 thousand, respectively, with a related tax benefit of $13 thousand and $39 thousand, respectively.  As of September 30, 2009, there was approximately $304 thousand of unrecognized compensationcost related to unvested stock options granted in 2006.  The cost will be recognized in a straight line method over a period of 2.00 years.  At September 30, 2008, there was approximately $453 thousand of unrecognized compensation cost related to unvested stock options granted in 2006. |

----

|   | 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 contributionsto 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 expenseequal 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 thousand and $63 thousand for the three and nine months ended September 30, 2009, respectively. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The following table presents the components of the ESOP shares:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|                           |   | September 30,2009 |    |   | September 30,2008 |   |
|--------------------------------|--------|-------------------|---------|--------|-------------------|--------|
| Shares released for allocation |   |              | 46,412  |   |              |   | 34,809 |   |
| Unreleased shares              |   |              | 119,986 |   |              |   | 131,589 |   |
| 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 and nine months ended September 30, 2009 and 2008 was as follows: |

|                                                             |   | Three Months EndedSeptember 30, |   |   | Nine Months EndedSeptember 30, |   |
|------------------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------|--------|
|                                                             |   | 2009                            |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                                             |   | (Dollars in thousands)          |   |
| Other comprehensive income (loss):                               |   |                            |   |   |                           |   |   |   |   |   |   |
| Unrealized holding gains (loss) on available for sale securities |   | $                               | 1,222  |   |                           | $      | (1,102 | ) |   | $ | 3,211 |   |   | $ | (2,895 | ) |
| Reclassification for impairment charge on investment securities  |   |                            | 568    |   |                           |   | 326 |   |   |   | 914 |   |   |   | 844 |   |
| Reclassification adjustment for net gains realized in net income |   |                            | (10    | )      |                           |   | (35 | ) |   |   | (295 | ) |   |   | (251 | ) |
| Net unrealized gains (losses)                                    |   |                            | 1,780  |   |                           |   | (811 | ) |   |   | 3,830 |   |   |   | (2,302 | ) |
| Income tax expense (benefit)                                     |   |                            | 637    |   |                           |   | (324 | ) |   |   | 1,373 |   |   |   | (881 | ) |
| Net of tax amount                                                |   | $                               | 1,143  |   |                           | $      | (487 | ) |   | $ | 2,457 |   |   | $ | (1,421 | ) |

----

| 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 completedor 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, whenissued, 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 $4.3 million of standby letters of credit outstanding as of September 30, 2009.  Management believes that the proceeds obtained through a liquidation of collateraland 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 thousand.  If the non-for-profit corporation does not comply with terms of the agreement, the Bank may be required to repaythe 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.                                                                                                                                                                                                                                                                                                                                                                                        |

----

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

|                         |   | Amortized Cost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | Fair Value |   |
|------------------------------|--------|----------------|---------|--------|----------------------|--------|--------|-----------------------|--------|--------|------------|--------|
|                         |   | (In thousands) |    |
| Available for Sale:          |   |           |    |   |                 |   |   |                  |   |   |       |   |
| September 30, 2009           |   |           |    |   |                 |   |   |                  |   |   |       |   |
| U. S. Government obligations |   | $              | 33,866  |   |                 | $      | 232    |                  |   | $      | (4         | )      |   | $ | 34,094 |   |
| Corporate                    |   |           | 15,277  |   |                 |   | 252    |                  |   |   | (891       | )      |   |   | 14,638 |   |
| Mutual funds                 |   |           | 1,800   |   |                 |   | 75     |                  |   |   | -          |   |   |   | 1,875 |   |
| Municipal securities         |   |           | 2,819   |   |                 |   | 84     |                  |   |   | (18        | )      |   |   | 2,885 |   |
| SBA pools                    |   |           | 5,563   |   |                 |   | 44     |                  |   |   | (43        | )      |   |   | 5,564 |   |
| Mortgage-backed securities   |   |           | 111,264 |   |                 |   | 4,362  |                  |   |   | (13        | )      |   |   | 115,613 |   |
|                         |   | $              | 170,589 |   |                 | $      | 5,049  |                  |   | $      | (969       | )      |   | $ | 174,669 |   |
|                         |   |           |    |   |                 |   |   |                  |   |   |       |   |   |   |   |   |

| December 31, 2008            |   |   |    |   |   |   |   |   |   |   |   |   |
|------------------------------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| U. S. Government obligations |   | $      | 21,963  |   |   | $      | 331    |   |   | $      | (49    | )      |   | $ | 22,245 |   |
| Corporate                    |   |   | 15,249  |   |   |   | 67     |   |   |   | (1,833 | )      |   |   | 13,483 |   |
| Mutual funds                 |   |   | 2,643   |   |   |   | -      |   |   |   | -      |   |   |   | 2,643 |   |
| Municipal securities         |   |   | 3,659   |   |   |   | 49     |   |   |   | (76    | )      |   |   | 3,632 |   |
| SBA pools                    |   |   | 6,453   |   |   |   | 58     |   |   |   | (62    | )      |   |   | 6,449 |   |
| Mortgage-backed securities   |   |   | 115,245 |   |   |   | 2,172  |   |   |   | (407   | )      |   |   | 117,010 |   |
|                         |   | $      | 165,212 |   |   | $      | 2,677  |   |   | $      | (2,427 | )      |   | $ | 165,462 |   |
|                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to Maturity:            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September 30, 2009           |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                    |   | $      | 5,458   |   |   | $      | 112    |   |   | $      | -      |   |   | $ | 5,570 |   |
| Municipal securities         |   |   | 35,299  |   |   |   | 396    |   |   |   | (7     | )      |   |   | 35,688 |   |
| Mortgage-backed securities   |   |   | 2,723   |   |   |   | 141    |   |   |   | -      |   |   |   | 2,864 |   |
|                         |   | $      | 43,480  |   |   | $      | 649    |   |   | $      | (7     | )      |   | $ | 44,122 |   |
|                         |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2008            |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U. S. Government obligations |   | $      | 932     |   |   | $      | 38     |   |   | $      | -      |   |   | $ | 970 |   |
| Corporate                    |   |   | 3,969   |   |   |   | 19     |   |   |   | (729   | )      |   |   | 3,259 |   |
| Municipal securities         |   |   | 8,853   |   |   |   | 217    |   |   |   | (223   | )      |   |   | 8,847 |   |
| Mortgage-backed securities   |   |   | 3,143   |   |   |   | 113    |   |   |   | -      |   |   |   | 3,256 |   |
|                         |   | $      | 16,897  |   |   | $      | 387    |   |   | $      | (952   | )      |   | $ | 16,332 |   |

|   | All of the Company’s mortgage-backed securities at September 30, 2009 and December 31, 2008 have been issued by government agencies or government sponsored enterprises. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The amortized cost and estimated fair value of investment securities at September 30, 2009, 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. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                  |   | Held to Maturity |   |   | Available for Sale |   |
|---------------------------------------|--------|------------------|--------|--------|--------------------|--------|
|                                  |   | AmortizedCost    |   |   | Fair Value         |   |   | AmortizedCost |   |   | Fair Value |   |
|                                  |   | (In thousands)   |   |
| Due in one year or less               |   | $                | 31,351 |   |               | $      | 31,381 |   |   | $ | 6,879 |   |   | $ | 6,916 |   |
| Due after one year through five years |   |             | 1,530  |   |               |   | 1,587 |   |   |   | 44,728 |   |   |   | 45,004 |   |
| Due after five year through ten years |   |             | 4,351  |   |               |   | 4,526 |   |   |   | 18,998 |   |   |   | 18,542 |   |
| Due thereafter                        |   |             | 6,248  |   |               |   | 6,628 |   |   |   | 100,059 |   |   |   | 104,207 |   |
|                                  |   | $                | 43,480 |   |               | $      | 44,122 |   |   | $ | 170,664 |   |   | $ | 174,669 |   |

|   | At September 30, 2009 and December 31, 2008, $73.3 million and $74.2 million, respectively, of securities were pledged as collateral to secure certain deposits and FHLB advances.                                                                                               |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                             |
|   | Gross gains and losses of $299 thousand and $4 thousand, respectively, for the nine months ended September 30, 2009, and $396 thousand and $145 thousand, respectively, for the nine months ended September 30, 2008, 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 September 30, 2009        |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                         |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                         |   | (In thousands)      |   |
| U. S. Government obligations |   | $                   | 6,393  |   |              | $      | 4      |       |   | $ | - |   |   | $ | - |   |   | $ | 6,393 |   |   | $ | 4 |   |
| Corporate                    |   |                | 278    |   |              |   | 3      |       |   |   | 4,563 |   |   |   | 888 |   |   |   | 4,841 |   |   |   | 891 |   |
| Municipal securities         |   |                | 296    |   |              |   | 18     |       |   |   | - |   |   |   | - |   |   |   | 296 |   |   |   | 18 |   |
| SBA pools                    |   |                | -      |   |              |   | -      |       |   |   | 2,456 |   |   |   | 43 |   |   |   | 2,456 |   |   |   | 43 |   |
| Mortgage-backed securities   |   |                | 4,925  |   |              |   | 10     |       |   |   | 665 |   |   |   | 3 |   |   |   | 5,590 |   |   |   | 13 |   |
| Total                        |   | $                   | 11,892 |   |              | $      | 35     |       |   | $ | 7,684 |   |   | $ | 934 |   |   | $ | 19,576 |   |   | $ | 969 |   |

| At December 31, 2008         |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|------------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                         |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                         |   | (In thousands)      |   |
| U. S. Government obligations |   | $                   | 451    |   |              | $      | 13     |       |   | $ | 1,931 |   |   | $ | 36 |   |   | $ | 2,382 |   |   | $ | 49 |   |
| Corporate                    |   |                | 8,889  |   |              |   | 1,157  |       |   |   | 2,748 |   |   |   | 676 |   |   |   | 11,637 |   |   |   | 1,833 |   |
| Municipal securities         |   |                | 1,373  |   |              |   | 76     |       |   |   | - |   |   |   | - |   |   |   | 1,373 |   |   |   | 76 |   |
| SBA pools                    |   |                | 1,609  |   |              |   | 38     |       |   |   | 1,316 |   |   |   | 24 |   |   |   | 2,925 |   |   |   | 62 |   |
| Mortgage-backed securities   |   |                | 31,136 |   |              |   | 357    |       |   |   | 2,046 |   |   |   | 50 |   |   |   | 33,182 |   |   |   | 407 |   |
| Total                        |   | $                   | 43,458 |   |              | $      | 1,641  |       |   | $ | 8,041 |   |   | $ | 786 |   |   | $ | 51,499 |   |   | $ | 2,427 |   |

----

|   | 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 September 30, 2009 |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|-----------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                  |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                  |   | (In thousands)      |   |
| Municipal securities  |   | $                   | 392    |   |              | $      | 7      |       |   | $ | - |   |   | $ | - |   |   | $ | 392 |   |   | $ | 7 |   |
| Total                 |   | $                   | 392    |   |              | $      | 7      |       |   | $ | - |   |   | $ | - |   |   | $ | 392 |   |   | $ | 7 |   |

| At December 31, 2008 |   | Less than 12 months |   |   | 12 months or more |   |   | Total      |   |
|----------------------|--------|---------------------|--------|--------|-------------------|--------|--------|------------|--------|
|                 |   | Fair Value          |   |   | UnrealizedLosses  |   |   | Fair Value |   |   | UnrealizedLosses |   |   | Fair Value |   |   | UnrealizedLosses |   |
|                 |   | (In thousands)      |   |
| Corporate            |   | $                   | 1,474  |   |              | $      | 351    |       |   | $ | 605 |   |   | $ | 378 |   |   | $ | 2,079 |   |   | $ | 729 |   |
| Municipal securities |   |                | 2,367  |   |              |   | 223    |       |   |   | - |   |   |   | - |   |   |   | 2,367 |   |   |   | 223 |   |
| Total                |   | $                   | 3,841  |   |              | $      | 574    |       |   | $ | 605 |   |   | $ | 378 |   |   | $ | 4,446 |   |   | $ | 952 |   |

|   | 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 investmentsare 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 September 30, 2009.                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | 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 flowsof 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, theCompany does not consider the investments to be other-than-temporarily impaired at September 30, 2009. |

----

|   | 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 third quarter of 2009, an MBIA Global Funding (“MBIA”) corporatebond was downgraded to below investment grade by rating companies, Moody’s Investor Service (“Moody’s”) and Standard and Poor’s Rating Services (“S & P”).  With the downgrade, the Company determined that the MBIA corporate bond was other-than-temporarily impaired and wrote-down the bond by $365 thousand to its estimated fair market value.  Also, in the third quarter of 2009, the Company continued the previously disclosed write-down of the AMBACcorporate bond due to its downgrade to below investment grade by rating companies, Moody’s and S and P, by an additional amount of $203 thousand, 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 corporates bonds are still rated investment grade by one of the rating companies, Moody’s andS and P, the Company does not consider the other corporate investments to be other-than-temporarily impaired at September 30, 2009. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | 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 becausethe 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 September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | For the three months and nine months ended September 30, 2009, the Company redeemed $250 thousand and $750 thousand of the AMF mutual fund, respectively, at a pre-tax gain of approximately $9 thousand and $8 thousand, respectively, or an after-tax gain of $5 thousand and $4 thousand, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

----

| 8.     | Loans                                                                               |
|--------|-------------------------------------------------------------------------------------|
|   |                                                                                |
|   | The components of loans at September 30, 2009 and December 31, 2008 are as follows: |

|                                  |   | At September 30, 2009  |    |   | At December 31, 2008 |   |
|---------------------------------------|--------|------------------------|---------|--------|----------------------|--------|
|                                  |   | Amount                 |    |   | Percent              |   |   | Amount |   |   | Percent |   |
|                                  |   | (Dollars in thousands) |    |
| Real estate loans:                    |   |                   |    |   |                 |   |   |   |   |   |   |   |
|                                  |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family residential       |   | $                      | 149,666 |   |                 |   | 46.5 | % |   | $ | 145,329 |   |   |   | 47.6 | % |
| Home equity loans and lines of credit |   |                   | 38,543  |   |                 |   | 12.0 |   |   |   | 41,293 |   |   |   | 13.5 |   |
| Multi-family                          |   |                   | 4,608   |   |                 |   | 1.4 |   |   |   | 4,942 |   |   |   | 1.6 |   |
| Commercial                            |   |                   | 94,132  |   |                 |   | 29.2 |   |   |   | 81,983 |   |   |   | 26.8 |   |
| Construction                          |   |                   | 14,786  |   |                 |   | 4.6 |   |   |   | 12,223 |   |   |   | 4.0 |   |
| Commercial                            |   |                   | 17,849  |   |                 |   | 5.5 |   |   |   | 17,177 |   |   |   | 5.6 |   |
| Consumer and other                    |   |                   | 2,412   |   |                 |   | 0.8 |   |   |   | 2,616 |   |   |   | 0.9 |   |
| Total loans receivable                |   | $                      | 321,996 |   |                 |   | 100.0 | % |   | $ | 305,563 |   |   |   | 100.0 | % |
| Deferred loan fees                    |   |                   | (384    | )      |                 |   |   |   |   |   | (307 | ) |   |   |   |   |
| Allowance for loan losses             |   |                   | (2,331  | )      |                 |   |   |   |   |   | (2,105 | ) |   |   |   |   |
| Total loans receivable, net           |   | $                      | 319,281 |   |                 |   |   |   |   | $ | 303,151 |   |   |   |   |   |

|   | 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-rateand 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 $4.0 million and $1.9 million at September 30, 2009 and December 31, 2008, respectively.  At September 30, 2009, the nonaccrual loans were comprised of $3.0 million of one- to-four family residential loans, $464 thousand of home equity loans and $596 thousand of commercial loans.  AtSeptember 30, 2009, the valuation allowances set up for the nonaccrual loans totaled $107 thousand for one- to-four family residential loans, $34 thousand for the home equity loans and $172 thousand for the commercial 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.                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | As of September 30, 2009, the Bank had restructured 9 loans totaling approximately $8.0 million.  Six of the loans are commercial real estate loans with an outstanding principal balance of $7.5 million.  For these loans the restructured term is one year or less and the concession is that these loans became interest onlyloans.  All these loans are current in terms of the restructured payments.                                                                                                                                                                      |

----

| 9.     | Deposits                                                                                          |
|--------|---------------------------------------------------------------------------------------------------|
|   |                                                                                              |
|   | Deposit accounts, by type, at September 30, 2009 and December 31, 2008 are summarized as follows: |

|                         |   | At September 30, 2009  |    |   | At December 31, 2008 |   |
|------------------------------|--------|------------------------|---------|--------|----------------------|--------|
|                         |   | Balance                |    |   | Percent              |   |   | Wtd.Avg.Rate |   |   | Balance |   |   | Percent |   |   | Wtd.Avg.Rate |   |
|                         |   | (Dollars in thousands) |    |
|                         |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposit type:                |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing demand. |   | $                      | 17,812  |   |                 |   | 3.66 | % |   |   | - | % |   | $ | 18,146 |   |   |   | 3.97 | % |   |   | - | % |
| Savings                      |   |                   | 89,049  |   |                 |   | 18.28 |   |   |   | 2.61 |   |   |   | 81,050 |   |   |   | 17.73 |   |   |   | 2.76 |   |
| NOW accounts                 |   |                   | 77,146  |   |                 |   | 15.84 |   |   |   | 0.85 |   |   |   | 55,439 |   |   |   | 12.12 |   |   |   | 0.72 |   |
| Super NOW accounts           |   |                   | 17,805  |   |                 |   | 3.66 |   |   |   | 1.45 |   |   |   | 15,532 |   |   |   | 3.40 |   |   |   | 1.75 |   |
| Money market deposit         |   |                   | 59,685  |   |                 |   | 12.25 |   |   |   | 1.76 |   |   |   | 45,404 |   |   |   | 9.93 |   |   |   | 3.26 |   |
| Total transaction accounts   |   |                   | 261,497 |   |                 |   | 53.69 |   |   |   | 1.64 |   |   |   | 215,571 |   |   |   | 47.15 |   |   |   | 2.06 |   |
|                         |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Certificates of deposit      |   |                   | 225,523 |   |                 |   | 46.31 |   |   |   | 3.37 |   |   |   | 241,660 |   |   |   | 52.85 |   |   |   | 3.97 |   |
|                         |   |                   |    |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits               |   | $                      | 487,020 |   |                 |   | 100.00 | % |   |   | 2.44 | % |   | $ | 457,231 |   |   |   | 100.00 | % |   |   | 3.06 | % |

| 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 September 30, 2009 and December 31, 2008: |

| Maturity          |   | InterestRate             |   |   | September 30, 2009 |   |   | December 31,2008 |   |
|-------------------|--------|--------------------------|--------|--------|-------------------------|--------|--------|------------------|--------|
|              |   |                     |   |   | (Dollars in thousands)  |   |
| June 23, 2009     |   |     3.35% |   |   | $                       | -      |   |             | $      | 3,000 |   |
| October 1, 2009   |   | 0.36                     |   |   |                    | 14,620 |   |             |   | - |   |
| October 19, 2009  |   | 4.65                     |   |   |                    | 4,000  |   |             |   | 4,000 |   |
| November 20, 2009 |   | 4.23                     |   |   |                    | 4,000  |   |             |   | 4,000 |   |
| December 3, 2009  |   | 3.89                     |   |   |                    | 4,000  |   |             |   | 4,000 |   |
| June 23, 2010     |   | 3.88                     |   |   |                    | 3,000  |   |             |   | 3,000 |   |
| October 18, 2010  |   | 4.70                     |   |   |                    | 4,000  |   |             |   | 4,000 |   |
| June 23, 2011     |   | 4.31                     |   |   |                    | 3,000  |   |             |   | 3,000 |   |
| June 30, 2021     |   | 5.57                     |   |   |                    | -      |   |             |   | 6,227 |   |
|              |   |                     |   |   | $                       | 36,620 |   |             | $      | 31,227 |   |

|   | At September 30, 2009, the Bank had a borrowing capacity of $129.7 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 September 30, 2009, the Bank had $36.6 million in outstandingborrowings from the FHLB of New York. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 11.    | Fair Value Measurements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company couldhave realized in a sale transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective dates and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | FASB issued ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements.  FASB ASC Topic 820 applies to other accounting pronouncements thatrequire or permit 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 (Level3 measurements).                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The three levels of the fair value hierarchy under FASB ASC Topic 820 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|   | 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 September 30, 2009 and December 31, 2008 are as follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |   | September 30,2009 |    |   | (Level 1)QuotedPrices inActiveMarkets for IdenticalAssets |   |   | (Level 2) SignificantObservableOther Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|-------------------------------|--------|-------------------|---------|--------|-----------------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|----------------------------------------|--------|
| Securities available-for-sale |   | $                 | 174,669 |   |                                                      | $      | -      |                                        |   | $      | 174,669                                |   |   | $ | - |   |

|                          |   | December 31,2008 |    |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   | (Level 2)SignificantObservableOther Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|-------------------------------|--------|------------------|---------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------|--------|
| Securities available-for-sale |   | $                | 165,462 |   |                                                     | $      | -      |                                       |   | $      | 165,462                                |   |   | $ | - |   |

|   | The fair value of investment securities available-for-sale is based on quoted market prices for similar or identical assets or other observable inputs that are provided by recognized broker dealers or an independent third party. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                 |
|   | For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2009 and December 31, 2008 are as follow:                                      |

|           |   | September 30,2009 |   |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   | (Level 2)significantObservableOther Inputs |   |   | (Level 3)SignificantUnobservableInputs |   |
|----------------|--------|-------------------|--------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------|--------|
| Impaired loans |   | $                 | 280    |   |                                                     | $      | -      |                                       |   | $      | -                                      |   |   | $ | 280 |   |

|              |   | December 31,2008 |   |   | (Level 1)QuotedPrices inActiveMarkets forIdenticalAssets |   |   | (Level 2)significantObservableOther Inputs |   |   |  (Level 3)SignificantUnobservableInputs |   |   |
|-------------------|--------|------------------|--------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|----------------------------------------------|--------|--------|
| Impaired loans    |   | $                | 257    |   |                                                     | $      | -      |                                       |   | $      | -                                            |   |   | $ | 257 |   |
| Real estate owned |   | $                | 113    |   |                                                     | $      | -      |                                       |   | $      | -                                            |   |   | $ | 113 |   |

|   | The fair value of impaired loans is based on the fair value of the collateral less specific valuation allowances.                                                                                                                                                                                                                                                                                   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                |
|   | At September 30, 2009 gross impaired loans totaled $596 thousand.  Of this, $452 thousand had a valuation allowance of $172 thousand and $144 thousand had no valuation allowance.  At December 31, 2008, gross impaired loans totaled $524 thousand.  Of this, $370 thousand had a valuation alloqance of $113 thousandand $154 thousand had no valuation allowance. |

----

|   | Real estate owned is based on the fair value of the collateral less estimated costs to sell the property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 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, comparisonsbetween 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 September 30, 2009 and December 31, 2008: |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 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 securitieswithout 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 includedas Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.  At September 30, 2009 the fair value consists of the loan balances of $452 thousand, net of a valuation allowance of $172 thousand.              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 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 discountedcash 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 liabilitywere 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 estimated fair value of the Company’s financial instruments at September 30, 2009 and December 31, 2008 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                   |

|                                               |   | September 30, 2009 |    |   | December 31, 2008 |   |
|----------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                               |   | CarryingAmount     |    |   | Fair Value        |   |   | CarryingAmount |   |   | Fair Value |   |
|                                               |   | (In thousands)     |    |
|                                               |   |               |    |   |              |   |   |   |   |   |   |   |
| Assets:                                            |   |               |    |   |              |   |   |   |   |   |   |   |
| Cash and amounts due from banks                    |   | $                  | 11,299  |   |              | $      | 11,299 |   |   | $ | 23,407 |   |   | $ | 23,407 |   |
| Investment securities available-for-sale           |   |               | 174,669 |   |              |   | 174,669 |   |   |   | 165,462 |   |   |   | 165,462 |   |
| Investment securities held-to-maturity             |   |               | 43,480  |   |              |   | 44,122 |   |   |   | 16,897 |   |   |   | 16,332 |   |
| Federal Home Loan Bank stock                       |   |               | 2,420   |   |              |   | 2,420 |   |   |   | 1,991 |   |   |   | 1,991 |   |
| Loans receivable, net                              |   |               | 319,281 |   |              |   | 332,275 |   |   |   | 303,151 |   |   |   | 311,796 |   |
| Accrued interest receivable                        |   |               | 2,370   |   |              |   | 2,370 |   |   |   | 2,298 |   |   |   | 2,298 |   |
|                                               |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                       |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                           |   |               | 487,020 |   |              |   | 493,212 |   |   |   | 457,231 |   |   |   | 467,070 |   |
| Federal Home Loan Bank short-term borrowings       |   |               | 14,620  |   |              |   | 14,620 |   |   |   | 3,000 |   |   |   | 3,000 |   |
| Federal Home Loan Bank long-term borrowings        |   |               | 22,000  |   |              |   | 22,842 |   |   |   | 28,227 |   |   |   | 30,896 |   |
| Accrued interest payable                           |   |               | 229     |   |              |   | 229 |   |   |   | 433 |   |   |   | 433 |   |
|                                               |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance sheet financial instruments:           |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to extend credit and letters of credit |   |               | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |

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| 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     | Not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Item 4T. | 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 coveredby 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’srules 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

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| Item 1.  | Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|     | The Company or the Bank is periodically involved in various claims and lawsuits in the ordinary course of business.  Management of the Company believes that such proceedings will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Item 1A. | Risk Factors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|     | In addition to the other information contained this Quarterly Report on Form 10-Q, the following risk factors represent material updates and additions to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2008, as filed with the Securities and Exchange Commissionand in our other filings with the Security and Exchange Commission. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differmaterially from those expressed in any forward-looking statements made by or on behalf of us.                                                                                                                                                                                                                                                                                                                        |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|     | The FDIC has adopted regulations that will require us to pre-pay our federal deposit insurance premiums.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|     | The Federal Deposit Insurance Corporation had adopted a rule pursuant to which all insured depository institutions will be required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012.  Under the rule, this pre-payment would be due on December 30, 2009.  Under therule, the assessment rate for the fourth quarter of 2009 and for 2010 will be based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume that the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 will be equal to the modified third quarter assessment rate plus an additional three basis points.  In addition, each institution’s base assessment rate foreach period will be calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. Based on our deposits and assessment rate at September 30, 2009, we estimate that our prepayment amount will be approximately $2.7 million.  We expect that we will be able to make the prepayment from available cash on hand. |

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|    | Another legislative proposal has been introduced that would eliminate our primary federal regulator, require the bank to convert to a national bank or state bank, and require Colonial Bankshares, MHC and the Company to become bank holding companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|    | The House Financial Services Committee has released a draft of proposed restructuring legislation that would implement sweeping changes to the current bank regulatory structure. The proposed legislation, developed in conjunction with the U.S. Treasury Department, would establish a Financial Services Oversight Council and merge our primaryregulator, the Office of Thrift Supervision, into the Office of the Comptroller of the Currency, the primary federal regulator for national banks.  The proposal also contemplates that a division of thrift supervision within the Office of the Comptroller of the Currency would regulate federal thrifts.  The proposal, if adopted, also would subject all holding companies of thrifts such as Colonial Bankshares, Inc. and Colonial Bankshares, MHC to regulation by the Federal Reserve to be regulated as bankholding companies, as opposed to regulation by the Office of Thrift Supervision as savings and loan holding companies.                      |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|    | As previously reported, the Federal Reserve’s current policy is to prohibit mutual holding companies from waiving the receipt of dividends so long as the subsidiary savings bank is well capitalized.  Moreover, Office of Thrift Supervision regulations provide that it will not take into account the amount of waived dividendsin determining an appropriate exchange ratio for minority shares in the event of the conversion of a mutual holding company to stock form.  If the Office of Thrift Supervision is eliminated, the Federal Reserve becomes the exclusive regulator of mutual holding companies, and the Federal Reserve retains its current policy regarding dividend waivers by mutual holding companies, Colonial Bankshares, MHC would not be permitted to waive the receipt of dividends declared by the Company. This could have anadverse impact on the Company’s financial condition and, consequently, could have an adverse impact on the value of our common stock. |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| 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 September 30, 2009.  On March 24, 2008, the Company announced a 100,454 stock repurchase program with 46,000 shares repurchased to date, September 30, 2009. |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
| Item 3. | Defaults Upon SeniorSecurities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |
|    | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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| Item 4. | Submission of Matters to Vote of Security Holders |
|---------|---------------------------------------------------|
|    |                                              |   |
|    | None                                              |   |
|    |                                              |   |
| 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 |

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|                               | COLONIAL BANKSHARES, INC.                                      |   |
|------------------------------------|----------------------------------------------------------------|--------|
|                               | Registrant                                                     |   |
|                               |                                                           |   |
|                               |                                                           |   |
|                               |                                                           |   |
| Date:  November 13, 2009 | By:  /s/ Edward J. Geletka                           |   |
|                               | Edward J. Geletka                                              |   |
|                               | President and Chief Executive Officer                          |   |
|                               | (Principal Executive Officer)                                  |   |
|                               |                                                           |   |
|                               |                                                           |   |
| Date:  November 13, 2009 | By:  /s/ L. Joseph Stella, III, CPA                  |   |
|                               | L. Joseph Stella, III, CPA                                     |   |
|                               | Executive Vice President andChief Financial Officer (Principal |   |
|                               | Accounting and Financial Officer)                              |   |