10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2012

or

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

For the transition period from _____ to _____

Commission file Number:           000-32891

1ST CONSTITUTION BANCORP

(Exact Name of Registrant as Specified in Its Charter)

New Jersey	22-3665653
(State of Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

2650 Route 130, P.O. Box 634, Cranbury, NJ	08512
(Address of Principal Executive Offices)	(Zip Code)

(609) 655-4500

(Issuer’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x       No o

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

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

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

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

As of August 12, 2012, there were 5,093,725 shares of the registrant’s common stock, no par value, outstanding.

1ST CONSTITUTION BANCORP

 FORM 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets
	(unaudited) at June 30, 2012
	and December 31, 2011	1
	Consolidated Statements of Income
	(unaudited) for the Three Months and Six Months Ended
	June 30, 2012 and June 30, 2011	2
	Consolidated Statements of Comprehensive Income
	(unaudited) for the Three Months and Six Months
	Ended June 30, 2012 and June 30, 2011	3
	Consolidated Statements of Changes in Shareholders’ Equity
	(unaudited) for the Six Months Ended
	June 30, 2012 and June 30, 2011	4
	Consolidated Statements of Cash Flows
	(unaudited) for the Six Months Ended
	June 30, 2012 and June 30, 2011	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II.	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	52
SIGNATURES		53

PART I. FINANCIAL INFORMATION

Item 1.                      Financial Statements.

1st Constitution Bancorp and Subsidiaries

Consolidated Balance Sheets

(unaudited)

	June 30, 2012			December 31, 2011
ASSETS
CASH AND DUE FROM BANKS	$	16,567,985		$	15,183,853
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS		11,413			11,406
Total cash and cash equivalents		16,579,398			15,195,259
INVESTMENT SECURITIES:
Available for sale, at fair value		97,537,598			93,683,774
Held to maturity (fair value of $128,856,455 and $147,621,280 at June 30, 2012, and December 31, 2011, respectively)		122,992,218			142,474,423
Total securities		220,529,816			236,158,197
LOANS HELD FOR SALE		16,595,846			19,234,111
LOANS		479,795,092			475,431,771
Less- Allowance for loan losses		(6,257,420	)		(5,534,450	)
Net loans		473,537,672			469,897,321
PREMISES AND EQUIPMENT, net		10,629,160			10,439,304
ACCRUED INTEREST RECEIVABLE		2,767,959			2,996,848
BANK-OWNED LIFE INSURANCE		13,804,079			13,578,981
OTHER REAL ESTATE OWNED		11,604,744			12,409,201
OTHER ASSETS		11,449,899			11,817,693
Total assets	$	777,498,573		$	791,726,915
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits
Non-interest bearing	$	129,822,625		$	105,470,543
Interest bearing		539,248,825			518,391,942
Total deposits		669,071,450			623,862,485
BORROWINGS		25,300,000			88,300,000
REDEEMABLE SUBORDINATED DEBENTURES		18,557,000			18,557,000
ACCRUED INTEREST PAYABLE		1,010,905			1,186,511
ACCRUED EXPENSES AND OTHER LIABILITIES		5,885,943			4,821,144
Total liabilities		719,825,298			736,727,140
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value; 5,000,000 shares authorized; none issued Common stock, no par value, 30,000,000 shares authorized; 5,101,907 and 5,096,054 shares issued and 5,093,725 and 5,094,503 shares outstanding as of June 30, 2012 and December 31, 2011 respectively		41,073,077			40,847,929
Retained earnings		15,535,446			13,070,606
Treasury Stock, at cost, 8,182 and 1,551 shares at June 30, 2012 and           December 31, 2011, respectively		(68,492	)		(10,222	)
Accumulated other comprehensive income		1,133,244			1,091,462
Total shareholders’ equity		57,673,275			54,999,775
Total liabilities and shareholders’ equity	$	777,498,573		$	791,726,915

See accompanying notes to consolidated financial statements.

1

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Income

(unaudited)

	Three months ended June 30,				Six months ended June 30,
INTEREST INCOME	2012		2011		2012		2011
Loans, including fees	$	6,319,104	$	5,167,439	$	12,733,563	$	10,521,646
Securities
Taxable		1,143,554		1,503,134		2,327,759		2,788,078
Tax-exempt		411,225		351,728		831,794		636,800
Federal funds sold and short-term investments		33,306		63,004		48,340		72,110
Total interest income		7,907,189		7,085,305		15,941,456		14,018,634
INTEREST EXPENSE
Deposits		1,079,048		1,530,274		2,265,522		2,928,404
Borrowings		103,639		103,712		221,561		210,632
Redeemable subordinated debentures		96,580		237,280		195,892		501,434
Total interest expense		1,279,267		1,871,266		2,682,975		3,640,470
Net interest income		6,627,922		5,214,039		13,258,481		10,378,164
PROVISION FOR LOAN LOSSES		549,998		275,000		1,149,996		674,998
Net interest income after provision for loan losses		6,077,924		4,939,039		12,108,485		9,703,166
NON-INTEREST INCOME
Service charges on deposit accounts		231,256		234,898		459,228		410,740
Gain on sales of loans		495,147		411,643		963,364		848,382
Income on bank-owned life insurance		113,176		103,522		225,098		198,659
Other income		348,387		390,249		705,441		707,281
Total non-interest income		1,187,966		1,140,312		2,353,131		2,165,062
NON-INTEREST EXPENSE
Salaries and employee benefits		3,154,903		2,843,948		6,095,253		5,420,612
Occupancy expense		613,534		580,969		1,337,320		1,147,707
Data processing expenses		252,545		313,776		516,120		617,249
FDIC insurance expenses		139,873		246,458		287,266		474,005
Other operating expenses		1,213,119		1,170,634		2,750,532		2,159,044
Total non-interest expenses		5,373,974		5,155,785		10,986,491		9,818,617
Income before income taxes		1,891,916		923,566		3,475,125		2,049,611
INCOME TAXES		593,808		94,650		1,010,285		430,827
Net income	$	1,298,108	$	828,916	$	2,464,840	$	1,618,784
NET INCOME PER SHARE
Basic	$	0.25	$	0.16	$	0.48	$	0.32
Diluted	$	0.25	$	0.16	$	0.48	$	0.32

See accompanying notes to consolidated financial statements.

2

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
NET INCOME	$	1,298,108	$	828,916	$	2,464,840	$	1,618,784
Other comprehensive income, net of tax
Unrealized gains on securities available for sale		28,135		936,493		37,930		819,296
Pension liability		1,926		1,926		3,852		3,853
Unrealized gain on interest rate swap contract		-		107,191		-		211,562
Other comprehensive income		30,061		1,045,610		41,782		1,034,711
Comprehensive income	$	1,328,169	$	1,874,526	$	2,506,622	$	2,653,495

The accompanying notes are an integral part of these financial statements.

3

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Six Months Ended June 30, 2012 and 2011

(unaudited)

	Common Stock		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income		Total Shareholders’ Equity
BALANCE, January 1, 2011	$	38,899,855	$	10,741,779	$	(58,652	)	$	98,174	$	49,681,156
Exercise of stock options and issuance of vested shares     under employee benefit programs		75,058				11,597					86,655
Share-based compensation		27,200									27,200
Treasury stock purchased						(15,354	)				(15,354	)
Net income for the six months ended June 30, 2011				1,618,784							1,618,784
Other comprehensive income									1,034,711		1,034,711
Balance, June 30, 2011	$	39,002,113	$	12,360,563	$	(62,409	)	$	1,132,885	$	52,433,152
Balance, January 1, 2012	$	40,847,929	$	13,070,606	$	(10,222	)	$	1,091,462	$	54,999,775
Exercise of stock options, net, and issuance of vested       shares under employee benefit programs		176,371									176,371
Share-based compensation		48,777									48,777
Treasury stock purchased						(58,270	)				(58,270	)
Net Income for the six months    ended June 30, 2012				2,464,840							2,464,840
Other comprehensive income									41,782		41,782
Balance, June 30, 2012	$	41,073,077	$	15,535,446	$	(68,492	)	$	1,133,244	$	57,673,275

See accompanying notes to consolidated financial statements.

4

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

		Six Months Ended June 30,
		2012		2011
OPERATING ACTIVITIES:
Net income	$	2,464,840	$	1,618,784
Adjustments to reconcile net income
to net cash provided by operating activities-
Provision for loan losses		1,149,996		674,998
Provision for loss on other real estate owned		501,644		147,178
Depreciation and amortization		579,455		510,473
Net amortization of premiums and discounts on securities		750,689		815,173
Gains on sales of loans held for sale		(963,364)		(848,382)
Originations of loans held for sale		(79,079,430)		(47,402,373)
Proceeds from sales of loans held for sale		82,681,059		62,498,228
Income on Bank – owned life insurance		(225,098)		(198,659)
Share-based compensation expense		224,221		187,921
Decrease (increase) in accrued interest receivable		228,889		(276,159)
Decrease (increase) in other assets		211,685		(1,574,006)
Decrease in accrued interest payable		(175,606)		(240,064)
Increase  (decrease) in accrued expenses and other liabilities		895,796		(914,212)
Net cash provided by operating activities		9,244,776		14,998,900
INVESTING ACTIVITIES:
Purchases of securities -
Available for sale		(28,280,554)		(69,849,189)
Held to maturity		-		(83,188,354)
Proceeds from maturities and prepayments of securities -
Available for sale		24,322,808		44,610,442
Held to maturity		18,892,905		22,600,347
Net (increase) decrease in loans		(5,260,752)		69,306,181
Capital expenditures		(635,328)		(347,008)
Additional investment in other real estate owned		(81,812)		(607,158)
Proceeds from sales of other real estate owned		855,030		1,629,315
Cash consideration received in connection with acquisition of branches		-		101,539,588
Net cash provided by investing activities		9,812,297		85,694,164
FINANCING ACTIVITIES:
Exercise of stock options and issuance of vested shares		176,371		86,655
Purchase of Treasury Stock		(58,270)		(15,354)
Net increase (decrease) in demand, savings and time deposits		45,208,965		(12,517,290)
Net (decrease) in borrowings		(63,000,000)		(15,900,000)
Net cash used in financing activities		(17,672,934)		(28,345,989)
Increase  in cash and cash equivalents		1,384,139		72,347,075
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD		15,195,259		17,710,501
CASH AND CASH EQUIVALENTS
AT END OF PERIOD	$	16,579,398	$	90,057,576
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest	$	2,858,581	$	3,880,534
Income taxes		887,000		857,000
Non-cash investing activities
Real estate acquired in full satisfaction of loans in foreclosure	$	470,405	$	3,107,664

See accompanying notes to consolidated financial statements.

5

1st Constitution Bancorp and Subsidiaries

Notes To Consolidated Financial Statements

June 30, 2012 (Unaudited)

(1)  Summary of Significant Accounting Policies

The accompanying unaudited Consolidated Financial Statements include 1st Constitution Bancorp (the “Company”), its wholly-owned subsidiary, 1st Constitution Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, 1st Constitution Investment Company of New Jersey, Inc., FCB Assets Holdings, Inc., 1st Constitution Title Agency, 204 South Newman Street Corp. and 249 New York Avenue, LLC.  1st Constitution Capital Trust II, a subsidiary of the Company, is not included in the Company’s consolidated financial statements as it is a variable interest entity and the Company is not the primary beneficiary.  All significant intercompany accounts and transactions have been eliminated in consolidation and certain prior period amounts have been reclassified to conform to current year presentation.  The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Article 8 of Regulation S-X.  Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations.  These Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2011, filed with the SEC on March 23, 2012.

In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the operating results for the interim periods have been included. The results of operations for periods of less than a year are not necessarily indicative of results for the full year.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2012 for items that should potentially be recognized or disclosed in these financial statements.  The evaluation was conducted through the date these financial statements were issued.

(2)  Acquisition of Unaffiliated Branches

On March 25, 2011, the Bank acquired certain deposit and other liabilities, real estate and related assets of the Rocky Hill, Hillsborough and Hopewell, New Jersey branch banking offices from another financial institution for a purchase price of $9.85 million (the “March 2011 Acquisition”).  The March 2011 Acquisition was completed pursuant to the terms and conditions of the Branch Purchase and Assumption Agreement and Agreement for Purchase dated as of December 30, 2010, which was previously disclosed on a Current Report on Form 8-K filed by the Company with the SEC on January 3, 2011.

The Company accounted for this transaction using applicable accounting guidance regarding business combinations. The fair value of savings and transaction deposit accounts acquired was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.  A core deposit intangible was ascribed to the value of non-maturity deposits based upon an independent third party evaluation which was prepared using the actual characteristics of the deposits and assumptions we believe to be reasonable.  Certificates of deposit accounts were valued utilizing a discounted cash flows analysis based upon the underlying accounts’ contractual maturities and interest rates.  The present value of the projected cash flow was then determined using discount rates based upon certificate of deposit interest rates available in the marketplace for accounts with similar terms. The fair value of the three branch buildings was determined via appraisals performed by qualified independent third party appraisers. The fair value of loans acquired, all of which were performing, was assumed to approximate amortized cost based upon the small size and nature of those loans.

As a result of the March 2011 Acquisition, the three branches became branches of the Bank.  Included in the March 2011 Acquisition were the assumption of deposit liabilities of $111.9 million, primarily consisting of demand deposits, and the acquisition of cash of approximately $101.5 million,  fixed assets of approximately $4.6 million, which includes, without limitation, ownership of the real estate and improvements upon which the branches are situated, and loans of $862,000.  The Bank recorded goodwill of approximately $3.2 million and a core deposit intangible asset of approximately $1.7 million as a result of the March 2011 Acquisition.

6

(3)  Net Income Per Common Share

Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during each period.

Diluted net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding, as adjusted for the assumed exercise of potential common stock warrants, common stock options and unvested restricted stock awards (as defined below), using the treasury stock method. All share information has been adjusted for the effect of a 5% common stock dividend declared December 15, 2011 and paid on February 2, 2012 to shareholders of record on January 17, 2012.

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per common share (EPS) calculations.  Dilutive securities in the tables below exclude common stock options and warrants with exercise prices that exceed the average market price of the Company’s common stock during the periods presented.  Inclusion of these common stock options and warrants would be anti-dilutive to the diluted earnings per common share calculation. 

	Three Months Ended June 30, 2012
	Income		Weighted- average shares	Per share Amount
Basic earnings per common share:
Net income	$	1,298,108	5,096,317	$0.25
Effect of dilutive securities:
Stock options and unvested stock awards			102,094
Diluted EPS:
Net income plus assumed conversion	$	1,298,108	5,198,411	$0.25

	Three Months Ended June 30, 2011
	Income		Weighted- average shares	Per share Amount
Basic earnings per common share:
Net income	$	828,916	5,043,504	$0.16
Effect of dilutive securities:
Stock options and unvested stock awards			48,938
Diluted EPS
Net income plus assumed conversion	$	828,916	5,092,442	$0.16

7

	Six Months Ended June 30, 2012
	Income		Weighted- average shares	Per share Amount
Basic earnings per share:
Net income	$	2,464,840	5,096,252	$0.48
Effect of dilutive securities:
Stock options and unvested stock awards			81,062
Diluted EPS
Net income plus assumed conversion	$	2,464,840	5,177,314	$0.48

	Six Months Ended June 30, 2011
	Income		Weighted- average shares	Per share Amount
Basic earnings per common share:
Net income	$	1,618,784	5,043,324	$0.32
Effect of dilutive securities:
Stock options and unvested stock awards			61,722
Diluted EPS:
Net income plus assumed conversion	$	1,618,784	5,105,046	$0.32

8

(4)           Investment Securities

 Amortized cost, gross unrealized gains and losses, and the estimated fair value by security type are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
June 30, 2012:	Cost		Gains		Losses		Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	16,984,686	$	115,414	$	0	$	17,100,100
Residential collateralized     mortgage obligations – GSE		11,038,324		428,381		0		11,466,705
Residential collateralized      mortgage obligations – non-GSE		3,522,276		120,913		(10,204)		3,632,985
Residential mortgage      backed securities – GSE		34,832,648		2,045,098		(4)		36,877,742
Obligations of State and
Political subdivisions		5,350,838		389,276		(1,017)		5,739,097
Trust preferred debt securities – single issuer		2,464,748		0		(568,775)		1,895,973
Corporate Debt Securities		19,219,511		24,192		(167,507)		19,076,196
Restricted stock		1,723,800		0		0		1,723,800
Mutual fund		25,000		0		0		25,000
	$	95,161,831	$	3,123,274	$	(747,507)	$	97,537,598

June 30, 2012:	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Income			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and                 agencies	$	3,098,502	$	0		$	3,098,502	$	39,763	$	0		$	3,138,265
Residential collateralized         Mortgage obligations – GSE		22,705,219		0			22,705,219		1,105,555		0			23,810,774
Residential collateralized        Mortgage obligations - non-GSE		13,471,005		0			13,471,005		760,872		0			14,231,877
Residential mortgage backed         securities – GSE		18,054,413		0			18,054,413		945,468		0			18,999,881
Obligations of State and
Political subdivisions		43,109,946		0			43,109,946		2,996,861		0			46,106,807
Trust preferred debt securities – pooled		651,788		(500,944	)		150,844		0		(61,602	)		89,242
Corporate debt securities		22,402,289		0			22,402,289		89,769		(12,449	)		22,479,609
	$	123,493,162	$	(500,944	)	$	122,992,218	$	5,938,288	$	(74,051	)	$	128,856,455

9

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2011:	Cost		Gains		Losses			Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	19,400,856	$	71,833	$	0		$	19,472,689
Residential collateralized     mortgage obligations – GSE		13,421,544		476,589		0			13,898,133
Residential collateralized      mortgage obligations – non-GSE		4,177,115		143,480		(20,151	)		4,300,444
Residential mortgage      backed securities – GSE		40,655,157		2,032,059		(7	)		42,687,209
Obligations of State and
Political subdivisions		5,366,145		339,747		(5,378	)		5,700,514
Trust preferred debt securities – single issuer		2,463,296		0		(712,055	)		1,751,241
Corporate Debt Securities		1,443,762		0		(7,818	)		1,435,944
Restricted stock		4,412,600		0		0			4,412,600
Mutual fund		25,000		0		0			25,000
	$	91,365,475	$	3,063,708	$	(745,409	)	$	93,683,774

December 31, 2011:	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Income			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and          agencies	$	11,118,649	$	0		$	11,118,649	$	59,571	$	0		$	11,178,220
Residential collateralized         mortgage obligations – GSE		24,705,415		0			24,705,415		1,007,737		0			25,713,152
Residential mortgage backed         securities – GSE		14,386,327		0			14,386,327		704,792		0			15,091,119
Residential mortgage backed         securities – non-GSE		20,260,354		0			20,260,354		801,882		0			21,062,236
Obligations of State and
Political subdivisions		46,820,985		0			46,820,985		2,848,587		(2,507	)		49,667,065
Trust preferred debt securities – pooled		646,574		(500,944	)		145,630		0		(142,122	)		3,508
Corporate debt securities		25,037,063		0			25,037,063		85,701		(216,784	)		24,905,980
	$	142,975,367	$	(500,944	)	$	142,474,423	$	5,508,270	$	(361,413	)	$	147,621,280

10

Restricted stock at June 30, 2012 and December 31, 2011 consisted of $1,708,800 and $4,397,600, respectively, of Federal Home Loan Bank of New York stock and $15,000 of Atlantic Central Bankers Bank stock.

The amortized cost and estimated fair value of investment securities at June 30, 2012, 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.  Restricted stock is included in “Available for sale - Due in one year or less.”

	Amortized Cost		Fair Value
Available for sale-
Due in one year or less
U.S. Treasury securities and obligations of U.S. Government                     sponsored corporations (“GSE”) and agencies	$	6,033,171	$	6,063,510
Residential backed securities-GSE		36,231		38,052
Corporate Debt Securities		1,755,664		1,760,441
Restricted Stock		1,723,800		1,723,800
Mutual Fund		25,000		25,000
	$	9,573,866	$	9,610,803
Due after one year through five years
U.S. Treasury securities and obligations of                     US Government sponsored corporations (“GSE”)and agencies	$	10,951,515	$	11,036,590
Residential mortgage backed securities-GSE		288,221		304,807
Obligations of State and Political subdivisions		593,820		597,801
Corporate Debt Securities		16,376,971		16,242,005
	$	28,210,527	$	28,181,203
Due after five years through ten years
Residential collateralized mortgage obligations -GSE	$	168,877	$	174,044
Residential mortgage backed Securities - GSE		3,357,223		3,662,711
Obligations of State and Political Subdivisions		2,712,683		2,991,213
	$	6,238,783	$	6,827,968
Due after ten years
Residential collateralized mortgage obligations -GSE	$	10,869,447	$	11,292,661
Residential collateralized mortgage obligations –non GSE		3,522,276		3,632,985
Residential mortgage backed securities - GSE		31,150,973		32,872,172
Obligations of State and Political subdivisions		2,044,335		2,150,083
Trust Preferred Debt Securities-single issuer		2,464,749		1,895,973
Corporate Debt Securities		1,086,876		1,073,750
	$	51,138,655	$	52,917,624
Total	$	95,161,831	$	97,537,598

11

Held to maturity-
Due in one year or less
Obligations of State and Political subdivisions	$	1,665,786	$	1,669,328
Corporate Debt Securities		13,475,530		13,523,475
	$	15,141,316	$	15,192,803
Due after one year through five years
U.S. Treasury securities and obligations of                     US Government sponsored corporations (“GSE”) and agencies	$	3,098,502	$	3,138,265
Obligations of State and Political subdivisions		5,198,416		5,410,645
Corporate Debt Securities		8,926,759		8,956,134
	$	17,223,677	$	17,505,044
Due after five years through ten years
Residential collateralized mortgage obligations                             – GSE	$	635,319	$	651,756
Residential mortgage backed securities – GSE		4,016,700		4,144,974
Obligations of State and Political subdivisions		22,961,646		24,580,362
	$	27,613,665	$	29,377,092
Due after ten years
U.S. Treasury securities and obligations of US                            Government sponsored corporations                            (“GSE”) and agencies	$	0	$	0
Residential collateralized mortgage obligations - GSE		22,069,900		23,159,018
Residential collateralized mortgage obligations – non GSE		13,471,005		14,231,877
Residential mortgage backed securities - GSE		14,037,713		14,854,907
Obligations of State and Political subdivisions		13,284,098		14,446,472
Trust Preferred Debt Securities - Pooled		651,788		89,242
	$	63,514,504	$	66,781,516
Total	$	123,493,162	$	128,856,455

Gross unrealized losses on securities and the estimated fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011 are as follows:

June 30, 2012			Less than 12 months				12 months or longer				Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Residential collateralized mortgage        obligations – non-GSE		1	$	0	$	0	$	206,518	$	(10,204)	$	206,518	$	(10,204)
Residential mortgage backed         securities - GSE		1		5,113		(4)		0		0		5,113		(4)
Obligations of State and Political     Subdivisions		1		522,653		(1,017)		0		0		522,653		(1,017)
Trust preferred debt securities –         single issuer		4		0		0		1,895,973		(568,775)		1,895,973		(568,775)
Trust preferred debt securities –          pooled		1		0		0		89,242		(562,546)		89,242		(562,546)
Corporate Debt Securities		21		16,074,746		(176,517)		1,180,379		(3,439)		17,255,125		(179,956)
Total temporarily impaired securities		29	$	16,602,512	$	(177.538)	$	3,372,112	$	(1,144,964)	$	19,974,624	$	(1,322,502)

12

December 31, 2011		Less than 12 months					12 months or longer					Total
	Number of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Residential collateralized mortgage      Obligations – non-GSE	1	$	0	$	0		$	251,723	$	(20,151	)	$	251,723	$	(20,151	)
Residential mortgage backed securities      GSE	1		5,280		(7	)		0		0			5,280		(7	)
Obligations of State and Political      Subdivisions	3		1,049,362		(7,885	)		0		0			1,049,362		(7,885	)
Trust preferred debt securities –         Single issuer	4		0		0			1,751,241		(712,055	)		1,751,241		(712,055	)
Trust preferred debt securities –         Pooled	1		0		0			3,508		(643,066	)		3,508		(643,066	)
Corporate debt securities	25		13,668,246		(211,075	)		666,956		(13,527	)		14,335,202		(224,602	)
Total temporarily impaired securities	35	$	14,722,888	$	(218,967	)	$	2,673,428	$	(1,388,799	)	$	17,396,316	$	(1,607,766	)

Residential collateralized mortgage obligations and residential mortgaged-backed securities: The unrealized losses on investments in residential collateralized residential mortgage obligations and mortgage-backed securities were caused by interest rate increases. The contractual cash flows of these securities are guaranteed by the issuer, which are generally government or government sponsored agencies. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Obligations of State and Political Subdivisions:  The unrealized losses on investments in these securities were caused by interest rate increases.  It is expected that the securities would not be settled at a price less than the amortized cost of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Corporate debt securities:   The unrealized losses on investments in corporate debt securities were caused by interest rate increases.  None of the corporate issuers have defaulted on interest payments.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

13

Trust preferred debt securities – single issuer:  The investments in these securities with unrealized losses are comprised of four corporate trust preferred securities that mature in 2027, all of which were single-issuer securities.   The contractual terms of the trust preferred securities do not allow the issuer to settle the securities at a price less than the face value of the trust preferred securities, which is greater than the amortized cost of the trust preferred securities.  None of the corporate issuers have defaulted on interest payments.  Because the decline in fair value is attributable to widening of interest rate spreads, the lack of an active trading market for these securities and, to a lesser degree, market concerns on the issuers’ credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Trust preferred debt security – pooled:  This trust preferred debt security was issued by a two issuer pool (Preferred Term Securities XXV, Ltd. co-issued by Keefe, Bruyette and Woods, Inc. and First Tennessee (“PreTSL XXV”)), consisting primarily of financial institution holding companies.  During 2009, the Company recognized an other-than-temporary impairment charge of $864,727, of which $363,783 was determined to be a credit loss and charged to operations and $500,944 was recognized in other comprehensive income (loss) component of shareholders’ equity.

The primary factor used to determine the credit portion of the impairment loss to be recognized in the income statement for this security was the discounted present value of projected cash flow where that present value of cash flow was less than the amortized cost basis of the security.  The present value of cash flow was developed using an EITF 99-20 model that considered performing collateral ratios, the level of subordination to senior tranches of the security, credit ratings of and projected credit defaults in the underlying collateral.

On a quarterly basis, management evaluates this security to determine if there is any additional other-than-temporary impairment.  As of June 30, 2012, our evaluation was as follows:

a. We obtained the PreTSL XXV Depository Institutions Issuer List as of June 30, 2012 from the FTN Financial Corp. (“FTN”) website and reviewed the financial ratios and capital levels of each individual financial institution issuer.

b. We sorted the financial institutions on the issuer list to develop three “buckets” (or categories) for further deferred/default analysis based upon the indicated “Texas Ratio.”  The Texas Ratio is calculated by dividing the institution’s Non-Performing Assets plus loans 90 days past due by the combined total of Tangible Equity plus the Allowance for Loan Losses.  The three buckets consisted of those institutions with a Texas Ratio of:

(1) Above 100;

(2) 75 to 100; and

(3) Below 75.

c. We then applied the following asset specific deferral/default assumptions to each of these buckets:

(1) Above 100 – 100% default; 0% recovery;

(2) 75 to 100 – 100% deferred; 15% recovery at 2 years from initial date of deferral; and

(3) Below 75 – no deferral/default.

d. We then ran a cash flow projection to analyze the impact of future deferral/default activity by applying the following assumption on those institutions in bucket (3) of our analysis:

14

· Defaults at 75 basis points applied annually; 15% recovery with a 2-year lag from the initial date of deferral.

Our rationale for these metrics is as follows:  (1) the FDIC lists the number of bank failures each year from 1934 – 2008.  Comparing bank failures to the number of FDIC institutions produces an annual average default rate of 36 basis points. Given the continuing uncertain economic environment, we believe double this amount, or 75 basis points, to be an appropriate measurement for defaults; and (2) Standard & Poor’s published “Global Methodology for Rating Trust Preferred/Hybrid Securities Revised” on November 21, 2008.  This analysis uses a recovery assumption of 15%, which we also deem an appropriate measurement.

Our position is that it is appropriate to apply this future default factor in our analysis as it is not realistic to assume no adverse conditions will occur over the remaining 25 year stated maturity of this pooled security even though the individual institutions are currently performing according to terms.

e. This June 30, 2012 projection of future cash flows produced a present value factor that exceeded the carrying value of the pooled trust preferred security; therefore, management concluded that no OTTI issues were present at June 30, 2012.

A number of factors or combinations of factors could cause management to conclude in one or more future reporting periods that an unrealized loss that exists with respect to PreTSL XXV constitutes an additional credit impairment.  These factors include, but are not limited to, failure to make interest payments, an increase in the severity of the unrealized loss, an increase in the continuous duration of the unrealized loss without an impairment in value or changes in market conditions and/or industry or issuer specific factors that would render management unable to forecast a full recovery in value.  In addition, the fair value of trust preferred securities could decline if the overall economy and the financial condition of the issuers continue to deteriorate and there remains limited liquidity for this security.

The following table sets forth information with respect to this security at June 30, 2012:

Security	Class	Amortized Cost	Fair Value	Unrealized  (Loss)	Percent of  Underlying  Collateral Performing	Percent of Underlying Collateral In Deferral (1)	Percent of Underlying Collateral In Default  (1)	Expected Deferrals and Defaults as a % of Remaining Performing Collateral	Moody's S&P / Ratings	Excess Subordination (2)
										Amount	%  of  Current Performing Collateral
PreTSL   XXV	B-1	$651,788	$89,242	($562,546)	65.8%	16.7%	17.5%	15.6%	C/ NR	$102,500,000	20.0%

Notes to table above:

(1) This percentage represents the amount of specific deferrals / defaults that have occurred, plus those that are known for the following quarters to the total amount of original collateral. Fewer deferrals / defaults produce a lower percentage.

(2) “Excess subordination” amount is the additional defaults / deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a “break in yield.”  This amount assumes that all currently performing collateral continues to perform.  A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity.  The “percent of underlying collateral performing” is the ratio of the “excess subordination amount” to current performing collateral - a higher percent means there is more excess subordination to absorb additional defaults / deferrals, and the better our security is protected from loss.

15

The following table presents a cumulative roll forward of the amount of other-than-temporary impairment related to credit losses, all of which relate to PreTSL XXV, which have been recognized in earnings for debt securities held to maturity and not intended to be sold.

(in thousands)	Three and six months ended June 30, 2012		Three and six months ended June 30, 2011
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

(5)  Loans and Allowance for Loan Losses

The Company’s primary lending emphasis is the origination of commercial and commercial real estate loans and mortgage warehouse lines of credit.  Based on the composition of the loan portfolio, the inherent primary risks are deteriorating credit quality, a decline in the economy, and a decline in New Jersey real estate market values.  Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels.

The following table provides an aging of the loan portfolio by loan class at June 30, 2012:

	30-59 Days		60-89 Days		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment  > 90 Days Accruing		Nonaccrual Loans
Commercial
Construction	$	0	$	0	$	0	$	0	$	59,650,806	$	59,650,806	$	0	$	0
Commercial Business		599,605		0		262,737		862,342		57,197,323		58,059,665		42,320		479,072
Commercial Real Estate		2,609,703		0		1,093,793		3,703,496		103,662,142		107,365,638		0		2,024,487
Mortgage Warehouse        Lines		0		0		0		0		230,776,678		230,776,678		0		0
Residential Real Estate		463,679		0		0		463,679		10,860,661		11,324,340		0		140,492
Consumer
Loans to Individuals		0		0		54,904		54,904		11,384,790		11,439,694		0		54,904
Other		0		0		0		0		227,448		227,448		0		0
Deferred Loan Fees		0		0		0		0		950,823		950,823		0		0
Total	$	3,762,987	$	0	$	1,411,434	$	5,084,421	$	474,710,671	$	479,795,092	$	42,320	$	2,698,955

16

The following table provides an aging of the loan portfolio by loan class at December 31, 2011:

	30-59 Days	60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Recorded Investment > 90 Days Accruing	Nonaccrual Loans
Commercial

Construction	$                0	$                0	$   140,055	$   140,055	$  49,145,728	$49,285,783	$                0	$    140,055
Commercial Business	364,743	564,152	122,535	1,051,430	49,733,244	50,784,674	0	669,166
Commercial Real Estate	0	245,874	503,877	749,751	98,887,225	99,636,976	0	1,443,220
Mortgage Warehouse Lines	0	0	0	0	249,345,831	249,345,831	0	0

   Residential Real Estate 905,310 0 661,171 1,566,481 11,112,827    12,885,352 0       661,171

Consumer

Loans to Individuals	0	144,904	77,858	222,762	11,996,878	12,219,640	0	77,858
Other	0	0	0	0	255,556	255,556	0	0

Deferred Loan Costs 0 0 0 0 1,017,959      1,017,959 0 0

Total $1,270,053 $   954,930 $1,505,496 $3,730,479 $471,701,292 $475,431,771 $                0 $ 2,991,470

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses.  The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements.  These elements include a specific reserve for impaired loans, an allocated reserve, and an unallocated portion.  

The Company consistently applies the following comprehensive methodology.  During the quarterly review of the allowance for loan losses, the Company considers a variety of factors that include:

· General economic conditions;

· Trends in charge-offs;

· Trends and levels of delinquent loans;

· Trends and levels of non-performing loans, including loans over 90 days delinquent;

· Trends in volume and terms of loans;

· Levels of allowance for specific classified loans; and

· Credit concentrations.

The methodology includes the segregation of the loan portfolio into loan types with a further segregation into risk rating categories, such as special mention, substandard, doubtful, and loss. This allows for an allocation of the allowance for loan losses by loan type; however, the allowance is available to absorb any loan loss without restriction.  Larger balance, non-homogeneous loans representing significant individual credit exposures are evaluated individually through the internal loan review process.  It is this process that produces the watch list.  The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated. Based on these reviews, an estimate of probable losses for the individual larger-balance loans are determined, whenever possible, and used to establish specific loan loss reserves.  In general, for non-homogeneous loans not individually assessed, and for homogeneous groups, such as residential mortgages and consumer credits, the loans are collectively evaluated based on delinquency status, loan type, and historical losses. These loan groups are then internally risk rated.

17

The watch list includes loans that are assigned a rating of special mention, substandard, doubtful and loss.  Loans classified special mention have potential weaknesses that deserve management’s close attention.  If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects.  Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable.  Loans rated as doubtful in whole, or in part, are placed in nonaccrual status.  Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses.

The specific reserve for impaired loans is established for specific loans which have been identified by management as being impaired.  The specific portion of the allowance is the total amount of potential unconfirmed losses for these individual doubtful loans. To assist in determining the fair value of loan collateral, the Company often utilizes independent third party qualified appraisal firms which, in turn, employ their own criteria and assumptions that may include occupancy rates, rental rates, and property expenses, among others.

The second category of reserves consists of the allocated portion of the allowance.  The allocated portion of the allowance is determined by taking pools of loans outstanding that have similar characteristics and applying historical loss experience for each pool.  This estimate represents the potential unconfirmed losses within the portfolio. Individual loan pools are created for commercial and commercial real estate loans, construction loans, and various types of loans to individuals.  The historical estimation for each loan pool is then adjusted to account for current conditions, current loan portfolio performance, loan policy or management changes, or any other factor which may cause future losses to deviate from historical levels.

The Company may, from time to time, maintain an unallocated allowance to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  Management must make estimates using assumptions and information that is often subjective and changing rapidly.

The following discusses the risk characteristics of each of our loan portfolio segments, commercial and consumer.

Commercial

The Company’s primary lending emphasis is the origination of commercial and commercial real estate loans and mortgage warehouse lines of credit.  Based on the composition of the loan portfolio, the inherent primary risks are deteriorating credit quality, a decline in the economy, and a decline in New Jersey real estate market values.  Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels.

Consumer

The Company’s consumer loan portfolio segment is comprised of residential real estate loans, home equity loans and other loans to individuals.  Individual loan pools are created for the various types of loans to individuals.

In general, for homogeneous groups, such as residential mortgages and consumer credits, the loans are collectively evaluated based on delinquency status, loan type, and industry historical losses. These loan groups are then internally risk rated.

The Company considers the following credit quality indicators in assessing the risk in the loan portfolio:

· Consumer credit scores;

· Internal credit risk grades;

· Loan-to-value ratios;

· Collateral; and

· Collection experience.

The Company’s internal credit risk grades are based on the definitions currently utilized by the bank regulatory agencies.  The grades assigned and their definitions are as follows, and loans graded excellent, above average, good and watch list are treated as “pass” for grading purposes:

18

1.  Excellent - Loans that are based upon cash collateral held at the Bank and adequately margined. Loans that are based upon “blue chip” stocks listed on the major exchanges and adequately margined.

2.  Above Average - Loans to companies whose balance sheets show excellent liquidity and whose long-term debt is on well-spread schedules of repayment easily covered by cash flow.  Such companies have been consistently profitable and have diversification in their product lines or sources of revenue.  The continuation of profitable operations for the foreseeable future is likely.  Management is comprised of a mix of ages, experience, and backgrounds and management succession is in place.  Sources of raw materials and service companies, the source of revenue is abundant.  Future needs have been planned for.  Character and repayment ability of individuals or company principals are excellent.  Loans to individuals supported by high net worths and liquid assets.

3.  Good - Loans to companies whose balance sheets show good liquidity and cash flow adequate to meet maturities of long-term debt with a comfortable margin.  Such company has established a profitable record over a number of years, and there has been growth in net worth.  Operating ratios are in line with those of the industry, and expenses are in proper relationship to the volume of business done and the profits achieved.  Management is well-balanced and competent in their responsibilities.  Economic environment is favorable; however, competition is strong.  The prospects for growth are good.  Loans in this category do not meet the collateral requirements of loans in categories 1 and 2 above.  Loans to individuals supported by good net worths but whose supporting assets are illiquid.

3w.  Watch List - Included in this category are loans evidencing problems identified by Bank management that require closer supervision.  Such problem has not developed to the point which requires a Special Mention rating.  This category also covers situations where the Bank does not have adequate current information upon which credit quality can be determined.  The account officer has the obligation to correct these deficiencies within 30 days after the time of notification.

4.  Special Mention - Loans or borrowing relationships that require more than the usual amount of attention by Bank management.  Industry conditions may be adverse or weak.  The borrower’s ability to meet current payment schedules may be questionable, even though interest and principal are being paid as agreed. Heavy reliance has been placed on the collateral.  Profits, if any, are interspersed with losses.  Management is “one man” or incompetent or there is no plan for management succession.  Expectations of a loan loss are not immediate; however, if present trends continue, a loan loss could be expected.

5.  Substandard - Loans in this category possess weaknesses that jeopardize the ultimate collection of total outstandings.  These weaknesses require close supervision by Bank management.  Current financial statements are unavailable and the loan is inadequately protected by the collateral pledged.  This category will normally include loans that have been classified as substandard by the regulators.

6.  Doubtful - Loans with weaknesses inherent in the substandard classification and where collection or liquidation in full is highly questionable.  It is likely that the loan will not be collected in full and the Bank will suffer some loss which is not quantifiable at the time of review.

7.  Loss - Loans considered uncollectable and of such little value that their continuance as an active asset is not warranted.  Loans in this category should immediately be eliminated from the Bank’s loan loss reserve.  Any accrued interest should immediately be backed out of income.

19

The following table provides a breakdown of the loan portfolio by credit quality indicator at June 30, 2012.

Commercial Credit Exposure - By Internally Assigned Grade	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse Lines	Residential Real Estate
Grade:
Pass	$54,594,154	$55,393,231	$80,134,127	$230,776,678	$11,183,848
Special Mention	1,041,045	1,159,276	19,287,729	0	0
Substandard	4,015,607	1,364,009	7,795,550	0	140,492
Doubtful	0	143,149	148,232	0	0
Total	$59,650,806	$58,059,665	$107,365,638	$230,776,678	$11,324,340
Consumer Credit Exposure - By Payment Activity	Loans To Individuals	Other
Performing	$11,384,790	$227,448
Nonperforming	54,904	0
Total	$11,439,694	$227,448

       The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2011.

Commercial Credit Exposure - By Internally Assigned Grade	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse Lines	Residential Real Estate
Grade:
Pass	$  44,106,827	$   47,973,545	$ 84,642,510	$249,345,831	$    12,224,181
Special Mention	5,038,901	1,657,993	10,574,489	0	142,477
Substandard	107,405	865,160	3,823,225	0	518,694
Doubtful	32,650	287,976	596,752	0	0
Total	$  49,285,783	$  50,784,674	$ 99,636,976	$249,345,831	$   12,885,352
Consumer Credit Exposure - By Payment Activity	Loans To Individuals	Other
Performing	$  12,141,782	$    255,556
Nonperforming	77,858	0
Total	$  12,219,640	$    255,556

Impaired Loans Disclosures

Loans are considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments.  When a loan is placed on nonaccrual status, it is also considered to be impaired.  Loans are placed on nonaccrual status when: (1) the full collection of interest or principal becomes uncertain; or (2) they are contractually past due 90 days or more as to interest or principal payments unless they are both well secured and in the process of collection.

The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2012 and December 31, 2011:

Period-End Allowance for Credit Losses by Impairment Method – June 30, 2012
			Commercial		Commercial		Mortgage		Residential								Deferred		Total
	Construction		Business		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Fees
Allowance for credit losses:
Ending Balance	$	1,647,605	$	903,401	$	2,304,010	$	1,153,883	$	122,510	$	123,213	$	2,798	$	0	$	0	$	6,257,420
Ending Balance
Individually evaluated      for impairment		0		138,597		357,074		0		28,566		0		0		0		0		524,237
Collectively evaluated       for impairment		1,647,605		764,804		1,946,936		1,153,883		93,944		123,213		2,798		0		0		5,733,182
Loans receivables:
Ending Balance	$	59,650,806	$	58,059,665	$	107,365,638	$	230,776,678	$	11,324,340	$	11,439,694	$	227,448	$	0	$	950,823	$	479,795,092
Individually evaluated         for impairment		0		851,819		2,507,360		0		140,492		54,904		0		0		0		3,554,575
Collectively evaluated        for impairment		59,650,806		57,207,846		104,858,278		230,776,678		11,183,848		11,384,790		227,448		0		950,823		476,240,517

20

Period-End Allowance for Credit Losses by Impairment Method – December 31, 2011
			Commercial		Commercial		Mortgage		Residential								Deferred		Total
	Construction		Business		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Fees
Allowance for credit losses:
Ending Balance	$	1,054,695	$	934,642	$	1,597,702	$	1,122,056	$	91,076	$	187,352	$	2,377	$	544,550	$	0	$	5,534,450
Ending Balance
Individually evaluated      for impairment		0		283,424		186,055		0		11,619		77,858		0		0		0		558,956
Collectively evaluated       for impairment		1,054,695		651,218		1,411,647		1,122,056		79,457		109,494		2,377		544,550		0		4,975,494
Loans receivables:
Ending Balance	$	49,285,783	$	50,784,674	$	99,636,976	$	249,345,831	$	12,885,352	$	12,219,640	$	255,556		0	$	1,017,959	$	475,431,771
Individually evaluated         for impairment		140,055		952,156		1,934,120		0		661,171		77,858		0		0		0		3,765,360
Collectively evaluated        for impairment		49,145,728		49,832,518		97,702,856		249,345,831		12,224,181		12,141,782		255,556		0		1,017,959		471,666,411

The allowance for loan loss by loan class at both June 30, 2012 and December 31, 2011, and related activity for the six months ended June 30, 2012, are as follows:

	Construction			Commercial Business			Commercial Real Estate		Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2011	$	1,054,695		$	934,642		$	1,597,702	$	1,122,056		$	91,076		$	187,352		$	2,377		$	544,550		$	5,534,450
Provision charged to operations		217,501			15,757			241,180		(115,451	)		148,497			22,076			6,803			63,635			599,998
Loans charged off		(32,650	)		(144,827	)		0		0			0			(77,858	)		(6,001	)		0			(261,336	)
Recoveries of loans charged off		3,403			5,427			0		0			0			0			0			0			8,830
Balance - March 31, 2012	$	1,242,949		$	810,999		$	1,838,882	$	1,006,605		$	239,573		$	131,570		$	3,179		$	608,185		$	5,881,942
Provision charged to operations		429,656			111,410			464,946		147,278			13,631			(8,357	)		(381	)		(608,185	)		549,998
Loans charged off		(25,000	)		(20,199	)		0		0			(130,694	)		0			0			0			(175,893	)
Recoveries of loans charged off		0			1,191			182		0			0			0			0			0			1,373
Balance - June 30, 2012	$	1,647,605		$	903,401		$	2,304,010	$	1,153,883		$	122,510		$	123,213		$	2,798		$	0		$	6,257,420

The allowance for loan loss by loan class at both June 30, 2011 and December 31, 2010, and related activity for the six months ended June 30, 2011, are as follows:

	Construction			Commercial Business			Commercial Real Estate			Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2010	$	1,744,068		$	971,994		$	1,723,865		$	763,092		$	67,828		$	192,457		$	1,910		$	297,498		$	5,762,712
Provision charged to operations		1,183,736			(55,760	)		(318,432	)		(344,826	)		9,777			(1,990	)		571			(73,078	)		399,998
Loans charged off		(366,587	)		(46,319	)		-			-			-			-			-			-			(412,906	)
Recoveries of loans charged off		-			239			-			-			-			-			-			-			239
Balance - March 31, 2011	$	2,561,217		$	870,154		$	1,405,433		$	418,266		$	77,605		$	190,467		$	2,481		$	224,420		$	5,750,043
Provision charged to operations		52,940			48,806			215,679			110,442			(370	)		(3,016	)		(28	)		(149,453	)		275,000
Loans charged off		(158,900	)		-			-			-			-			-			-			-			(158,900	)
Recoveries of loans charged off		-			3,438			-			-			-			-			-			-			3,438
Balance - June 30, 2011	$	2,455,257		$	922,398		$	1,621,112		$	528,708		$	77,235		$	187,451		$	2,453		$	74,967		$	5,869,581

21

When a loan is identified as impaired, the measurement of impairment is based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole remaining source of repayment for the loan is the liquidation of the collateral.  In such cases, the current fair value of the collateral less selling costs is used.  If the value of the impaired loan is less than the recorded investment in the loan, the impairment is recognized through an allowance estimate or a charge to the allowance.

	Impaired Loans Receivables (By Class) – June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Quarter- End June 30, 2012 Average Recorded Investment		Quarter- End June 30, 2011 Average Recorded Investment		Year to Date 2012 Average Recorded Investment		Year to Date 2011 Average Recorded Investment		Quarter- End June 30, 2011 Interest Income Recognized		Quarter- End June 30, 2011 Interest Income Recognized		Year to Date 2012 Interest Income Recognized		Year to Date 2011 Interest Income Recognized
With no related allowance:
Commercial
Construction	$	0	$	0	$	0	$	35,802	$	113,947	$	71,603	$	1,555,877	$	0	$	0	$	0	$	0
Commercial   Business		431,381		474,063		0		423,129		348,094		415,353		286,550		0		0		0		0
Commercial   Real Estate		0		0		0		81,666		292,682		208,536		358,490		0		0		0		0
Mortgage   Warehouse   Lines		0		0		0		0		0
Subtotal		431,381		474,063		0		540,597		754,723		695,492		2,200,917		0		0		0		0
Residential   Real Estate		0		0		0		0		0		47,199		0		0		0		0		0
Consumer
Loans to   Individuals		54,904		54,904		0		54,904		0		54,904		0		0		0		0		0
Other		0		0		0		0		0		0		0		0		0		0		0
Subtotal		54,904		54,904		0		54,904		0		54,904		0		0		0		0		0
Subtotal With no related allowance:		486,285		528,967		0		595,501		754,723		797,595		2,200,917		0		0		0		0
With an allowance:
Commercial
Construction		0		0		0		0		3,268,474		0		3,154,480		0		0		0		0
Commercial   Business		420,438		565,265		138,597		435,032		832,399		429,700		593,070		3,790		0		7,439		0
Commercial  Real Estate		2,507,360		2,614,922		357,074		2,313,770		1,111,122		1,952,730		1,047,746		6,792		0		14,209		0
Mortgage   Warehouse   Lines		0		0		0		0		0		0		0		0		0		0		0
Subtotal		2,927,798		3,180,187		495,671		2,748,802		5,211,995		2,382,430		4,795,296		10,582		0		21,648		0
Residential   Real Estate		140,492		140,492		28,566		313,517		519,000		439,616		432,854		0		3,028		0		4,544
Consumer
Loans to   Individuals		0		0		0		0		77,858		0		77,858		0		0		0		0
Other		0		0		0		0		0		0		0		0		0		0		0
Subtotal		0		0		0		0		77,858		0		77,858		0		0		0		0
Subtotal with an allowance:		3,068,290		3,320,679		524,237		3,062,319		5,808,853		2,822,046		5,306,008		10,582		3,028		21,648		4,544
Total:
Commercial		3,359,179		3,654,250		495,671		3,289,399		5,966,718		3,077,922		6,996,213		10,582		0		21,648		0
Residential   Real Estate		140,492		140,492		28,566		313,517		519,000		486,815		432,854		0		3,028		0		4,544
Consumer		54,904		54,904		0		54,904		77,858		54,904		77,858		0		0		0		0
Total	$	3,554,575	$	3,849,646	$	524,237	$	3,657,820	$	6,563,576	$	3,619,641	$	7,506,925	$	10,582	$	3,028	$	21,648	$	4,544

22

Impaired Loans Receivables (By Class)
December 31 ,2011
	Recorded Investment	Unpaid Principal Balance	Related Allowance	Year to Date Average Recorded Investment	Year to Date Interest Income Recognized
With no related allowance:
Commercial

Construction	$140,055	$277,405	$0	$610,358	$0
Commercial Business	381,190	426,803	0	257,942	0
Commercial Real Estate	503,877	611,389	0	457,464	0
Mortgage Warehouse Lines	0	0	0	0	0
Subtotal	1,025,122	1,315,597	0	1,325,764	0
Residential Real Estate	142,477	142,477	0	11,873
Consumer
Loans to Individuals	0	0	0	0	0
Other	0	0	0	0	0
Subtotal	0	0	0	0	0
Subtotal with no Related Allowance	1,167,599	1,315,597	0	1,337,637	0
With an allowance:
Commercial
Construction	0	0	0	2,389,162	0
Commercial Business	570,966	570,966	283,424	791,808	10,001
Commercial Real Estate	1,430,243	1,430,243	186,055	1,036,007	2,294
Mortgage Warehouse Lines	0	0	0	0	0
Subtotal	2,001,209	2,001,209	469,479	4,216,977	12,295
Residential Real Estate	518,694	518,694	11,619	490,081	0
Consumer
Loans to Individuals	77,858	77,858	77,858	77,858	0
Other	0	0	0	0	0
Subtotal	77,858	77,858	77,858	77,858	0
Subtotal with an Allowance	2,597,761	2,597,761	558,956	4,784,916	12,295
Total:
Commercial	3,026,331	3,316,806	469,479	5,542,741	12,295
Residential Real Estate	661,171	518,694	11,619	501,954	0
Consumer	77,858	77,858	77,858	77,858	0
Total	$3,765,360	$3,913,358	$558,956	$6,122,553	$12,295

23

The Bank adopted Accounting Standards Update (“ASU”) No. 2011-02 on July 1, 2011.  ASU No. 2011-02 provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring.  In evaluating whether a restructuring constitutes a troubled debt restructuring, ASU No. 2011-02 requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties.  As a result of our adoption of ASU No. 2011-02, we reassessed the terms of loan restructurings.  The following table is a breakdown of troubled debt restructuring activity during the six months ended June 30, 2012.

	Number of Contracts		Pre-modification outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		1	$	137,028	$	137,028

	Number of Contracts	Recorded Investment
Troubled Debt Restructurings During the Prior Twelve Months    that subsequently Defaulted:
Commercial	1	$	22,471
Residential Real Estate	1	$	518,694

If the Bank determines that a borrower has suffered deterioration in its financial condition, a restructuring of the loan terms may occur.  Such loan restructurings may include, but are not limited to, reductions in principal or interest, reductions in interest rates, and extensions of the maturity date.  When modifications are implemented, such loans meet the definition of a troubled debt restructuring.  The modifications employed by the Bank during the six month period ended June 30, 2012 resulted in lower amortization payments for a limited time period without any reduction in the interest rate.  The lower payments are determined by an analysis of the borrower’s cash flow ability to meet the modified terms while anticipating an improved financial condition to enable a resumption of the original payment terms.

(6)  Share-Based Compensation

The Company establishes fair value for its equity awards to determine its cost and recognizes the related expense for stock options over the vesting period using the straight-line method.  The grant date fair value for stock options is calculated using the Black-Scholes option valuation model.

24

The Company’s stock-based incentive plans (the “Stock Plans”) authorize the issuance of an aggregate of 1,298,193 shares of the Company’s common stock (as adjusted for stock dividends) pursuant to awards that may be granted in the form of stock options to purchase common stock (“Options”) and awards of shares of common stock (“Stock Awards”).  The purpose of the Stock Plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, employees and other persons to promote the success of the Company.  Under the Stock Plans, options have a term of ten years after the date of grant, subject to earlier termination in certain circumstances.  Options are granted with an exercise price at the then fair market value of the Company’s common stock.  As of June 30, 2012, there were 123,974 shares of common stock (as adjusted for the 5% stock dividend declared December 15, 2011 and paid February 2, 2012 to shareholders of record on January 17, 2012) available for future grants under the Stock Plans.

Stock-based compensation expense related to Options was $48,777 and $27,200 for the six months ended June 30, 2012 and 2011, respectively.

Transactions under the Stock Plans during the six months ended June 30, 2012 are summarized as follows:

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
Stock Options	Shares			Exercise Price		Term (years)		Value
Outstanding at January 1, 2012		196,906			$9.66
Granted		26,670			6.42
Exercised		(327	)		5.96
Forfeited		-			-
Expired		-			-
Outstanding at June 30, 2012		223,249			$9.28		6.1	$	293,458
Exercisable at June 30, 2012		162,094			$10.25		5.1	$	104,972

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the six months ended June 30, 2012 are as follows:

Fair value of options granted	$2.20
Risk-free rate of return	0.84	%
Expected option life in years	7
Expected volatility	31.48	%
Expected dividends (1)	-

(1) To date, the Company has not paid any cash dividends on its common stock.

As of June 30, 2012, there was approximately $146,906 of unrecognized compensation cost related to nonvested stock option based compensation arrangements granted under the Company’s stock incentive plans. That cost is expected to be recognized over the next three years.

The following table summarizes nonvested restricted shares for the six months ended June 30, 2012 (as adjusted to reflect the 5% stock dividend declared in December 2011):

				Average
	Number of			Grant Date
Non-vested shares	Shares			Fair Value
Non-vested at January 1, 2012		151,753			$6.87
Granted		1,995			6.42
Vested		(20,875	)		8.12
Forfeited		-			-
Non-vested at June 30, 2012		132,873			$6.67

25

The value of restricted shares is based upon the closing price of the common stock on the date of grant. The shares generally vest over a four year service period with compensation expense recognized on a straight-line basis.

Stock based compensation expense related to stock grants was $175,444 and $160,721 for the six months ended June 30, 2012 and 2011.

As of June 30, 2012, there was approximately $661,325 of unrecognized compensation cost related to nonvested stock grants that will be recognized over the next four years.

(7)  Benefit Plans

The Company has a 401(k) plan which covers substantially all employees with six months or more of service.  The Company’s contributions to the 401(k) plan are expensed as incurred.

The Company also provides retirement benefits to certain employees under supplemental executive retirement plans (the “SERPs”).  The SERPs are unfunded and the Company accrues actuarially determined benefit costs over the estimated service period of the employees in the SERPs.  The Company recognizes the over funded or under funded status of a defined benefit post-retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and recognizes changes in that funded status in the year in which the changes occur, through comprehensive income.

The components of net periodic expense for the Company’s SERPs for the three and six months ended June 30, 2012 and 2011 are as follows:

	Three months ended June 30,					Six months ended June 30,
	2012		2011			2012		2011
Service cost	$	61,823	$	68,425		$	123,646	$	136,850
Interest cost		50,073		57,057			100,146		114,114
Actuarial (gain) loss recognized		5,300		(2,062	)		10,600		(4,124	)
Prior service cost recognized		24,858		19,859			49,716		39,718
	$	142,054	$	143,279		$	284,108	$	286,558

(8)  Other Comprehensive Income and Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income and their related income tax effects were as follows:

	June 30,			December 31,
	2012			2011
Unrealized holding gains on securities available for sale	$	2,375,768		$	2,318,299
Related income tax effect		(807,760	)		(788,221	)
		1,568,008			1,530,078
Unrealized impairment loss on held to maturity security		(500,944	)		(500,944	)
Related income tax effect		170,321			170,321
		(330,623	)		(330,623	)
Pension liability		(172,220	)		(178,661	)
Related income tax effect		68,079			70,668
		(104,141	)		(107,993	)
Accumulated other comprehensive income	$	1,133,244		$	1,091,462

26

The components of other comprehensive income and their related income tax effects for the three and six month periods ended June 30, 2011 and 2010 are as follows:

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
Unrealized holding gains on securities available for sale	$	42,628		$	1,418,929		$	57,469		$	1,241,357
Related income tax effect		(14,493	)		(482,436	)		(19,539	)		(422,061	)
		28,135			936,493			37,930			819,296
Unrealized holding loss on interest rate swap contract		-			179,773			-			353,552
Related income tax effect		-			(72,582	)		-			(141,990	)
		-			107,191			-			211,562
Pension liability		3,220			3,219			6,441			6,438
Related income tax effect		(1,294	)		(1,293	)		(2,589	)		(2,585	)
		1,926			1,926			3,852			3,853
Other comprehensive income	$	30,061		$	1,045,610		$	41,782		$	1,034,711

 (9)  Recent Accounting Pronouncements

 ASU 2011-11 (Disclosures about offsetting Assets and Liabilities)

On December 19, 2011, The FASB issued Accounting Standards Update (ASU) 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This new guidance affects all entities with financial instruments or derivatives that are either presented on a net basis in the balance sheet or subject to an enforceable master netting arrangement or a similar arrangement.  The ASU does not change existing offsetting criteria in U.S. generally accepted accounting principles (U.S. GAAP) or the permitted balance sheet presentation for items meeting the criteria.  To help financial statement users better assess the effect or potential effect of offsetting arrangements on an entity’s financial position, the new guidance requires disclosures in the financial statement notes that provide both net and gross information about assets and liabilities that have been offset and the related arrangements.

The new disclosure requirements in the ASU are intended to enhance comparability between financial statements prepared using U.S. GAAP and those prepared in accordance with International Financial Reporting Standards (IFRS).  The eligibility criteria for offsetting are different in U.S. GAAP and IFRS. In January 2011, the FASB and the International Accounting Standards Board issued an exposure draft proposing new common criteria for offsetting, but the boards could not agree.  The FASB voted to retain existing U.S. GAAP guidance on offsetting and to require expanded disclosures for financial instruments and derivative instruments that are either offset in the balance sheet or eligible for offset subject to a master netting arrangement or similar arrangement.

27

The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Disclosures required by the amendments should be provided retrospectively for all comparative periods. The FASB has published a short recap highlighting the significant issues the ASU addresses.  The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial position or results of operations.

ASU 2011-08 (Testing for Goodwill for Impairment)

In September, 2011, the FASB issued Accounting Standards Update (ASU) 2011-08, “Testing Goodwill for Impairment”.The purpose of this ASU is to simplify how entities test goodwill for impairment by adding a new first step to the preexisting goodwill impairment test under ASC Topic 350, Intangibles-Goodwill and other.  This amendment gives the entity the option to first assess a variety of qualitative factors such as economic conditions, cash flows, and competition to determine whether it was more likely than not that the fair value of goodwill has fallen below its carrying value.  If the entity determines that it is not likely that the fair value has fallen below its carrying value, then the entity will not have to complete the original two-step test under Topic 350. The amendments in this ASU are effective for impairment tests performed for fiscal years beginning after December 15, 2011.  The Company is evaluating the impact of this ASU on its consolidated financial statements.

ASU 2011-05 (Presentation of Comprehensive Income)

The provisions of this ASU amend FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The ASU prohibits the presentation of the components of comprehensive income in the statement of shareholders’ equity. Reporting entities are allowed to present either a statement of comprehensive income, which reports both net income and other comprehensive income, or separate, but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all three presentations were acceptable. Regardless of the presentation selected, the reporting entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this ASU are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities.

ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income (“AOCI”) in Accounting Standards Update No. 2011-05,” was issued by the FASB on December 23, 2011. This ASU defers the implementation of only those provisions in ASU 2011-05 dealing with the presentation of items reclassified out of AOCI.

The amendments in ASU 2011-12 and ASU 2011-05 are effective at the same time: For public entities, the guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The requirements are effective for nonpublic entities for fiscal years ending after December 15, 2012. The FASB has published a short recap of the reasons for the ASU 2011-12 deferrals.  The adoption of this guidance did not have any impact on the Company’s consolidated financial position or results of operations.

ASU 2011-04 (Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs)

This ASU amends FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The ASU clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity’s shareholders’ equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of Level 3 assets. The ASU also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The ASU also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in Level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as Level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011.  The adoption of this ASU did not affect the Company’s consolidated financial position or results of operations.

28

(10)  Fair Value Disclosures

U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

In general, fair value is based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and counterparty creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future values.  While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities Available for Sale.  Securities classified as available for sale are reported at fair value utilizing Level 1 and Level 2 inputs.  For these securities, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

Impaired loans.  Loans included in the following table are those which the Company has measured and recognized 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 on the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.  The fair value consists of the loan balances less specific valuation allowances.

Other Real Estate Owned.  Foreclosed properties are adjusted to fair value less estimated selling costs at the time of foreclosure in preparation for transfer from portfolio loans to other real estate owned (“OREO”), thereby establishing a new accounting basis.  The Company subsequently adjusts the fair value of the OREO utilizing Level 3 inputs on a non-recurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

29

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2012:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	17,100,100	$	-	$	-	$	17,100,100
Residential collateralized mortgage obligations- GSE		-		11,466,705		-		11,466,705
Residential collateralized mortgage obligations - non GSE		-		3,632,985		-		3,632,985
Residential mortgage backed securities – GSE		-		36,877,742		-		36,877,742
Obligations of State and Political subdivisions		-		5,739,097		-		5,739,097
Trust preferred debt securities – single issuer		-		1,895,973		-		1,895,973
Corporate debt securities		-		19,076,196		-		19,076,196
Restricted stock		-		1,723,800		-		1,723,800
Mutual fund		-		25,000		-		25,000
December 31, 2011:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	7,108,870	$	12,363,819		-	$	19,472,689
Residential collateralized mortgage obligations- GSE		-		13,898,133		-		13,898,133
Residential collateralized mortgage obligations - non GSE		-		4,300,444		-		4,300,444
Residential mortgage backed securities – GSE		-		42,687,209		-		42,687,209
Obligations of State and Political subdivisions		-		5,700,514		-		5,700,514
Trust preferred debt securities – single issuer		-		1,751,241		-		1,751,241
Corporate debt securities		-		1,435,944		-		1,435,944
Restricted stock		-		4,412,600		-		4,412,600
Mutual fund		-		25,000		-		25,000

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a non-recurring basis at June 30, 2012 and December 31, 2011 are as follows:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2012:
Impaired loans		-		-	$	2,544,053	$	2,544,053
Other real estate owned		-		-		3,000,619		3,000,619
December 31, 2011:
Impaired loans		-		-	$	2,038,805	$	2,038,805
Other real estate owned		-		-		491,536		491,536

30

Impaired loans, measured at fair value and included in the above table, consisted of 12 loans having an aggregate balance of $3,068,290 and specific loan loss allowances of $524,237 at June 30, 2012 and nine loans at December 31, 2011 having an aggregate balance of $2,597,761 and specific loan loss allowances of $558,956.

The following table presents additional qualitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value Estimate	Valuation Techniques	Unobservable Input	Range of Adjustments
June 30, 2012
Impaired loans	$2,544,053	Appraisal of	Appraisal
		collateral (1)	adjustments (1)	5-50%
	$3,000,619
Other Real Estate Owned		Appraisal of	Appraisal
		collateral (1)	adjustments (1),(2)	8-60%

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs that are not identifiable.

(2) Includes qualitative adjustments by management and estimated liquidation expenses

The fair values of other real estate owned was determined using appraisals, which may be discounted based on management’s review and changes in market conditions.

The following is a summary of fair value versus the carrying value of all of the Company’s financial instruments.  For the Company and the Bank, as for most financial institutions, the bulk of their assets and liabilities are considered financial instruments.  Many of the financial instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction.  Therefore, significant estimations and present value calculations were used for the purpose of this note.  Changes in assumptions could significantly affect these estimates.

Estimated fair values have been determined by using the best available data and an estimation methodology suitable for each category of financial instruments as follows:

Cash and Cash Equivalents, Accrued Interest Receivable and Accrued Interest Payable (Carried at Cost). The carrying amounts reported in the balance sheet for cash and cash equivalents, accrued interest receivable and accrued interest payable approximate fair value.

Securities Held to Maturity (Carried at Amortized Cost). The fair values of securities held to maturity are determined in the same manner as for securities available for sale.

Loans Held For Sale (Carried at Lower of Aggregated Cost or Fair Value). The fair values of loans held for sale are determined, when possible, using quoted secondary market prices. If no such quoted market prices exist, fair values are determined using quoted prices for similar loans, adjusted for the specific attributes of the loans.

Loans Receivable (Carried at Cost). The fair values of loans, excluding impaired loans subject to specific loss reserves, 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 re-price frequently and have no significant change in credit risk, fair values are based on carrying values.

31

Deposit Liabilities (Carried at Cost). The fair values disclosed for demand deposits (e.g., interest and non-interest demand and savings accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates of deposit to a schedule of aggregated expected monthly maturities of time deposits.

Borrowings and Subordinated Debentures (Carried at Cost). The carrying amounts of short-term borrowings approximate their fair values. The fair values of long-term FHLB advances and subordinated debentures are estimated using discounted cash flow analysis, based on quoted or estimated interest rates for new borrowings with similar credit risk characteristics, terms and remaining maturities. 

The estimated fair values, and the recorded book balances, at June 30, 2012 and December 31, 2011 are as follows:

	December 31, 2011
	Carrying			Fair
	Value			Value
Cash and cash equivalents	$	15,195,259		$	15,195,259
Securities available for sale		93,683,774			93,683,774
Securities held to maturity		142,474,423			147,621,280
Loans held for sale		19,234,111			19,234,111
Loans, net		469,897,000			471,634,000
Accrued interest receivable		2,996,848			2,996,848
Deposits		(623,862,485	)		(625,764,000	)
Borrowings		(88,300,000	)		(90,163,000	)
Redeemable subordinated debentures		(18,557,000	)		(18,557,000	)
Accrued interest payable		(1,186,511	)		(1,186,511	)

				June 30, 2012
	Carrying	Level 1		Level 2		Level 3		Fair
	Value	Inputs		Inputs		Inputs		Value
Cash and cash equivalents	$16,579,398	$	-	$	16,579,398	$	-	$	16,579,398
Securities available for sale	97,537,598		17,100,100		80,437,498		-		97,537,598
Securities held to maturity	122,992,218		-		128,856,455		-		128,856,455
Loans held for sale	16,595,846		16,595,846		-		-		16,595,846
Loans, net	473,537,672		-		-		476,920,000		476,920,000
Accrued interest receivable	2,767,959		-		2,767,959		-		2,767,959
Deposits	(669,071,450)		-		(670,964,000)		-		(670,964,000	)
Borrowings	(25,300,000)		-		(26,945,000)		-		(26,945,000	)
Redeemable subordinated debentures	(18,557,000)		-		(18,557,000)		-		(18,557,000	)
Accrued interest payable	(1,010,905)		-		(1,010,905)		-		(1,010,905	)

Loan commitments and standby letters of credit as of June 30, 2012 and December 31, 2011 are based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit is nominal.

32

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

The purpose of this discussion and analysis of the operating results and financial condition at June 30, 2012 is intended to help readers analyze the accompanying financial statements, notes and other supplemental information contained in this document. Results of operations for the three month and six month periods ended June 30, 2012 are not necessarily indicative of results to be attained for any other period.

This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, notes and tables included elsewhere in this report and Part II, Item 7 of the Company’s Form 10-K (Management’s Discussion and Analysis of Financial Condition and Results of Operations) for the year ended December 31, 2011, as filed with the Securities and Exchange Commission (the “SEC”) on March 23, 2012.

General

Throughout the following sections, the “Company” refers to 1st Constitution Bancorp and, as the context requires, its wholly-owned subsidiary, 1st Constitution Bank (the “Bank”) and the Bank’s wholly-owned subsidiaries, 1st Constitution Investment Company of New Jersey, Inc., FCB Assets Holdings, Inc., 1st Constitution Title Agency, 204 South Newman Street Corp. and 249 New York Avenue, LLC.  1st Constitution Capital Trust II, (“Trust II”), a subsidiary of the Company, is not included in the Company’s consolidated financial statements as it is a variable interest entity and the Company is not the primary beneficiary.

The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The Company was organized under the laws of the State of New Jersey in February 1999 for the purpose of acquiring all of the issued and outstanding stock of the Bank, a full service commercial bank which began operations in August 1989, and thereby enabling the Bank to operate within a bank holding company structure. The Company became an active bank holding company on July 1, 1999. The Bank is a wholly-owned subsidiary of the Company. Other than its ownership interest in the Bank, the Company currently conducts no other significant business activities.

The Bank operates fourteen branches, and manages an investment portfolio through its subsidiary, 1st Constitution Investment Company of New Jersey, Inc.  FCB Assets Holdings, Inc., a subsidiary of the Bank, is used by the Bank to manage and dispose of repossessed real estate.

Trust II, a subsidiary of the Company, was created in May 2006 to issue trust preferred securities to assist the Company to raise additional regulatory capital.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements.  When used in this and in future filings by the Company with the SEC, in the Company’s press releases and in oral statements made with the approval of an authorized executive officer of the Company, the words or phrases “will,” “will likely result,” “could,” “anticipates,” “believes,” “continues,” “expects,” “plans,” “will continue,” “is anticipated,” “estimated,” “project” or “outlook” or similar expressions (including confirmations by an authorized executive officer of the Company of any such expressions made by a third party with respect to the Company) are intended to identify forward-looking statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made.  Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.

Factors that may cause actual results to differ from those results, expressed or implied, include, but are not limited to, those listed under “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K filed with the SEC on March 23, 2011, such as the overall economy and the interest rate environment; the ability of customers to repay their obligations; the adequacy of the allowance for loan losses; competition; significant changes in accounting, tax or regulatory practices and requirements; certain interest rate risks; risks associated with investments in mortgage-backed securities; and risks associated with speculative construction lending. Although management has taken certain steps to mitigate any negative effect of the aforementioned items, significant unfavorable changes could severely impact the assumptions used and could have an adverse effect on profitability. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements, except as required by law.

33

Acquisition of Three Branches in 2011

On March 25, 2011, the Bank acquired certain deposit and other liabilities, real estate and related assets of the Rocky Hill, Hillsborough and Hopewell, New Jersey branch banking offices from another financial institution for a purchase price of $9.85 million (the “March 2011 Acquisition”).  The March 2011 Acquisition was completed pursuant to the terms and conditions of the Branch Purchase and Assumption Agreement and Agreement for Purchase dated as of December 30, 2010, which was previously disclosed on a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 3, 2011.

As a result of the March 2011 Acquisition, the three branches became branches of the Bank.  Included in the March 2011 Acquisition were the assumption of deposit liabilities of $111.9 million, primarily consisting of demand deposits, and the acquisition of cash of approximately $101.5 million,  fixed assets of approximately $4.6 million, which includes, without limitation, ownership of the real estate and improvements upon which the branches are situated, and loans of $862,000.  The Bank recorded goodwill of approximately $3.2 million and a core deposit intangible asset of approximately $1.7 million as a result of the March 2011 Acquisition.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2012 Compared to the Three Months Ended June 30, 2011

Summary

The Company realized net income of $1,298,108 for the three months ended June 30, 2012, an increase of $469,192, or 56.6%, from the $828,916 reported for the three months ended June 30, 2011.  The increase was due primarily to increases in net interest income and non-interest income which, in total, offset increases in the provision for loan losses and non-interest expenses.  Net income per diluted common share was $0.25 for the three months ended June 30, 2012 compared to net income per diluted common share of $0.16 for the three months ended June 30, 2011.   All prior year share information has been adjusted for the effect of a 5% stock dividend declared on December 15, 2011 and paid on February 2, 2012 to shareholders of record on January 17, 2012.

Key performance ratios improved for the three months ended June 30, 2012 due to higher net income for that period compared to the three months ended June 30, 2011.  Return on average assets and return on average equity were 0.68% and 9.18% for the three months ended June 30, 2012 compared to 0.45% and 6.55%, respectively, for the three months ended June 30, 2011.

The Bank’s results of operations depend primarily on net interest income, which is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, and the difference between the yield on interest-earning assets and the rate paid on interest-bearing liabilities.  Other factors that may affect the Bank’s operating results are general and local economic and competitive conditions, government policies and actions of regulatory authorities.  The net interest margin on a tax-equivalent basis for the three months ended June 30, 2012 was 3.87% as compared to the 3.25% net interest margin recorded for the three months ended June 30, 2011, an increase of 62 basis points.  The Company will continue to closely monitor the mix of earning assets and funding sources to maximize net interest income during this challenging interest rate environment.

Earnings Analysis

Net Interest Income

Net interest income, the Company’s largest and most significant component of operating income, is the difference between interest and fees earned on loans and other earning assets and interest paid on deposits and borrowed funds. This component represented 84.8% of the Company’s net revenues for the three month period ended June 30, 2012 and 82.1% of net revenues for the three month period ended June 30, 2011. Net interest income also depends upon the relative amount of average interest-earning assets, average interest-bearing liabilities, and the interest rate earned or paid on them, respectively.

34

The Company’s net interest income increased by $1,413,883, or 27.1 %, to $6,627,922 for the three months ended June 30, 2011 from the $5,214,039 reported for the three months ended June 30, 2011.  The increase in net interest income was primarily attributable to lower rates paid on interest-bearing liabilities during the current period.  The average rate paid on interest-bearing liabilities for the three months ended June 30, 2012 was 0.89%, a reduction of 43 basis points compared to 1.32% paid for the three months ended June 30, 2011. The portfolio yield increased despite declining market rates due to a shift in average assets away from securities into loans which typically have higher yields than securities.

Average interest earning assets increased by $43,581,005, or 6.6%, to $707,149,181 for the three month period ended June 30, 2012 from $663,568,176 for the three month period ended June 30, 2011.  The overall yield on interest earning assets, on a tax-equivalent basis, increased 22 basis points to 4.60% for the three month period ended June 30, 2012 when compared to 4.38% for the three month period ended June 30, 2011.  The portfolio yield increased despite declining market rates due to a shift in average assets away from securities and into loans.

Average interest bearing liabilities increased by $10,681,057, or 1.9%, to $577,646,246 for the three month period ended June 30, 2012 from $566,965,189 for the three month period ended June 30, 2011.  Overall, the cost of total interest bearing liabilities decreased 43 basis points to 0.89% for the three months ended June 30, 2012 compared to 1.32% for the three months ended June 30, 2011.

The net interest margin (on a tax-equivalent basis), which is net interest income divided by average interest earning assets, was 3.87% for the three months ended June 30, 2012 compared to 3.25% the three months ended June 30, 2011.  

Provision for Loan Losses 

Management considers a complete review of the following specific factors in determining the provisions for loan losses: historical losses by loan category, non-accrual loans, and problem loans as identified through internal classifications, collateral values, and the growth and size of the loan portfolio.  In addition to these factors, management takes into consideration current economic conditions and local real estate market conditions.  Using this evaluation process, the Company’s provision for loan losses was $549,998 for the three months ended June 30, 2012 compared to $275,000 for the three months ended June 30, 2011.  The increased provision for 2012 was primarily the result of increased general allowances on construction loans and commercial real estate loans.

Non-Interest Income

Total non-interest income for the three months ended June 30, 2012 was $1,187,966, an increase of $47,654, or 4.2%, over non-interest income of $1,140,312 for the three months ended June 30, 2011.

Service charges on deposit accounts represent a consistent source of non-interest income. Service charge revenues decreased to $231,256 for the three months ended June 30, 2012 from $234,898 for the three months ended June 30, 2011.

Gain on sales of loans held for sale increased by $83,504, or 20.3%, to $495,147 for the three months ended June 30, 2012 compared to $411,643 for the three months ended June 30, 2011.  The Bank sells both residential mortgage loans and Small Business Administration loans in the secondary market.  The volume of mortgage loan sales increased significantly for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.

Non-interest income also includes income from bank-owned life insurance (“BOLI”), which amounted to $113,176 for the three months ended June 30, 2012 compared to $103,522 for the three months ended June 30, 2011, an increase of $9,654 for the second quarter of 2012 as compared to the second quarter of 2011. The Bank purchased tax-free BOLI assets to partially offset the cost of employee benefit plans and reduce the Company’s overall effective tax rate.

35

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rental, wire transfer service fees and Automated Teller Machine fees for non-Bank customers. Decreased customer demand for these services contributed $348,387 to the other income component of non-interest income for the three months ended June 30, 2012 compared to $390,249 for the three months ended June 30, 2011, a decrease of $41,862 for the second quarter of 2012 as compared to the second quarter of 2011.

Non-Interest Expense

Non-interest expenses increased by $218,189, or 4.2%, to $5,373,974 for the three months ended June 30, 2012 from $5,155,785 for the three months ended June 30, 2011.  The current period increase in other real estate owned expenses was the primary cause for this current period increase in total non-interest expense when compared with the prior period’s non-interest expense.  The following table presents the major components of non-interest expenses for the three months ended June 30, 2012 and 2011.

Non-interest Expenses
	Three months ended June 30,
	2012		2011
Salaries and employee benefits	$	3,154,903	$	2,843,948
Occupancy expenses		613,534		580,969
Data processing services		252,545		313,776
Marketing		53,789		52,021
Regulatory, professional and other fees		232,028		286,084
FDIC insurance expense		139,873		246,458
Other real estate owned expenses		418,563		72,971
Amortization of intangible assets		66,991		66,992
All other expenses		418,748		692,566
	$	5,373,974	$	5,155,785

Salaries and employee benefits, which represent the largest portion of non-interest expenses, increased by $310,955, or 10.9%, to $3,154,903 for the three months ended June 30, 2012 compared to $2,843,948 for the three months ended June 30, 2011. The increase in salaries and employee benefits for the three months ended June 30, 2012 was a result of regular merit increases and increased health care costs.

Occupancy expenses increased by $32,565, or 5.6%, to $613,534 for the three months ended June 30, 2012 compared to $580,969 for the three months ended June 30, 2011.   The increase in occupancy expenses was primarily attributable to increased depreciation, property taxes and maintenance costs in maintaining the Bank’s branch properties.

The cost of data processing services has decreased to $252,545 for the three months ended June 30, 2012 from $313,776 for the three months ended June 30, 2011, as Bank management reviewed all data processing systems during the second quarter of 2012, streamlined operating efficiencies and purged non-essential elements, resulting in lower monthly costs.

Regulatory, professional and other fees decreased by $54,056, or 18.9%, to $232,028 for the three months ended June 30, 2012 compared to $286,084 for the three months ended June 30, 2011.  During the second quarter of 2011, the Company incurred non-recurring professional fees in connection with the March 2011 Acquisition, which was completed on March 25, 2011.

Other real estate owned expenses increased by $368,592 to $441,563 for the three months ended June 30, 2012 compared to $72,971 for the three months ended June 30, 2011 as the Company incurred increased loss provisions, property taxes, and maintenance expenses on more properties during the second quarter of 2012 compared to the second quarter of 2011.

36

FDIC insurance expense decreased to $139,873 for the three months ended June 30, 2012 compared to $246,458 for the three months ended June 30, 2011 as a result of the changes required by the Dodd-Frank Act with respect to FDIC premium assessment rules.

All other expenses decreased to $418,748 for the three months ended June 30, 2012 from $692,566 for the three months ended June 30, 2011 primarily due to decreases in the Bank’s office and supplies expenses.  During the second quarter of 2012, fewer maintenance agreements on equipment were renewed as compared with the same period in the prior year.  In addition, the Bank contracted with a new vendor for office supplies during the second quarter of 2012 that has resulted in reduced costs as compared with the same period in 2011.

An important financial services industry productivity measure is the efficiency ratio. The efficiency ratio is calculated by dividing total operating expenses by net interest income plus non-interest income. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same or greater volume of income, while a decrease would indicate a more efficient allocation of resources.  The Company’s efficiency ratio decreased to 68.8% for the three months ended June 30, 2012 compared to 81.1% for the three months ended June 30, 2011.  

Income Taxes

Income tax expense increased by $499,158 to $593,808 for the three months ended June 30, 2012 from $94,650 for the three months ended June 30, 2011.  The increase was primarily due to a higher level of pretax income for the second quarter of 2012 as compared to the second quarter of 2011.  

Six Months Ended June 30, 2012 Compared to the Six Months Ended June 30, 2011

Summary

The Company realized net income of $2,464,840 for the six months ended June 30, 2012, an increase of 52.3% from the $1,618,784 reported for the six months ended June 30, 2011.  The increase was due primarily to increases in net interest income and non-interest income which, in total, offset increases in the provision for loan losses and non-interest expenses for the six months ended June 30, 2012 compared to the same period in 2011.

Diluted net income per common share was $0.48 for the six months ended June 30, 2012 compared to diluted net income per common share of $0.32 for the six months ended June 30, 2011.  All prior year share information has been adjusted for the effect of a 5% stock dividend declared on December 15, 2011, and paid on February 2, 2012 to shareholders of record on January 17, 2012.

Key performance ratios improved for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011 due to higher net income for the 2012 period.  Return on average assets and return on average equity were 0.65% and 8.81% for the six months ended June 30, 2012 compared to 0.47% and 6.52%, respectively, for the six months ended June 30, 2011.

The Bank’s results of operations depend primarily on net interest income, which is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, and the difference between the yield on interest-earning assets and the rate paid on interest-bearing liabilities.  Other factors that may affect the Bank’s operating results are general and local economic and competitive conditions, government policies and actions of regulatory authorities.  The net interest margin for the six months ended June 30, 2012 was 3.92% as compared to the 3.38% net interest margin recorded for the six months ended June 30, 2011, an increase of 54 basis points.  The Company will continue to closely monitor the mix of earning assets and funding sources to maximize net interest income during this challenging interest rate environment.

37

Earnings Analysis

Net Interest Income

Net interest income, the Company’s largest and most significant component of operating income, is the difference between interest and fees earned on loans and other earning assets and interest paid on deposits and borrowed funds. This component represented 84.9% of the Company’s net revenues for the six month period ended June 30, 2012 and 82.7% of net revenues for the six month period ended June 30, 2011. Net interest income also depends upon the relative amount of interest-earning assets, interest-bearing liabilities, and the interest rate earned or paid on them, respectively.

The following table sets forth the Company’s consolidated average balances of assets, liabilities and shareholders’ equity as well as interest income and expense on related items and the Company’s average yield or rate for the six month periods ended June 30, 2012 and 2011, respectively. The average rates are derived by dividing interest income and expense by the average balance of assets and liabilities, respectively.

38

Average Balance Sheets with Resultant Interest and Rates
(yields on a tax-equivalent basis)	Six months ended June 30, 2012						Six months ended June 30, 2011
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
Assets:
Federal Funds Sold/Short-Term Investments	$	36,860,458	$	48,340		0.26%	$	53,784,770	$	72,110		0.27%
Investment Securities:
Taxable		171,349,167		2,327,759		2.72%		208,521,295		2,788,077		2.70%
Tax-exempt		51,276,230		1,230,374		4.81%		37,213,024		942,463		5.04%
Total		222,625,397		3,558,133		3.21%		245,734,319		3,730,540		3.06%
Loan Portfolio:
Construction		54,948,513		1,855,335		6.77%		64,630,882		1,994,670		6.22%
Residential real estate		12,303,773		316,592		5.16%		10,512,306		322,570		6.19%
Home Equity		10,779,569		303,956		5.65%		12,380,687		353,045		5.75%
Commercial and commercial real estate		144,033,903		5,287,559		7.36%		131,980,885		5,047,386		7.71%
Mortgage warehouse lines		184,622,769		4,396,188		4.78%		95,073,344		2,348,262		4.98%
Installment		378,818		12,629		6.69%		429,371		14,948		7.02%
All Other Loans		32,259,311		561,304		3.49%		23,078,861		440,765		3.85%
Total		439,326,656		12,733,563		5.81%		338,086,336		10,521,646		6.28%
Total Interest-Earning Assets		698,812,511		16,340,036		4.69%		637,605,425		14,324,296		4.53%
Allowance for Loan Losses		(5,955,926)						(6,007,813)
Cash and Due From Bank		12,726,136						23,608,726
Other Assets		52,881,065						39,973,930
Total Assets	$	758,463,786					$	695,180,268
Liabilities and Shareholders’ Equity: Interest-Bearing Liabilities:
Money Market and NOW Accounts	$	204,902,097	$	542,887		0.53%	$	164,207,897	$	853,425		1.05%
Savings Accounts		191,355,779		620,354		0.65%		179,218,559		747,154		0.84%
Certificates of Deposit		147,499,965		1,101,598		1.50%		157,516,362		1,327,825		1.70%
Other Borrowed Funds		16,220,330		221,561		2.74%		11,396,740		210,632		3.56%
Trust Preferred Securities		18,557,000		195,892		2.12%		18,557,000		501,434		5.37%
Total Interest-Bearing Liabilities		578,535,171		2,682,292		0.93%		531,436,558		3,640,470		1.38%
Net Interest Spread						3.76%						3.15%
Demand Deposits		115,201,429						103,997,443
Other Liabilities		8,634,205						9,677,753
Total Liabilities		702,370,805						645,111,754
Shareholders’ Equity		56,092,981						50,068,514
Total Liabilities and Shareholders’ Equity	$	758,463,786					$	695,180,268
Net Interest Margin			$	13,657,744		3.92%			$	10,683,826		3.38%

The Company’s net interest income increased by $2,880,317, or 27.8%, to $13,258,481 for the six months ended June 30, 2012 from the $10,378,164 reported for the six months ended June 30, 2011. The increase in net interest income was attributable to an increased loan portfolio volume combined with lower rates paid on interest-bearing liabilities, which was more than sufficient to offset the reduced volume of the investment portfolio.

39

Average interest earning assets increased by $61,207,086, or 9.6%, to $698,812,511 for the six month period ended June 30, 2012 from $637,605,425 for the six month period ended June 30, 2011.  The average investment securities portfolio decreased by $23,108,922, or 9.4%, to $222,625,397 for the six month period ended June 30, 2012 compared to $245,734,319 for the six month period ended June 30, 2011 as proceeds from maturities and prepayments of U.S. Government sponsored agency bonds and obligations of states and political subdivisions during the 2012 period were being invested in the loan portfolio.  The average loan portfolio increased by $101,240,320, or 29.9%, to $439,326,656 for the six month period ended June 30, 2012 compared to $338,086,336 for the six month period ended June 30, 2011.  The overall risk profile of the loan portfolio was reduced by a change in its composition via a reduction in average construction loans of $9,682,369, or 15.0%, to $54,948,513 for the six month period ended June 30, 2012 compared to $64,630,882 for the six month period ended June 30, 2011 as the current adverse economic conditions have resulted in depreciation of collateral values securing these loans.  Overall, the yield on interest earning assets, on a tax-equivalent basis, increased 16 basis points to 4.69% for the six month period ended June 30, 2012 when compared to 4.53% for the six month period ended June 30, 2011.

Average interest bearing liabilities increased by $47,098,613, or 8.9%, to $578,535,171 for the six month period ended June 30, 2012 from $531,436,558 for the six month period ended June 30, 2011.  Overall, the cost of total interest bearing liabilities decreased 45 basis points to 0.93% for the six months ended June 30, 2012 compared to 1.38% for the six months ended June 30, 2011.

The net interest margin (on a tax-equivalent basis), which is net interest income divided by average interest earning assets, was 3.92% for the six months ended June 30, 2012 compared to 3.38% the six months ended June 30, 2011.

Provision for Loan Losses

Management considers a complete review of the following specific factors in determining the provisions for loan losses: historical losses by loan category, non-accrual loans, problem loans as identified through internal classifications, collateral values, and the growth and size of the loan portfolio.  In addition to these factors, management takes into consideration current economic conditions and local real estate market conditions.  Using this evaluation process, the Company’s provision for loan losses was $1,149,996 for the six months ended June 30, 2012 compared to $674,998 for the six months ended June 30, 2011.  The increased provision for 2012 was primarily the result of increased general allowances on construction loans and commercial real estate loans.

Non-Interest Income

Total non-interest income for the six months ended June 30, 2012 was $2,353,131, an increase of $188,069, or 8.7%, over non-interest income of $2,165,062 for the six months ended June 30, 2011.

Service charges on deposit accounts represent a significant source of non-interest income. Service charges on deposit accounts increased by $48,488, or 11.8%, to $459,228 for the six months ended June 30, 2012 from $410,740 for the six months ended June 30, 2011.  This increase was primarily the result of an increase in the number of deposit accounts subject to service charges during the six months ended June 30, 2012 compared to the prior year period.

Gain on sales of loans increased by $114,982, or 13.6%, to $963,364 for the six months ended June 30, 2012 compared to $848,382 for the six months ended June 30, 2011.  The Bank sells both residential mortgage loans and SBA loans in the secondary market.  The volume of mortgage loan sales increased for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.

Non-interest income also includes income from bank-owned life insurance (“BOLI”), which amounted to $225,098 for the six months ended June 30, 2012 compared to $198,659 for the six months ended June 30, 2011. The Bank purchased tax-free BOLI assets to partially offset the cost of employee benefit plans and reduced the Company’s overall effective tax rate.

40

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rental, wire transfer service fees and Automated Teller Machine fees for non-Bank customers.  Decreased customer demand for these services contributed to the other income component of non-interest income amounting to $705,441 for the six months ended June 30, 2012, compared to $707,281 for the six months ended June 30, 2011.

Non-Interest Expense

Non-interest expenses increased by $1,167,874, or 11.9%, to $10,986,491 for the six months ended June 30, 2012 from $9,818,617 for the six months ended June 30, 2011.  The March 2011 Acquisition was the primary cause for this current period increase in total non-interest expense and each of its major components when compared with the prior period non-interest expense.  Operating expenses of the three acquired branches are included in all six months of operations for 2012 whereas 2011 operating expenses for the six month period include only three months of expenses for these branches.  The current period increase in other real estate owned expenses was another significant factor contributing to the increase in total non-interest expenses.  The following table presents the major components of non-interest expenses for the six months ended June 30, 2012 and 2011.

Non-interest Expenses	Six months ended June 30,
	2012		2011
Salaries and employee benefits	$	6,095,253	$5,420,612
Occupancy expenses		1,337,320	1,147,707
Data processing services		516,120	617,249
Marketing		98,824	79,987
Regulatory, professional and other fees		414,736	484,236
FDIC insurance expense		287,266	474,005
Other real estate owned expenses		819,190	309,352
Amortization of intangible assets		133,983	76,170
All other expenses		1,283,799	1,209,299
	$	10,986,491	$9,818,617

Salaries and employee benefits, which represent the largest portion of non-interest expenses, increased by $674,641, or 12.4%, to $6,095,253 for the six months ended June 30, 2012 compared to $5,420,612 for the six months ended June 30, 2011. In addition to the inclusion of three months of salary and benefits costs due to the March 2011 Acquisition,  the increase in salaries and employee benefits for the six months ended June 30, 2012 was a result of regular merit increases and increased health care costs.

Occupancy expenses increased by $189,613, or 16.5%, to $1,337,320 for the six months ended June 30, 2012 compared to $1,147,707 for the six months ended June 30, 2011.  In addition to the operating costs of the three new branches, the increase in occupancy expenses for the current period was primarily attributable to increased depreciation, property taxes and maintenance costs in maintaining the Bank’s branch properties.

Regulatory, professional and other fees decreased by $69,500, or 14.4%, to $414,736 for the six months ended June 30, 2012 compared to $484,236 for the six months ended June 30, 2011.  During the first six months of 2011, the Company incurred additional fees primarily in connection with the March 2011 Acquisition.

Other real estate owned expenses increased by $509,838 to $819,190 for the six months ended June 30, 2012 compared to $309,352 for the six months ended June 30, 2011 as the Company recorded $501,644 in loss provisions during 2012 and incurred property tax and maintenance costs on more properties held as other real estate owned during the first six months of 2012 as compared to the first six months of 2011.

Amortization of intangible assets expense increased to $133,983 for the six months ended June 30, 2012 compared to $76,170 for the six months ended June 30, 2011 as the expense for the current period included six months of amortization of the $1.7 million core deposit intangible asset resulting from the March 2011 Acquisition versus three months of amortization of this intangible asset in the prior year period.

41

An important financial services industry productivity measure is the efficiency ratio. The efficiency ratio is calculated by dividing total operating expenses by net interest income plus non-interest income. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same or greater volume of income, while a decrease would indicate a more efficient allocation of resources.  The Company’s efficiency ratio decreased to 70.4% for the six months ended June 30, 2012 compared to 78.3% for the six months ended June 30, 2011.  

Income Taxes

The Company had income tax expense of $1,010,285 for the six months ended June 30, 2012 compared to income tax expense of $430,827 for the six months ended June 30, 2011.  The increase in the income tax expense for the 2012 period was primarily due to the higher level of taxable interest income for the first six months of 2012 as compared to the first six months of 2011.

Financial Condition

June 30, 2012 Compared with December 31, 2011

Total consolidated assets at June 30, 2012 were $777,498,573, representing a decrease of $14,228,342, or 1.8%, from total consolidated assets of $791,726,915 at December 31, 2011.  

Cash and Cash Equivalents

Cash and cash equivalentsat June 30, 2012 totaled $16,579,398 compared to $15,195,259 at December 31, 2011. Cash and cash equivalents at June 30, 2012 consisted of cash and due from banks of $16,567,985 and Federal funds sold/short term investments of $11,413. The corresponding balances at December 31, 2012 were $15,183,853 and $11,406, respectively.  To the extent that the Bank did not utilize the funds for loan originations or securities purchases, the cash inflows accumulated in cash and cash equivalents.

Loans Held for Sale

Loans held for sale at June 30, 2012 amounted to $16,595,846 compared to $19,234,111 at December 31, 2011. As indicated in the Consolidated Statements of Cash Flows, the amount of loans originated for sale was $79,079,430 for the six months ended June 30, 2012.

Investment Securities

Investment securities represented 28.4% of total assets at June 30, 2012 and 29.8% at December 31, 2011. Total investment securities decreased $15,628,381, or 6.6%, to $220,529,816 at June 30, 2012 from $236,158,197 at December 31, 2011.  Purchases of investments totaled $28,280,554 during the six months ended June 30, 2012, and proceeds from calls and repayments totaled $43,215,713 during the period.

Securities available for sale are investments that may be sold in response to changing market and interest rate conditions or for other business purposes.  Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk and to take advantage of market conditions that create more economically attractive returns.  At June 30, 2012, securities available for sale totaled $97,537,598, which was an increase of $3,853,824, or 4.1%, from securities available for sale totaling $93,683,774 at December 31, 2011.

42

At June 30, 2012, the securities available for sale portfolio had net unrealized gains of $2,375,767 compared to net unrealized gains of $2,318,299 at December 31, 2011.  These unrealized gains are reflected, net of tax, in shareholders’ equity as a component of accumulated other comprehensive income.

Securities held to maturity, which are carried at amortized historical cost, are investments for which there is the positive intent and ability to hold to maturity.  At June 30, 2012, securities held to maturity were $122,992,218, a decrease of $19,482,205, or 13.7%, from $142,474,423 at December 31, 2011.  The fair value of the held to maturity portfolio at June 30, 2011 was $128,856,455.

Proceeds from maturities and prepayments of securities during the first six months of 2012 were used primarily to reduce the Company’s borrowings.

Loans

The loan portfolio, which represents our largest asset, is a significant source of both interest and fee income. Elements of the loan portfolio are subject to differing levels of credit and interest rate risk. The Bank’s primary lending focus continues to be mortgage warehouse lines, construction loans, commercial loans, owner-occupied commercial mortgage loans and tenanted commercial real estate loans.

The following table sets forth the classification of loans by major category at June 30, 2012 and December 31, 2011.

Loan Portfolio Composition	June 30, 2012			December 31, 2011
Component	Amount		% of total	Amount		% of total
Construction loans	$	59,650,806	12%	$	49,285,783	10%
Residential real estate loans		11,324,340	2%		12,885,352	3%
Commercial business		58,059,665	12%		50,784,674	11%
Commercial real estate		107,365,638	22%		99,636,976	21%
Mortgage warehouse lines		230,776,678	48%		249,345,831	52%
Loans to individuals		11,439,694	2%		12,219,640	3%
Deferred loan fees and costs		950,823	0%		1,017,959	0%
All other loans		227,448	0%		255,556	0%
	$	479,795,092	100%	$	475,431,771	100%

The loan portfolio increased by $4,363,321, or 0.9%, to $479,795,092 at June 30, 2012, compared to $475,431,771 at December 31, 2011.  The mortgage warehouse lines portfolio decreased by $18,569,153, or 7.4%, to $230,776,678 at June 30, 2012 compared to $249,345,831 at December 31, 2011.  This component’s decrease at June 30, 2012 compared to December 31, 2011 was principally the result of a slowdown in traditional refinance activity as many borrowers that were credit qualified and had the required equity in their homes had previously refinanced their mortgages.

The Bank’s Mortgage Warehouse Funding Group offers a revolving line of credit that is available to licensed mortgage banking companies (the “Warehouse Line of Credit”) and that we believe has been successful from inception in 2008. The Warehouse Line of Credit is used by mortgage bankers to originate one-to-four family residential mortgage loans that are pre-sold to the secondary mortgage market, which includes state and national banks, national mortgage banking firms, insurance companies and government-sponsored enterprises, including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and others.  On average, an advance under the Warehouse Line of Credit remains outstanding for a period of less than 30 days, with repayment coming directly from the sale of the loan into the secondary mortgage market.  Interest (the spread between our borrowing cost and the rate charged to the client) and a transaction fee are collected by the Bank at the time of repayment.  Additionally, customers of the Warehouse Line of Credit are required to maintain deposit relationships with the Bank that, on average, represent 10% to 15% of the loan balances.

The ability of the Company to enter into larger loan relationships and management’s philosophy of relationship banking are key factors in the Company’s strategy for loan growth.  The ultimate collectability of the loan portfolio and recovery of the carrying amount of real estate are subject to changes in the Company’s market region’s economic environment and real estate market.

43

Non-Performing Assets

Non-performing assets consist of non-performing loans and other real estate owned. Non-performing loans are composed of (1) loans on a non-accrual basis and (2) loans which are contractually past due 90 days or more as to interest and principal payments but have not been classified as non-accrual.

The Bank’s policy with regard to non-accrual loans is that generally, loans are placed on a non-accrual status when they are 90 days past due, unless these loans are well secured and in the process of collection or, regardless of the past due status of the loan, when management determines that the complete recovery of principal or interest is in doubt.  Consumer loans are generally charged off after they become 120 days past due.  Subsequent payments on loans in non-accrual status are credited to income only if collection of principal is not in doubt.

Non-performing loans decreased by $292,515 to $2,698,955 at June 30, 2012 from $2,991,470 at December 31, 2011.  The major segments of non-accrual loans consist of commercial loans, commercial real estate loans and SBA loans which are in the process of collection and loans secured by residential real estate which is either in foreclosure or under contract to close after June 30, 2012.  The table below sets forth non-performing assets and risk elements in the Bank’s portfolio for the periods indicated.

As the table demonstrates, non-performing loans to total loans decreased modestly to 0.56% at June 30, 2012 from 0.63% at December 31, 2011.  Loan quality is still considered to be sound. This was accomplished through quality loan underwriting, a proactive approach to loan monitoring and aggressive workout strategies.

Non-Performing Assets and Loans	June 30,	December 31,
	2012	2011
Non-Performing loans:
Loans 90 days or more past due and still accruing	$0	$0
Non-accrual loans	2,698,955	2,991,470
Total non-performing loans	2,698,955	2,991,470
Other real estate owned	11,604,744	12,409,201
Total non-performing assets	$14,303,699	$15,400,671
Non-performing loans to total loans	0.56%	0.63%
Non-performing loans to total loans excluding mortgage warehouse lines	1.08%	1.32%
Non-performing assets to total assets	1.84%	1.95%
Non-performing assets to total assets excluding mortgage warehouse lines	2.62%	2.84%

Non-performing assets decreased by $1,096,972 to $14,303,699 at June 30, 2012 from $15,400,671 at December 31, 2011.  Other real estate owned decreased by $804,457 to $11,604,744 at June 30, 2012 from $12,409,201 at December 31, 2011.  Since December 31, 2011, the Bank sold other real estate owned properties totaling approximately $855,030. In addition, during the six months ended June 30, 2012, the Bank recorded a provision for loss on other real estate owned of $501,644.

At June 30, 2012, the Bank had eight loans totaling $1,254,132 which were troubled debt restructurings.  Three of these loans totaling $398,510 are included in the above table as nonaccrual loans.  The remaining five loans totaling $855,622 are considered performing loans.

Non-performing assets represented 1.84% of total assets at June 30, 2012 and 1.95% at December 31, 2011.

Management takes a proactive approach in addressing delinquent loans. The Company’s President meets weekly with all loan officers to review the status of credits past due 10 days or more. An action plan is discussed for delinquent loans to determine the steps necessary to induce the borrower to cure the delinquency and restore the loan to a current status. Also, delinquency notices are system generated when loans are five days past due and again at 15 days past due.

44

In most cases, the Company’s collateral is real estate and when the collateral is foreclosed upon, the real estate is carried at the lower of fair market value less the estimated selling costs or the initially recorded amount. The amount, if any, by which the recorded amount of the loan exceeds the fair market value of the collateral is a loss which is charged to the allowance for loan losses at the time of foreclosure or repossession. Resolution of a past due loan can be delayed if the borrower files a bankruptcy petition because a collection action cannot be continued unless the Company first obtains relief from the automatic stay provided by the bankruptcy code.

Allowance for Loan Losses and Related Provision

The allowance for loan losses is maintained at a level sufficient to absorb estimated credit losses in the loan portfolio as of the date of the financial statements.  The allowance for loan losses is a valuation reserve available for losses incurred or inherent in the loan portfolio and other extensions of credit.  The determination of the adequacy of the allowance for loan losses is a critical accounting policy of the Company.

The Company’s primary lending emphasis is the origination of commercial and commercial real estate loans and mortgage warehouse lines of credit.  Based on the composition of the loan portfolio, the inherent primary risks are deteriorating credit quality, a decline in the economy, and a decline in New Jersey real estate market values.  Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels.

All, or part, of the principal balance of commercial and commercial real estate loans and construction loans are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.  Consumer loans are generally charged off no later than 120 days past due on a contractual basis, earlier in the event of bankruptcy, or if there is an amount deemed uncollectible.  Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses.

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management’s assessment of probable estimated losses.  The Company’s methodology for assessing the adequacy of the allowance for loan losses consists of several key elements.  These elements may include a specific reserve for doubtful or high risk loans, an allocated reserve, and an unallocated portion.  

The Company consistently applies the following comprehensive methodology.  During the quarterly review of the allowance for loan losses, the Company considers a variety of factors that include:

· General economic conditions;

· Trends in charge-offs;

· Trends and levels of delinquent loans;

· Trends and levels of non-performing loans, including loans over 90 days delinquent;

· Trends in volume and terms of loans;

· Levels of allowance for specific classified loans; and

· Credit concentrations:

The methodology includes the segregation of the loan portfolio into loan types with a further segregation into risk rating categories. This allows for an allocation of the allowance for loan losses by loan type; however, the allowance is available to absorb any loan loss without restriction.  Larger balance, non-homogeneous loans representing significant individual credit exposures are evaluated individually through the internal loan review process.  It is this process that produces the watch list.  The borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated. Based on these reviews, an estimate of probable losses for the individual larger balance loans are determined, whenever possible, and used to establish loan loss reserves.  In general, for non-homogeneous loans not individually assessed, and for homogeneous loans, such as residential mortgages and consumer credits, the loans are collectively evaluated based on delinquency status, loan type, and historical losses. These loan groups are then internally risk rated.

45

The watch list includes loans that are assigned a rating of special mention, substandard, doubtful and loss.  Loans classified as special mention have potential weaknesses that deserve management’s close attention.  If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects.  Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans classified as doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable.  Loans rated as doubtful in whole, or in part, are placed in nonaccrual status.  Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses.

The specific reserve for impaired loans is established for specific loans which have been identified by management as being high risk loan assets.  The specific portion of the allowance is the total amount of potential unconfirmed losses for these individual doubtful loans. To assist in determining the fair value of loan collateral, the Company often utilizes independent third party qualified appraisal firms which in turn employ their own criteria and assumptions that may include occupancy rates, rental rates, and property expenses, among others.

The second category of reserves consists of the allocated portion of the allowance.  The allocated portion of the allowance is determined by taking pools of loans outstanding that have similar characteristics and applying historical loss experience for each pool.  This estimate represents the potential unconfirmed losses within the portfolio. Individual loan pools are created for commercial and commercial real estate loans, construction loans, and various types of loans to individuals.  The historical estimation for each loan pool is then adjusted to account for current conditions, current loan portfolio performance, loan policy or management changes, or any other factors which may cause future losses to deviate from historical levels.

The Company may, from time to time, maintain an unallocated allowance to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  Management must make estimates using assumptions and information that is often subjective and changing rapidly.

Loans are placed in a nonaccrual status when the ultimate collectability of principal or interest in whole, or part, is in doubt.  Past due loans contractually past due 90 days or more for either principal or interest are also placed in nonaccrual status unless they are both well secured and in the process of collection.  Impaired loans are evaluated individually.

46

The following table presents, for the periods indicated, an analysis of the allowance for loan losses and other related data.

Allowance for Loan Losses
	June 30,			December 31,			June 30,
	2012			2011			2011
Balance, beginning of period	$	5,534,450		$	5,762,712		$	5,762,712
Provision charged to operating expenses		1,149,996			2,558,328			674,998
Loans charged off :
Construction loans		(57,650	)		(2,361,783	)		(525,488	)
Residential real estate loans		(130,694	)		-			-
Commercial and commercial real estate		(165,026	)		(437,699	)		(46,319	)
Loans to individuals		(77,858	)		-			-
Lease financing		-			-			-
All other loans		(6,001	)		-			-
		(437,229	)		(2,799,482	)		(571,807	)
Recoveries
Construction loans		3,403			8,951			-
Residential real estate loans		-			-			-
Commercial and commercial real estate		6,800			3,941			3,678
Loans to individuals		-			-			-
Lease financing		-			-			-
All other loans		-			-			-
		10,203			12,892			3,678
Net (charge offs) / recoveries		(427,026	)		(2,786,590	)		(568,129	)
Balance, end of period	$	6,257,420		$	5,534,450		$	5,869,581
Loans :
At period end	$	479,795,092		$	475,431,771		$	339,867,302
Average during the period		421,111,355			362,289,390			326,804,031
Net charge offs to average loans outstanding          (annualized)		(0.10	%)		(0.77	%)		(0.17	%)
Allowance for loan losses to :
Total loans at period end		1.30	%		1.16	%		1.73	%
Total loans at period end excluding mortgage           warehouse lines		2.05	%		1.95	%		2.40	%
Non-performing loans		231.85	%		185.01	%		103.17	%

The Company’s provision for loan losses was $1,149,996 for the six months ended June 30, 2012 compared to $674,998 for the six months ended June 30, 2011.  While the balance of non-performing loans decreased modestly from December 31, 2011 to June 30, 2012, the continuing adverse economic conditions that resulted in depreciation of collateral values securing construction and commercial loans necessitated the recorded provision.  Net charge offs/recoveries amounted to a net charge-off of $427,027 for the six months ended June 30, 2012.

47

At June 30, 2012, the allowance for loan losses was $6,257,420 compared to $5,534,450 at December 31, 2011, an increase of $722,970.  The ratio of the allowance for loan losses to total loans at June 30, 2012 and December 31, 2011 was 1.30% and 1.16%, respectively.  The allowance for loan losses as a percentage of non-performing loans was 231.85% at June 30, 2012 compared to 185.01% at December 31, 2011. Management believes the quality of the loan portfolio remains sound considering the economic climate and economy in the State of New Jersey and that the allowance for loan losses is adequate in relation to credit risk exposure levels.

Deposits

Deposits, which include demand deposits (interest bearing and non-interest bearing), savings deposits and time deposits, are a fundamental and cost-effective source of funding.  The flow of deposits is influenced significantly by general economic conditions, changes in market interest rates and competition.  The Bank offers a variety of products designed to attract and retain customers, with the Bank’s primary focus being on building and expanding long-term relationships.

The following table summarizes deposits at June 30, 2012 and December 31, 2011.

	June 30, 2012		December 31, 2011
Demand
Non-interest bearing	$	129,822,625	$	105,470,543
Interest bearing		197,636,733		201,987,751
Savings		190,844,887		176,198,907
Time		150,767,205		140,205,284
	$	669,071,450	$	623,862,485

At June 30, 2012, total deposits were $669,071,450, an increase of $45,208,965, or 7.2%, from $623,862,485 at December 31, 2011.

Borrowings

Borrowings are mainly comprised of Federal Home Loan Bank (“FHLB”) borrowings and overnight funds purchased.  These borrowings are primarily used to fund asset growth not supported by deposit generation.  The balance of borrowings was $25,300,000 at June 30, 2012, consisting of FHLB long-term borrowings of $10,000,000 and overnight funds purchased of $15,300,000, compared to $88,300,000 at December 31, 2011, consisting of long-term FHLB borrowings of $10,000,000 and overnight funds purchased of $78,300,000.

The Bank has a fixed rate convertible advance from the FHLB in the amount of $10,000,000 that bears interest at the rate of 4.08%.  This advance may be called by the FHLB quarterly at the option of the FHLB if rates rise and the rate earned by the FHLB is no longer a “market” rate.  This advance is fully secured by marketable securities.

Shareholders’ Equity and Dividends

Shareholders’ equity increased by $2,673,500, or 4.9%, to $57,673,275 at June 30, 2012 from $54,999,775 at December 31, 2011.  Tangible book value per common share increased by $0.55, or 5.7%, to $10.28 at June 30, 2012 from $9.73 at December 31, 2011.  The current period increase in tangible book value per common share was the result of net income of $2,464,840 for the six months ended June 30, 2012.  The ratio of shareholders’ equity to total assets was 7.42% and 6.95% at June 30, 2012 and December 31, 2011, respectively.  

In lieu of cash dividends to common shareholders, the Company (and its predecessor, the Bank) has declared a stock dividend every year since 1992 and has paid such dividends every year since 1993.  Five percent stock dividends were declared in 2011 and 2010 and paid in 2012 and 2011, respectively.  

The Company’s common stock is quoted on the Nasdaq Global Market under the symbol “FCCY”.

48

In 2005, the Company’s board of directors authorized a common stock repurchase program that allows for the repurchase of a limited number of the Company’s shares at management’s discretion on the open market. The Company undertook this repurchase program in order to increase shareholder value. Disclosure of repurchases of Company shares, if any, made during the quarter ended June 30, 2012 is set forth under Part II, Item 2 of this report, “Unregistered Sales of Equity Securities and Use of Proceeds.”

Actual capital amounts and ratios for the Company and the Bank as of June 30, 2012 and December 31, 2011 are as follows:

	Actual				For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provision
	Amount		Ratio		Amount		Ratio	Amount		Ratio
As of June 30, 2012
Company
Total Capital to Risk Weighted Assets	$	75,505,924		12.51%	$	48,292,720	>8%		N/A	N/A
Tier 1 Capital to Risk Weighted Assets		69,248,504		11.47%		24,146,360	>4%		N/A	N/A
Tier 1 Capital to Average Assets		69,248,504		9.16%		30,236,111	>4%		N/A	N/A
Bank
Total Capital to Risk Weighted Assets	$	72,789,414		12.06%	$	48,292,720	>8%	$	60,365,900	>10%
Tier 1 Capital to Risk Weighted Assets		66,531,994		11.02%		24,146,360	>4%		36,219,540	>6%
Tier 1 Capital to Average Assets		66,531,994		8.83%		30,145,771	>4%		37,682,241	>5%

As of December 31, 2011
Company
Total Capital to Risk Weighted Assets	$	72,037,863	12.22%	$	40,335,354	>8%		N/A	N/A
Tier 1 Capital to Risk Weighted Assets		66,434,272	11.27%		20,167,677	>4%		N/A	N/A
Tier 1 Capital to Average Assets		66,434,272	8.82%		27,196,758	>4%		N/A	N/A
Bank
Total Capital to Risk Weighted Assets	$	69,172,940	11.73%	$	40,272,800	>8%	$	58,956,000	>10%
Tier 1 Capital to Risk Weighted Assets		63,638,489	10.79%		20,136,400	>4%		35,373,600	>6%
Tier 1 Capital to Average Assets		63,638,489	8.49%		27,054,854	>4%		37,479,475	>5%

The minimum regulatory capital requirements for financial institutions require institutions to have a Tier 1 capital to average assets ratio of 4.0%, a Tier 1 capital to risk weighted assets ratio of 4.0% and a total capital to risk weighted assets ratio of 8.0%.  To be considered “well capitalized,” an institution must have a minimum Tier 1 leverage ratio of 5.0%.  At June 30, 2012, the ratios of the Company exceeded the ratios required to be considered well capitalized. It is management’s goal to monitor and maintain adequate capital levels to continue to support asset growth and continue its status as a well capitalized institution.

Liquidity

At June 30, 2012, the amount of liquid assets remained at a level management deemed adequate to ensure that contractual liabilities, depositors’ withdrawal requirements, and other operational and customer credit needs could be satisfied.

49

Liquidity management refers to the Company’s ability to support asset growth while satisfying the borrowing needs and deposit withdrawal requirements of customers.  In addition to maintaining liquid assets, factors such as capital position, profitability, asset quality and availability of funding affect a bank’s ability to meet its liquidity needs.  On the asset side, liquid funds are maintained in the form of cash and cash equivalents, Federal funds sold, investment securities held to maturity maturing within one year, securities available for sale and loans held for sale.  Additional asset-based liquidity is derived from scheduled loan repayments as well as investment repayments of principal and interest from mortgage-backed securities.  On the liability side, the primary source of liquidity is the ability to generate core deposits.  Short-term borrowings are used as supplemental funding sources when growth in the core deposit base does not keep pace with that of earning assets.

The Bank has established a borrowing relationship with the FHLB which further supports and enhances liquidity. During 2010, FHLB replaced its Overnight Line of Credit and One-Month Overnight Repricing Line of Credit facilities available to member banks with a fully secured line of up to 50 percent of a bank’s quarter-end total assets.  Under the terms of this facility, the Bank’s total credit exposure to FHLB cannot exceed 50 percent, or $374,799,892, of its total assets at March 31, 2012.  In addition, the aggregate outstanding principal amount of the Bank’s advances, letters of credit, the dollar amount of the FHLB’s minimum collateral requirement for off-balance sheet financial contracts and advance commitments cannot exceed 30 percent of the Bank’s total assets, unless the Bank obtains approval from FHLB’s Board of Directors or its Executive Committee.  These limits are further restricted by a member’s ability to provide eligible collateral to support its obligations to FHLB as well as the ability to meet the FHLB’s stock requirement.  The Bank also maintains an unsecured federal funds line of $20,000,000 with a correspondent bank.

The Consolidated Statements of Cash Flows present the changes in cash from operating, investing and financing activities.  At June 30, 2012, the balance of cash and cash equivalents was $16,579,398.

Net cash provided by operating activities totaled $9,244,776 for the six months ended June 30, 2012 compared to net cash provided by operations of $14,998,900 for the six months ended June 30, 2011.  The primary source of funds is net income from operations adjusted for activity related to loans originated for sale, the provision for loan losses, depreciation expenses, and net amortization of premiums on securities.

Net cash provided by investing activities totaled $9,812,297 for the six months ended June 30, 2012 compared to net cash provided by investing activities of $85,694,164 for the six months ended June 30, 2011.  The cash provided by investing activities for the 2011 period included $101,539,588 in cash and cash equivalents acquired from the purchase of three branch offices.

Net cash used in financing activities totaled $17,672,934 for the six months ended June 30, 2012 compared to net cash used in financing activities of $28,345,989 for the six months ended June 30, 2011.  

The securities portfolios are also a source of liquidity, providing cash flows from maturities and periodic repayments of principal.  For the six months ended June 30, 2012, prepayments and maturities of investment securities totaled $43,215,713.  Another source of liquidity is the loan portfolio, which provides a flow of payments and maturities.

Interest Rate Sensitivity Analysis

The largest component of the Company’s total income is net interest income, and the majority of the Company’s financial instruments are composed of interest rate-sensitive assets and liabilities with various terms and maturities. The primary objective of management is to maximize net interest income while minimizing interest rate risk. Interest rate risk is derived from timing differences in the repricing of assets and liabilities, loan prepayments, deposit withdrawals, and differences in lending and funding rates. Management actively seeks to monitor and control the mix of interest rate-sensitive assets and interest rate-sensitive liabilities.

The Company continually evaluates interest rate risk management opportunities, including the use of derivative financial instruments. Management believes that hedging instruments currently available are not cost-effective and, therefore, has focused its efforts on increasing the Bank’s spread by attracting lower-cost retail deposits.

50

Item 3.                    Quantitative and Qualitative Disclosures About Market Risk.

Not required. 

Item 4.                    Controls and Procedures.

The Company has established disclosure controls and procedures designed 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 SEC rules and forms and is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

The Company’s principal executive officer and principal financial officer, with the assistance of other members of the Company’s management, have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report.  Based upon such evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.

The Company’s principal executive officer and principal financial officer have also concluded that there was no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

51

PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities

On July 21, 2005, the board of directors authorized a stock repurchase program under which the Company may repurchase in open market or privately negotiated transactions up to 5% of its common shares outstanding at that date.  The Company undertook this repurchase program in order to increase shareholder value. The following table provides common stock repurchases made by or on behalf of the Company during the three months ended June 30, 2012, if any.

Issuer Purchases of Equity Securities(1)

Period		Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased As Part of Publicly Announced Plan or Program		Maximum Number of Shares That May Yet be Purchased Under the Plan or Program
Beginning	Ending
April 1, 2012	April 30, 2012		-		-		-		178,628
May 1, 2012	May 31, 2012		-		-		-		178,628
June 1, 2012	June 30, 2012		-		-		-		178,628
Total			-		-		-		178,628

_________________

(1) The Company’s common stock repurchase program covers a maximum of 195,076 shares of common stock of the Company, representing 5% of the outstanding common stock of the Company on July 21, 2005, as adjusted for the subsequent common stock dividends.

Item 6. Exhibits.

31.1	*	Certification of Robert F. Mangano, principal executive officer of the Company, pursuant to Securities Exchange Act Rule 13a-14(a)
31.2	*	Certification of Joseph M. Reardon, principal financial officer of the Company, pursuant to Securities Exchange Act Rule 13a-14(a)
32	*	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Robert F. Mangano, principal executive officer of the Company, and Joseph M. Reardon, principal financial officer of the Company
101.INS	*	XBRL Instance DocumentX
101.SCH	*	XBRL Taxonomy Extension Schema DocumentX
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LAB	*	XBRL Taxonomy Extension Label Linkbase DocumentX
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase DocumentX

_____________________

*  Filed herewith.

X These interactive data files are being furnished as part of this Quarterly Report, and in accordance with Rule 402 of Regulation S-T, shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

52

SIGNATURES

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

	1ST CONSTITUTION BANCORP
Date: August 14, 2012	By:	/s/ Robert F. Mangano
		Robert F. Mangano
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 14, 2012	By:	/s/ Joseph M. Reardon
		Joseph M. Reardon
		Senior Vice President and Treasurer
		(Principal Financial and Accounting Officer)

53 

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert F. Mangano, certify that:

1. I have reviewed this quarterly report on Form 10-Q of 1st Constitution Bancorp;

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

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

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

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

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

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

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

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

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

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

Date: August 14, 2012

	/s/ Robert F. Mangano
Name:	Robert F. Mangano
Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Joseph M. Reardon, certify that:

1. I have reviewed this quarterly report on Form 10-Q of 1st Constitution Bancorp;

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

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

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

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

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

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

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

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

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

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

Date:  August 14, 2012

	/s/ Joseph M. Reardon
Name:	Joseph M. Reardon
Title:	Senior Vice President and
	Treasurer

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report on Form 10-Q of 1st Constitution Bancorp (the “Company”) for the fiscal quarter ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. (section) 1350, as adopted pursuant to (section) 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ Robert F. Mangano
Name:	Robert F. Mangano
Title:	President and Chief Executive Officer
Date:	August 14, 2012
/s/ Joseph M. Reardon
Name:	Joseph M. Reardon
Title:	Senior Vice President and
	Treasurer
Date:	August 14, 2012

XML

Allowance for Loan Losses and Credit Quality Disclosure (Narrative)

6 Months Ended

Jun. 30, 2012

Allowance for Loan Losses and Credit Quality Disclosure [Abstract]

Loans and Leases Receivable, Impaired, Description

Loans are considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When a loan is placed on nonaccrual status, it is also considered to be impaired. Loans are placed on nonaccrual status when: (1) the full collection of interest or principal becomes uncertain; or (2) they are contractually past due 90 days or more as to interest or principal payments unless both well secured and in the process of collection.

XML

Fair Value Disclosures (Fair Value Assets Measured On Nonrecurring Basis Valuation Techniques) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans, fair value disclosure	$ 2,544,053	$ 2,038,805
Other real estate owned, fair value disclosure	3,000,619	491,536
Level 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans, fair value disclosure	2,544,053	2,038,805
Other real estate owned, fair value disclosure	$ 3,000,619	$ 491,536

XML

Share Base Compensation (Share Based Compensation Arrangement By Share Based Payment Award Options Grants In Period Weighted Average Grant Date Fair Value) (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Share-Based Compensation [Abstract]
Non-vested at January 1, 2012 Number of Shares	151,753
Non-vested at January 1, 2012 Average Grant Date	$ 6.87
Number of Shares Granted	1,995
Average Grant Date Fair Value Granted	$ 6.42
Number of Shares Vested	(20,875)
Average Grant Date Fair Value Vested	$ 8.12
Non-vested at June 30, 2012 Number of Shares	132,873
Non-vested at June 30, 2012 Average Grant Date	$ 6.67

XML

Fair Value Disclosures (Fair Value AssetsMeasured On NonrecurringBasis Valuation Techniques) (Details)	6 Months Ended
	Jun. 30, 2012
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Techniques	Appraisal of collateral (1)	[1]
Unobservable Input	Appraisal adjustments (1)	[1]
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Techniques	Appraisal of collateral (1)	[1]
Unobservable Input	Appraisal adjustments (1),(2)	[1],[2]
Maximum [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of Adjustments	50.00%
Maximum [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of Adjustments	60.00%
Minimum [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of Adjustments	5.00%
Minimum [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Range of Adjustments	8.00%

[1] (1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs that are not identifiable.

[2] (2) Includes qualitative adjustments by management and estimated liquidation expenses

XML

Share Base Compensation (Schedule Of Share Based Compensation Activity) (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Share-Based Compensation [Abstract]
Outstanding at January 1, 2012 Number of Shares	196,906
Outstanding at January 1, 2012 Weighted Average Exercise Price	$ 9.66
Granted Number of Shares	26,670
Granted Weighted Average Exercise Price	$ 6.42
Exercised Number of Shares	(327)
Exercised Weighted Average Exercise Price	$ 5.96
Outstanding at June 30, 2012 Number of Shares	223,249
Outstanding at June 30, 2012 Weighted Average	$ 9.28
Outstanding at June 30, 2012 Weighted Average Remaining Contractual Term (years)	6 years 1 month 6 days
Outstanding at June 30, 2012 Aggregate Intrinsic Value		$ 293,458
Exercisable at June 30, 2012 Number of Shares	162,094
Exercisable at June 30, 2012 Weighted Average Exercise Price	$ 10.25
Exercisable at June 30, 2012 Weighted Average Remaining Contractual Term (years)	5 years 1 month 6 days
Exercisable at June 30, 2012 Aggregate Intrinsic Value	$ 104,972

XML

Investment Securities (Available For Sale Securities) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 95,161,831	$ 91,365,475
Gross Unrealized Gains	3,123,274	3,063,708
Gross Unrealized Losses	(747,507)	(745,409)
Fair Value	97,537,598	93,683,774
U.S Treasury securities and obligations of U.S. Government sponsored corporations("GSE') and agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,984,686	19,400,856
Gross Unrealized Gains	115,414	71,833
Gross Unrealized Losses	0	0
Fair Value	17,100,100	19,472,689
Residential collateralized mortgage obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,038,324	13,421,544
Gross Unrealized Gains	428,381	476,589
Gross Unrealized Losses	0	0
Fair Value	11,466,705	13,898,133
Residential collateralized mortgage obligations- non GSEs [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,522,276	4,177,115
Gross Unrealized Gains	120,913	143,480
Gross Unrealized Losses	(10,204)	(20,151)
Fair Value	3,632,985	4,300,444
Residential mortgage obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	34,832,648	40,655,157
Gross Unrealized Gains	2,045,098	2,032,059
Gross Unrealized Losses	(4)	(7)
Fair Value	36,877,742	42,687,209
Obligations of State and Political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	5,350,838	5,366,145
Gross Unrealized Gains	389,276	339,747
Gross Unrealized Losses	(1,017)	(5,378)
Fair Value	5,739,097	5,700,514
Trust preferred debt securities - single issuer [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,464,748	2,463,296
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(568,775)	(712,055)
Fair Value	1,895,973	1,751,241
Corporate debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	19,219,511	1,443,762
Gross Unrealized Gains	24,192	0
Gross Unrealized Losses	(167,507)	(7,818)
Fair Value	19,076,196	1,435,944
Restricted stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,723,800	4,412,600
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	1,723,800	4,412,600
Mutual fund [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	25,000	25,000
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	$ 25,000	$ 25,000

XML

Share Base Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Schedule of Share-based Compensation, Activity [Table Text Block]

			Weighted
			Average
		Weighted	Remaining	Aggregate
	Number of	Average	Contractual	Intrinsic
Stock Options	Shares	Exercise Price	Term (years)	Value
Outstanding at January 1, 2012	196,906	$9.66
Granted	26,670	6.42
Exercised	(327)	5.96
Forfeited	-	-
Expired	-	-
Outstanding at June 30, 2012	223,249	$9.28	6.1	$293,458
Exercisable at June 30, 2012	162,094	$10.25	5.1	$104,972

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

            Fair value of options granted                                            $2.20

            Risk-free rate of return                                                       0.84%

Expected option life in years                                                   7

Expected volatility                                                              31.48%

Expected dividends ⁽¹⁾                                                                 -

(1) To date, the Company has not paid cash dividends on its common stock.

Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value [Table Text Block]

		Average
	Number of	Grant Date
Non-vested shares	Shares	Fair Value
Non-vested at January 1, 2012	151,753	$6.87
Granted	1,995	6.42
Vested	(20,875)	8.12
Forfeited	-	-
Non-vested at June 30, 2012	132,873	$6.67

XML

Other Comprehensive Income and Accumulated Other Comprehensive Income (Schedule of Accumulated Other Comprehensive Income) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Other Comprehensive Income and Accumulated Other Comprehensive Income [Abstract]
Unrealized holding gains on securities available for sale	$ 2,375,768	$ 2,318,299
Related income tax effect	(807,760)	(788,221)
Total, Unrealized holding gains on securities available for sale	1,568,008	1,530,078
Unrealized impairment loss on held to maturity security	500,944	500,944
Related income tax effect	(170,321)	(170,321)
Total, Unrealized impairment loss on held to maturity security	330,623	330,623
Pension liability	172,220	178,661
Related income tax effect	(68,079)	(70,668)
Total, Pension liability	104,141	107,993
Accumulated other comprehensive income	$ 1,133,244	$ 1,091,462

XML

Allowance for Loan Losses and Credit Quality Disclosure (Allowance For Credit Losses On Financing Receivables) (Details) (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	$ 6,257,420	$ 5,881,942	$ 5,869,581	$ 5,750,043	$ 6,257,420	$ 5,869,581
Individually evaluated for impairment	524,237				524,237		558,956
Collectively evaluated for impairment	5,733,182				5,733,182		4,975,494
Ending Balance Loans	479,795,092				479,795,092		475,431,771
Individually evaluated for impairment	3,554,575				3,554,575		3,765,360
Collectively evaluated for impairment	476,240,517				476,240,517		471,666,411
Balance	5,881,942	5,534,450	5,750,043	5,762,712	5,534,450	5,762,712
Provision for loan losses	549,998	599,998	275,000	399,998	1,149,996	674,998
Loans charged-off	(175,893)	(261,336)	(158,900)	(412,906)
Recoveries of loans charged off	1,373	8,830	3,438	239
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	1,647,605	1,242,949	2,455,257	2,561,217	1,647,605	2,455,257
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	1,647,605				1,647,605		1,054,695
Ending Balance Loans	59,650,806				59,650,806		49,285,783
Individually evaluated for impairment	0				0		140,055
Collectively evaluated for impairment	59,650,806				59,650,806		49,145,728
Balance	1,242,949	1,054,695	2,561,217	1,744,068	1,054,695	1,744,068
Provision for loan losses	429,656	217,501	52,940	1,183,736
Loans charged-off	(25,000)	(32,650)	(158,900)	(366,587)
Recoveries of loans charged off	0	3,403
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	903,401	810,999	922,398	870,154	903,401	922,398
Individually evaluated for impairment	138,597				138,597		283,424
Collectively evaluated for impairment	764,804				764,804		651,218
Ending Balance Loans	58,059,665				58,059,665		50,784,674
Individually evaluated for impairment	851,819				851,819		952,156
Collectively evaluated for impairment	57,207,846				57,207,846		49,832,518
Balance	810,999	934,642	870,154	971,994	934,642	971,994
Provision for loan losses	111,410	15,757	48,806	(55,760)
Loans charged-off	(20,199)	(144,827)		(46,319)
Recoveries of loans charged off	1,191	5,427	3,438	239
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	2,304,010	1,838,882	1,621,112	1,405,433	2,304,010	1,621,112
Individually evaluated for impairment	357,074				357,074		186,055
Collectively evaluated for impairment	1,946,936				1,946,936		1,411,647
Ending Balance Loans	107,365,638				107,365,638		99,636,976
Individually evaluated for impairment	2,507,360				2,507,360		1,934,120
Collectively evaluated for impairment	104,858,278				104,858,278		97,702,856
Balance	1,838,882	1,597,702	1,405,433	1,723,865	1,597,702	1,723,865
Provision for loan losses	464,946	241,180	215,679	(318,432)
Loans charged-off	0	0
Recoveries of loans charged off	182	0
Mortgage Warehouse Lines [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	1,153,883	1,006,605	528,708	418,266	1,153,883	528,708
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	1,153,883				1,153,883		1,122,056
Ending Balance Loans	230,776,678				230,776,678		249,345,831
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	230,776,678				230,776,678		249,345,831
Balance	1,006,605	1,122,056	418,266	763,092	1,122,056	763,092
Provision for loan losses	147,278	(115,451)	110,442	(344,826)
Loans charged-off	0	0
Recoveries of loans charged off	0	0
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	122,510	239,573	77,235	77,605	122,510	77,235
Individually evaluated for impairment	28,566				28,566		11,619
Collectively evaluated for impairment	93,944				93,944		79,457
Ending Balance Loans	11,324,340				11,324,340		12,885,352
Individually evaluated for impairment	140,492				140,492		661,171
Collectively evaluated for impairment	11,183,848				11,183,848		12,224,181
Balance	239,573	91,076	77,605	67,828	91,076	67,828
Provision for loan losses	13,631	148,497	(370)	9,777
Loans charged-off	(130,694)	0
Recoveries of loans charged off	0	0
Loans to Individuals [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	123,213	131,570	187,451	190,467	123,213	187,451
Individually evaluated for impairment	0				0		77,858
Collectively evaluated for impairment	123,213				123,213		109,494
Ending Balance Loans	11,439,694				11,439,694		12,219,640
Individually evaluated for impairment	54,904				54,904		77,858
Collectively evaluated for impairment	11,384,790				11,384,790		12,141,782
Balance	131,570	187,352	190,467	192,457	187,352	192,457
Provision for loan losses	(8,357)	22,076	(3,016)	(1,990)
Loans charged-off	0	(77,858)
Recoveries of loans charged off	0	0
Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	2,798	3,179	2,453	2,481	2,798	2,453
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	2,798				2,798		2,377
Ending Balance Loans	227,448				227,448		255,556
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	227,448				227,448		255,556
Balance	3,179	2,377	2,481	1,910	2,377	1,910
Provision for loan losses	(381)	6,803	(28)	571
Loans charged-off	0	(6,001)
Recoveries of loans charged off	0	0
Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	0	608,185	74,967	224,420	0	74,967
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	0				0		544,550
Ending Balance Loans	0				0		0
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	0				0		0
Balance	608,185	544,550	224,420	297,498	544,550	297,498
Provision for loan losses	(608,185)	63,635	(149,453)	(73,078)
Loans charged-off	0	0
Recoveries of loans charged off	0	0
Loan Cost [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	0				0		0
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	0				0		0
Ending Balance Loans	950,823				950,823		1,017,959
Individually evaluated for impairment	0				0		0
Collectively evaluated for impairment	950,823				950,823		1,017,959
Balance							$ 0

XML

Investment Securities (Schedule Of Unrealized Loss On Investments) (Details) (USD $)			6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 PreTSL XXV Member
Schedule of Available-for-sale Securities [Line Items]
Class			B-1
Amortized Cost	$ 123,493,162	$ 142,975,367	$ 651,788
Fair Value	128,856,455	147,621,280	89,242
Unrealized Losses	(74,051)	(361,413)	(562,546)
Percent of Underlying Collateral Performing			65.80%
Percent of Underlying Collateral Deferral			16.70%
Percent of Underlying Collateral In Default			17.50%
Expected Deferrals and Defaults as a Percent of Remaining Performing Collateral			15.60%
Excess Subordination Amount			$ 102,500,000
Excess Subordination Percent of Current Performing Collateral			20.00%

XML

Fair Value Disclosures (Narative) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired Financing Receivable, Unpaid Principal Balance	$ 3,849,646	$ 3,913,358
Impaired Financing Receivable, Related Allowance	524,237	558,956
Loans with a fair value measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of Loans	12	9
Impaired Financing Receivable, Unpaid Principal Balance	3,068,290	2,597,761
Impaired Financing Receivable, Related Allowance	$ 524,237	$ 558,956

XML

Share Base Compensation (Fair Value Inputs Assets Quantitative Information) (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Share-Based Compensation [Abstract]
Fair value of options granted	$ 2.20
Risk-free rate of return	0.84%
Expected option life in years	7 years
Expected volatility	31.48%
Expected dividends	$ 0	[1]

[1] (1) To date, the Company has not paid cash dividends on its common stock.

XML

Acquisition of Unaffiliated Branches

6 Months Ended

Jun. 30, 2012

Acquisition of Unaffiliated Branches [Abstract]

Acquisition of Unaffiliated Branches

(2)  Acquisition of Unaffiliated Branches

On March 25, 2011, the Bank acquired certain deposit and other liabilities, real estate and related assets of the Rocky Hill, Hillsborough and Hopewell, New Jersey branch banking offices from another financial institution for a purchase price of $9.85 million (the "March 2011 Acquisition"). The March 2011 Acquisition was completed pursuant to the terms and conditions of the Branch Purchase and Assumption Agreement and Agreement for Purchase dated as of December 30, 2010, which was previously disclosed on a Current Report on Form 8-K filed by the Company with the SEC on January 3, 2011.

The Company accounted for this transaction using applicable accounting guidance regarding business combinations. The fair value of savings and transaction deposit accounts acquired was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.  A core deposit intangible was ascribed to the value of non-maturity deposits based upon an independent third party evaluation which was prepared using the actual characteristics of the deposits and assumptions we believe to be reasonable.  Certificates of deposit accounts were valued utilizing a discounted cash flows analysis based upon the underlying accounts' contractual maturities and interest rates.  The present value of the projected cash flow was then determined using discount rates based upon certificate of deposit interest rates available in the marketplace for accounts with similar terms. The fair value of the three branch buildings was determined via appraisals performed by qualified independent third party appraisers. The fair value of loans acquired, all of which were performing, was assumed to approximate amortized cost based upon the small size and nature of those loans.

As a result of the March 2011 Acquisition, the three branches became branches of the Bank.  Included in the March 2011 Acquisition were the assumption of deposit liabilities of $111.9 million, primarily consisting of demand deposits, and the acquisition of cash of approximately $101.5 million,  fixed assets of approximately $4.6 million, which includes, without limitation, ownership of the real estate and improvements upon which the branches are situated, and loans of $862,000.  The Bank recorded goodwill of approximately $3.2 million and a core deposit intangible asset of approximately $1.7 million as a result of the March 2011 Acquisition.

XML

Allowance for Loan Losses and Credit Quality Disclosure (Impaired Financing Receivables) (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 486,285		$ 486,285		$ 1,167,599
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	528,967		528,967		1,315,597
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	595,501	754,723	797,595	2,200,917	1,337,637
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	3,068,290		3,068,290		2,597,761
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	3,320,679		3,320,679		2,597,761
Impaired Financing Receivable, Related Allowance	524,237		524,237		558,956
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	3,062,319	5,808,853	2,822,046	5,306,008	4,784,916
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	10,582	3,028	21,648	4,544	12,295
Impaired Financing Receivable, Recorded Investment	3,554,575		3,554,575		3,765,360
Impaired Financing Receivable, Unpaid Principal Balance	3,849,646		3,849,646		3,913,358
Impaired Financing Receivable, Average Recorded Investment	3,657,820	6,563,576	3,619,641	7,506,925	6,122,553
Impaired Financing Receivable, Interest Income, Accrual Method	10,582	3,028	21,648	4,544	12,295
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0		0		140,055
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0		0		277,405
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	35,802	113,947	71,603	1,555,877	610,358
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0		0		0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0		0		0
Impaired Financing Receivable, Related Allowance	0		0		0
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	3,268,474	0	3,154,480	2,389,162
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	431,381		431,381		381,190
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	474,063		474,063		426,803
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	423,129	348,094	415,353	286,550	257,942
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	420,438		420,438		570,966
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	565,265		565,265		570,966
Impaired Financing Receivable, Related Allowance	138,597		138,597		283,424
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	435,032	832,399	429,700	593,070	791,808
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	3,790	0	7,439	0	10,001
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0		0		503,877
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0		0		611,389
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	81,666	292,682	208,536	358,490	457,464
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	2,507,360		2,507,360		1,430,243
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	2,614,922		2,614,922		1,430,243
Impaired Financing Receivable, Related Allowance	357,074		357,074		186,055
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	2,313,770	1,111,122	1,952,730	1,047,746	1,036,007
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	6,792	0	14,209	0	2,294
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	431,381		431,381		1,025,122
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	474,063		474,063		1,315,597
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	540,597	754,723	695,492	2,200,917	1,325,764
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	2,927,798		2,927,798		2,001,209
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	3,180,187		3,180,187		2,001,209
Impaired Financing Receivable, Related Allowance	495,671		495,671		469,479
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	2,748,802	5,211,995	2,382,430	4,795,296	4,216,977
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	10,582	0	21,648	0	12,295
Impaired Financing Receivable, Recorded Investment	3,359,179		3,359,179		3,026,331
Impaired Financing Receivable, Unpaid Principal Balance	3,654,250		3,654,250		3,316,806
Impaired Financing Receivable, Average Recorded Investment	3,289,399	5,966,718	3,077,922	6,996,213	5,542,741
Impaired Financing Receivable, Interest Income, Accrual Method	10,582	0	21,648	0	12,295
Mortgage Warehouse Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0		0		0
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0		0		0
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	0	0			0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method					0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0		0		0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0		0		0
Impaired Financing Receivable, Related Allowance	0		0		0
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0		0		142,477
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0		0		142,477
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	0	0	47,199	0	11,873
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	140,492		140,492		518,694
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	140,492		140,492		518,694
Impaired Financing Receivable, Related Allowance	28,566		28,566		11,619
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	313,517	519,000	439,616	432,854	490,081
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	3,028	0	4,544	0
Impaired Financing Receivable, Recorded Investment	140,492		140,492		661,171
Impaired Financing Receivable, Unpaid Principal Balance	140,492		140,492		518,694
Impaired Financing Receivable, Average Recorded Investment	313,517	519,000	486,815	432,854	501,954
Impaired Financing Receivable, Interest Income, Accrual Method	0	3,028	0	4,544	0
Loans to Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	54,904		54,904		0
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	54,904		54,904		0
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	54,904	0	54,904	0	0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0		0		77,858
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0		0		77,858
Impaired Financing Receivable, Related Allowance	0		0		77,858
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	77,858	0	77,858	77,858
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, Recorded Investment	54,904		54,904		77,858
Impaired Financing Receivable, Unpaid Principal Balance	54,904		54,904		77,858
Impaired Financing Receivable, Average Recorded Investment	54,904	77,858	54,904	77,858	77,858
Impaired Financing Receivable, Interest Income, Accrual Method	0	0	0	0	0
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0		0		0
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0		0		0
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	0	0	0	0	0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0		0		0
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0		0		0
Impaired Financing Receivable, Related Allowance	0		0		0
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	54,904		54,904		0
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	54,904		54,904		0
Impaired Financing Receivable, with No Related Allowance, Related Allowance	0		0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	54,904	0	54,904	0	0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0		0		77,858
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0		0		77,858
Impaired Financing Receivable, Related Allowance	0		0		77,858
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	77,858	0	77,858	77,858
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	$ 0	$ 0	$ 0	$ 0	$ 0

XML

Acquisition of Unaffiliated Branches (Narrative) (Details) (USD $)	0 Months Ended
	Mar. 26, 2011	Jun. 30, 2012
Acquisition of Unaffiliated Branches [Abstract]
Business Acquisition, Date of Acquisition Agreement	Mar. 25, 2011
Business Acquisition, Cost of Acquired Entity, Purchase Price		$ 9,850,000
Business Acquisition, Purchase Price Allocation, Current Liabilities		111,900,000
Business Acquisition, Purchase Price Allocation, Current Assets, Cash and Cash Equivalents		101,500,000
Business Acquisition, Purchase Price Allocation, Property, Plant and Equipment		4,600,000
Business Acquisition, Purchase Price Allocation, Current Liabilities, Long-term Debt		862,000,000
Business Acquisition, Purchase Price Allocation, Goodwill Amount		3,200,000
Business Acquisition, Purchase Price Allocation, Intangible Assets Other than Goodwill		$ 1,700,000

XML

Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis [Table Text Block]

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2012:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies		$17,100,100		-		-		$17,100,100
Residential collateralized mortgage obligations- GSE		-		11,466,705		-		11,466,705
Residential collateralized mortgage obligations - non GSE		-		3,632,985		-		3,632,985
Residential mortgage backed securities – GSE		-		36,877,742		-		36,877,742
Obligations of State and Political subdivisions		-		5,739,097		-		5,739,097
Trust preferred debt securities – single issuer		-		1,895,973		-		1,895,973
Corporate debt securities		-		19,076,196		-		19,076,196
Restricted stock		-		1,723,800		-		1,723,800
Mutual fund		-		25,000		-		25,000
December 31, 2011:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies		$7,108,870		$12,363,819		-		$19,472,689
Residential collateralized mortgage obligations- GSE		-		13,898,133		-		13,898,133
Residential collateralized mortgage obligations - non GSE		-		4,300,444		-		4,300,444
Residential mortgage backed securities – GSE		-		42,687,209		-		42,687,209
Obligations of State and Political subdivisions		-		5,700,514		-		5,700,514
Trust preferred debt securities – single issuer		-		1,751,241		-		1,751,241
Corporate debt securities		-		1,435,944		-		1,435,944
Restricted stock		-		4,412,600		-		4,412,600
Mutual fund		-		25,000		-		25,000

Fair Value Measurements, Nonrecurring [Table Text Block]

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2012:
Impaired loans		-		-		$2,544,053		$2,544,053
Other real estate owned		-		-		3,000,619		3,000,619
December 31, 2011:
Impaired loans		-		-		$2,038,805		$2,038,805
Other real estate owned		-		-		491,536		491,536

Fair Value, Option, Quantitative Disclosures [Table Text Block]

                                                  Quantitative Information about Level 3 Fair Value Measurements

	Fair Value Estimate	Valuation Techniques	Unobservable Input	Range of Adjustments
June 30, 2012
Impaired loans	$2,544,053	Appraisal of collateral (1)	Appraisal adjustments (1)	5-50%
Other Real Estate Owned	$3,000,619	Appraisal of collateral (1)	Appraisal adjustments (1),(2)	8-60%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs that are not identifiable.

(2)Includes qualitative adjustments by management and estimated liquidation expenses

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block]

	December 31, 2011
	Carrying			Fair
	Value			Value
Cash and cash equivalents		$15,195,259			$15,195,259
Securities available for sale		93,683,774			93,683,774
Securities held to maturity		142,474,423			147,621,280
Loans held for sale		19,234,111			19,234,111
Loans, net		469,897,000			471,634,000
Accrued interest receivable		2,996,848			2,996,848
Deposits		(623,862,485	)		(625,764,000	)
Borrowings		(88,300,000	)		(90,163,000	)
Redeemable subordinated debentures		(18,557,000	)		(18,557,000	)
Accrued interest payable		(1,186,511	)		(1,186,511	)

                                                                                                           June 30, 2012

	Carrying	Level 1		Level 2		Level 3		Fair
	Value	Inputs		Inputs		Inputs		Value
Cash and cash equivalents	$16,579,398	$	-		$16,579,398	$	-		$16,579,398
Securities available for sale	97,537,598		17,100,100		80,437,498		-		97,537,598
Securities held to maturity	122,992,218		-		128,856,455		-		128,856,455
Loans held for sale	16,595,846		16,595,846		-		-		16,595,846
Loans, net	473,537,672		-				476,920,000		476,920,000
Accrued interest receivable	2,767,959		-		2,767,959		-		2,767,959
Deposits	(669,071,450)		-		(670,964,000)		-		(670,964,000	)
Borrowings	(25,300,000)		-		(26,945,000)		-		(26,945,000	)
Redeemable subordinated debentures	(18,557,000)		-		(18,557,000)		-		(18,557,000	)
Accrued interest payable	(1,010,905)				(1,010,905)		-		(1,010,905	)

XML

Fair Value Disclosures (Schedule Of Carrying Values And Estimated Fair Values Of Debt Instruments) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 16,579,398	$ 15,195,259
Securities available for sale	97,537,598	93,683,774
Securities held to maturity	122,992,218	142,474,423
Loans Held for Sale	16,595,846	19,234,111
Loans, net	473,537,672	469,897,321
Accrued intrest receivable	2,767,959	2,996,848
Deposits	(669,071,450)	(623,862,485)
Borrowings	(25,300,000)	(88,300,000)
Redeemable subordinated debentures	(18,557,000)	(18,557,000)
Accrued intrest payable	(1,010,905)	(1,186,511)
Cash and Cash Equivalents, Fair Value Disclosure	16,579,398	15,195,259
Available-for-sale Securities, Fair Value Disclosure	97,537,598	93,683,774
Investment securities, held to maturity, fair value	128,856,455	147,621,280
Loans Held-for-sale, Fair Value Disclosure	16,595,846	19,234,111
Loans Receivable, Fair Value Disclosure	476,920,000	471,634,000
Deposits, Fair Value Disclosure	(670,964,000)	(625,764,000)
Notes Payable, Fair Value Disclosure	(26,945,000)	(90,163,000)
Carrying Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	16,579,398	15,195,259
Securities available for sale	97,537,598	93,683,774
Securities held to maturity	122,992,218	142,474,423
Loans Held for Sale	16,595,846	19,234,111
Loans, net	473,537,672	469,897,000
Accrued intrest receivable	2,767,959	2,996,848
Deposits	(669,071,450)	(623,862,485)
Borrowings	(25,300,000)	(88,300,000)
Redeemable subordinated debentures	(18,557,000)	(18,557,000)
Accrued intrest payable	(1,010,905)	(1,186,511)
Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	17,100,100
Loans Held-for-sale, Fair Value Disclosure	16,595,846
Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Accrued intrest receivable	2,767,959
Redeemable subordinated debentures	(18,557,000)
Accrued intrest payable	(1,010,905)
Cash and Cash Equivalents, Fair Value Disclosure	16,579,398
Available-for-sale Securities, Fair Value Disclosure	80,437,498
Investment securities, held to maturity, fair value	128,856,455
Deposits, Fair Value Disclosure	(670,964,000)
Notes Payable, Fair Value Disclosure	(26,945,000)
Level 3 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans Receivable, Fair Value Disclosure	$ 476,920,000

XML

Allowance for Loan Losses and Credit Quality Disclosure (Troubled Debt Restructurings On Financing Receivables) (Details) (USD $)	Jun. 30, 2012
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	1
Pre-Modification Outstanding Recorded Investment	$ 137,028
Post-Modification Outstanding Recorded Investment	137,028
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	1
Financing Receivable, Modifications, Subsequent Default, Recorded Investment	22,471
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	1
Financing Receivable, Modifications, Subsequent Default, Recorded Investment	$ 518,694

XML

Net Income Per Common Share (Narrative) (Details)	0 Months Ended		6 Months Ended
	Feb. 03, 2012	Jan. 18, 2012	Jun. 30, 2012
Net Income Per Common Share [Abstract]
Adjusted Share Information			5.00%
Dividends Payable, Date Declared			Dec. 15, 2011
Dividends Payable, Date to be Paid	Feb. 02, 2012		Feb. 02, 2012
Dividends Payable, Date of Record		Jan. 17, 2012	Jan. 17, 2012

XML

Net Income Per Common Share (Schedule of Earnings Per Share, Basic and Diluted) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net Income Per Common Share [Abstract]
Income Net income	$ 1,298,108	$ 828,916	$ 2,464,840	$ 1,618,784
Income Net income plus assumed conversion	$ 1,298,108	$ 828,916	$ 2,464,840	$ 1,618,784
Weighted-average shares Net income	5,096,317	5,043,504	5,096,252	5,043,324
Weighted-average shares Stock options and unvested stock awards	102,094	48,938	81,062	61,722
Weighted-average shares Net income plus assumed conversion	5,198,411	5,092,442	5,177,314	5,105,046
Per share amount Net income	$ 0.25	$ 0.16	$ 0.48	$ 0.32
Per share amount Net income plus assumed conversion	$ 0.25	$ 0.16	$ 0.48	$ 0.32

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(1)  Summary of Significant Accounting Policies

The accompanying unaudited Consolidated Financial Statements include 1^st Constitution Bancorp (the "Company"), its wholly-owned subsidiary, 1^st Constitution Bank (the "Bank"), and the Bank's wholly-owned subsidiaries, 1^st Constitution Investment Company of New Jersey, Inc., FCB Assets Holdings, Inc., 1^st Constitution Title Agency, 204 South Newman Street Corp. and 249 New York Avenue, LLC.  1^st Constitution Capital Trust II, a subsidiary of the Company, is not included in the Company's consolidated financial statements as it is a variable interest entity and the Company is not the primary beneficiary.  All significant intercompany accounts and transactions have been eliminated in consolidation and certain prior period amounts have been reclassified to conform to current year presentation.  The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") including the instructions to Form 10-Q and Article 8 of Regulation S-X.  Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations.  These Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company's Form 10-K for the year ended December 31, 2011, filed with the SEC on March 23, 2012.

In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the operating results for the interim periods have been included. The results of operations for periods of less than a year are not necessarily indicative of results for the full year.

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2012 for items that should potentially be recognized or disclosed in these financial statements.  The evaluation was conducted through the date these financial statements were issued.

XML

Investment Securities (Narrative) (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2009	Dec. 31, 2011	Jun. 30, 2011
Investment Securities [Abstract]
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Income (Loss), before Tax, Including Portion Attributable to Noncontrolling Interest		$ 864,727
Net Credit Losses During Period on Loans Managed or Securitized or Asset-backed Financing Arrangement		363,783
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Credit Losses on Debt Securities Held	364,000	500,944		364,000
Federal Home Loan Bank Stock	1,708,800		4,397,600
Atlantic Central Bankers Bank Stock	$ 15,000

XML

Allowance for Loan Losses and Credit Quality Disclosure (Past Due Financing Receivables) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	$ 3,762,987	$ 1,270,053
60-89 Days	0	954,930
Greater than 90 Days	1,411,434	1,505,496
Total Past Due	5,084,421	3,730,479
Current	474,710,671	471,701,292
Total Loans Receivable	479,795,092	475,431,771
Recorded Investment >90 Days Accruing	42,320	0
Nonaccrual Loans	2,698,955	2,991,470
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	0
60-89 Days	0	0
Greater than 90 Days	0	140,055
Total Past Due	0	140,055
Current	59,650,806	49,145,728
Total Loans Receivable	59,650,806	49,285,783
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	0	140,055
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	599,605	364,743
60-89 Days	0	564,152
Greater than 90 Days	262,737	122,535
Total Past Due	862,342	1,051,430
Current	57,197,323	49,733,244
Total Loans Receivable	58,059,665	50,784,674
Recorded Investment >90 Days Accruing	42,320	0
Nonaccrual Loans	479,072	669,166
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	2,609,703	0
60-89 Days	0	245,874
Greater than 90 Days	1,093,793	503,877
Total Past Due	3,703,496	749,751
Current	103,662,142	98,887,225
Total Loans Receivable	107,365,638	99,636,976
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	2,024,487	1,443,220
Mortgage Warehouse Lines [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	0
60-89 Days	0	0
Greater than 90 Days	0	0
Total Past Due	0	0
Current	230,776,678	249,345,831
Total Loans Receivable	230,776,678	249,345,831
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	0	0
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	463,679	905,310
60-89 Days	0	0
Greater than 90 Days	0	661,171
Total Past Due	463,679	1,566,481
Current	10,860,661	11,318,871
Total Loans Receivable	11,324,340	12,885,352
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	140,492	661,171
Loans to Individuals [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	0
60-89 Days	0	144,904
Greater than 90 Days	54,904	77,858
Total Past Due	54,904	222,762
Current	11,384,790	11,996,878
Total Loans Receivable	11,439,694	12,219,640
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	54,904	77,858
Other [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	0
60-89 Days	0	0
Greater than 90 Days	0	0
Total Past Due	0	0
Current	227,448	255,556
Total Loans Receivable	227,448	255,556
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	0	0
Deferred Loan Cost [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	0
60-89 Days	0	0
Greater than 90 Days	0	0
Total Past Due	0	0
Current	950,823	1,017,959
Total Loans Receivable	950,823	1,017,959
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	$ 0	$ 0

XML

Fair Value Disclosures (Fair Value Assets Measured On Nonrecurring Basis) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 97,537,598	$ 93,683,774
Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	17,100,100
Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	80,437,498
U.S Treasury securities and obligations of U.S. Government sponsored corporations("GSE') and agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	17,100,100	19,472,689
U.S Treasury securities and obligations of U.S. Government sponsored corporations("GSE') and agencies [Member] | Level 1 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	17,100,100	7,108,870
U.S Treasury securities and obligations of U.S. Government sponsored corporations("GSE') and agencies [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure		12,363,819
Residential collateralized mortgage obligations- GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	11,466,705	13,898,133
Residential collateralized mortgage obligations- GSE [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	11,466,705	13,898,133
Residential collateralized mortgage obligations- non GSEs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	3,632,985	4,300,444
Residential collateralized mortgage obligations- non GSEs [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	3,632,985	4,300,444
Residential mortgage obligations- GSE [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	36,877,742	42,687,209
Residential mortgage obligations- GSE [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	36,877,742	42,687,209
Obligations of State and Political subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	5,739,097	5,700,514
Obligations of State and Political subdivisions [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	5,739,097	5,700,514
Trust preferred debt securities - single issuer [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	1,895,973	1,751,241
Trust preferred debt securities - single issuer [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	1,895,973	1,751,241
Corporate debt securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	19,076,196	1,435,944
Corporate debt securities [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	19,076,196	1,435,944
Restricted stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	1,723,800	4,412,600
Restricted stock [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	1,723,800	4,412,600
Mutual fund [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	25,000	25,000
Mutual fund [Member] | Level 2 Inputs [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 25,000	$ 25,000

XML

Consolidated Balance Sheets (USD $)	Jun. 30, 2012	Dec. 31, 2011
ASSETS
CASH AND DUE FROM BANKS	$ 16,567,985	$ 15,183,853
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS	11,413	11,406
Total cash and cash equivalents	16,579,398	15,195,259
INVESTMENT SECURITIES:
Available for sale, at fair value	97,537,598	93,683,774
Held to maturity (fair value of $128,856,455 and $147,621,280 at June 30, 2012, and December 31, 2011 respectively)	122,992,218	142,474,423
Total securities	220,529,816	236,158,197
LOANS HELD FOR SALE	16,595,846	19,234,111
LOANS	479,795,092	475,431,771
Less- Allowance for loan losses	(6,257,420)	(5,534,450)
Net loans	473,537,672	469,897,321
PREMISES AND EQUIPMENT, net	10,629,160	10,439,304
ACCRUED INTEREST RECEIVABLE	2,767,959	2,996,848
BANK-OWNED LIFE INSURANCE	13,804,079	13,578,981
OTHER REAL ESTATE OWNED	11,604,744	12,409,201
OTHER ASSETS	11,449,899	11,817,693
Total assets	777,498,573	791,726,915
LIABILITIES
Deposits: Non-interest bearing	129,822,625	105,470,543
Deposits: Interest bearing	539,248,825	518,391,942
Total deposits	669,071,450	623,862,485
BORROWINGS	25,300,000	88,300,000
REDEEMABLE SUBORDINATED DEBENTURES	18,557,000	18,557,000
ACCRUED INTEREST PAYABLE	1,010,905	1,186,511
ACCRUED EXPENSES AND OTHER LIABILITIES	5,885,943	4,821,144
Total liabilities	719,825,298	736,727,140
COMMITTMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, no par value; 5,000,000 shares authorized, none issued	0	0
Common stock, no par value,30,000,000 shares authorized; 5,101,907 and 5,096,054 shares issued and 5,093,725 and 5,094,503 shares outstanding as of June 30, 2012 and December 31, 2011 respectively	41,073,077	40,847,929
Retained earnings	15,535,446	13,070,606
Treasury Stock, at cost, 8,182 shares at June 30, 2012 and 1,551 shares at December 31, 2011, respectively	(68,492)	(10,222)
Accumulated other comprehensive income	1,133,244	1,091,462
Total shareholders' equity	57,673,275	54,999,775
Total liabilities and shareholders' equity	$ 777,498,573	$ 791,726,915

XML

Share-Based Compensation (Narative) (USD $)	0 Months Ended		6 Months Ended
	Feb. 03, 2012	Jan. 18, 2012	Jun. 30, 2012	Jun. 30, 2011
Share-Based Compensation [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			1,298,193
Option Expiration			10 years
Stocks Availible For Future Grants			123,974
Dividends Payable, Date Declared			Dec. 15, 2011
Dividends Payable, Date to be Paid	Feb. 02, 2012		Feb. 02, 2012
Dividends Payable, Date of Record		Jan. 17, 2012	Jan. 17, 2012
Allocated Share-based Compensation Expense			$ 48,777	$ 27,200
Unrecognized Compensation Cost Related To Nonvested Stock Option Based Compensation Arrangements			146,906
Recognition of Nonvested Stock Options			3 years
Employee Benefits and Share-based Compensation			175,444	160,721
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized			$ 661,325
Recognition of Nonvested Stock Grants			4 years

XML

Consolidated Statements of Changes in Shareholders' Equity (USD $)	Common Stock [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance at Dec. 31, 2010	$ 38,899,855	$ 10,741,779	$ (58,652)	$ 98,174	$ 49,681,156
Exercise of stock options and issuance of vested shares under employee benefit programs	75,058		11,597		86,655
Share-based compensation	27,200				27,200
Treasury stock purchased			(15,354)		(15,354)
Net income for the six months ended June 30		1,618,784			1,618,784
Other comprehensive income				1,034,711	1,034,711
Balance at Jun. 30, 2011	39,002,113	12,360,563	(62,409)	1,132,885	52,433,152
Balance at Dec. 31, 2011	40,847,929	13,070,606	(10,222)	1,091,462	54,999,775
Exercise of stock options and issuance of vested shares under employee benefit programs	176,371				176,371
Share-based compensation	48,777				48,777
Treasury stock purchased			(58,270)		(58,270)
Net income for the six months ended June 30		2,464,840			2,464,840
Other comprehensive income				41,782	41,782
Balance at Jun. 30, 2012	$ 41,073,077	$ 15,535,446	$ (68,492)	$ 1,133,244	$ 57,673,275

XML

Investment Securities (Investments Classified By Contractual Maturity Date) (Details) (USD $)	Jun. 30, 2012
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities, within one year, amortized cost	$ 9,573,866
Available-for-sale securities, within one year, fair value	9,610,803
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	28,210,527
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	28,181,203
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	6,238,783
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	6,827,968
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	51,138,655
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	52,917,624
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	95,161,831
Available-for-sale Securities, Debt Securities	97,537,598
Held-to-maturity Securities, Debt Maturities, within One Year, Net Carrying Amount	15,141,316
Held-to-maturity Securities, Debt Maturities, Next Twelve Months, Fair Value	15,192,803
Held-to-maturity Securities, Debt Maturities, after One Through Five Years, Net Carrying Amount	17,223,677
Held-to-maturity Securities, Debt Maturities, Year Two Through Five, Fair Value	17,505,044
Held-to-maturity Securities, Debt Maturities, after Five Through Ten Years, Net Carrying Amount	27,613,665
Held-to-maturity Securities, Debt Maturities, Year Six Through Ten, Fair Value	29,377,092
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	63,514,504
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	66,781,516
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount	123,493,162
Held-to-maturity Securities, Debt Maturities, Fair Value	128,856,455
U.S Treasury securities and obligations of U.S. Government sponsored corporations("GSE') and agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	6,033,171
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	6,063,510
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	10,951,515
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	11,036,590
Held-to-maturity Securities, Debt Maturities, after One Through Five Years, Net Carrying Amount	3,098,502
Held-to-maturity Securities, Debt Maturities, Year Two Through Five, Fair Value	3,138,265
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	0
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	0
Residential collateralized mortgage obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	168,877
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	174,044
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	10,869,447
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	11,292,661
Held-to-maturity Securities, Debt Maturities, after Five Through Ten Years, Net Carrying Amount	635,319
Held-to-maturity Securities, Debt Maturities, Year Six Through Ten, Fair Value	651,756
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	22,069,900
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	23,159,018
Residential collateralized mortgage obligations- non GSEs [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	3,522,276
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	3,632,985
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	13,471,005
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	14,231,877
Residential mortgage obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	36,231
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	38,052
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	288,221
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	304,807
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	3,357,223
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	3,662,711
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	31,150,973
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	32,872,172
Held-to-maturity Securities, Debt Maturities, after Five Through Ten Years, Net Carrying Amount	4,016,700
Held-to-maturity Securities, Debt Maturities, Year Six Through Ten, Fair Value	4,144,974
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	14,037,713
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	14,854,907
Obligations of State and Political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	593,820
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	597,801
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	2,712,683
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	2,991,213
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	2,044,335
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	2,150,083
Held-to-maturity Securities, Debt Maturities, within One Year, Net Carrying Amount	1,665,786
Held-to-maturity Securities, Debt Maturities, Next Twelve Months, Fair Value	1,669,328
Held-to-maturity Securities, Debt Maturities, after One Through Five Years, Net Carrying Amount	5,198,416
Held-to-maturity Securities, Debt Maturities, Year Two Through Five, Fair Value	5,410,645
Held-to-maturity Securities, Debt Maturities, after Five Through Ten Years, Net Carrying Amount	22,961,646
Held-to-maturity Securities, Debt Maturities, Year Six Through Ten, Fair Value	24,580,362
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	13,284,098
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	14,446,472
Trust preferred debt securities - single issuer [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	2,464,749
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	1,895,973
Held-to-maturity Securities, Debt Maturities, after Ten Years, Net Carrying Amount	651,788
Held-to-maturity Securities, Debt Maturities, after Ten Years, Fair Value	89,242
Corporate debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	1,755,664
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	1,760,441
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	16,376,971
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	16,242,005
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	1,086,876
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	1,073,750
Held-to-maturity Securities, Debt Maturities, within One Year, Net Carrying Amount	13,475,530
Held-to-maturity Securities, Debt Maturities, Next Twelve Months, Fair Value	13,523,475
Held-to-maturity Securities, Debt Maturities, after One Through Five Years, Net Carrying Amount	8,926,759
Held-to-maturity Securities, Debt Maturities, Year Two Through Five, Fair Value	8,956,134
Restricted stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	1,723,800
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	1,723,800
Mutual fund [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	25,000
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	$ 25,000

XML

Net Income Per Common Share (Tables)

6 Months Ended

Jun. 30, 2012

Net Income Per Common Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30, 2012
	Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income		$1,298,108	5,096,317		$0.25
Effect of dilutive securities:
Stock options and unvested stock awards				102,094
Diluted EPS:
Net income plus assumed conversion		$1,298,108		5,198,411		$0.25

	Three Months Ended June 30, 2011
	Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income		$828,916	5,043,504		$0.16
Effect of dilutive securities:
Stock options and unvested stock awards				48,938
Diluted EPS
Net income plus assumed conversion		$828,916		5,092,442		$0.16

	Six Months Ended June 30, 2012
	Income		Weighted- average shares		Per share Amount
Basic earnings per share:
Net income		$2,464,840	5,096,252		$0.48
Effect of dilutive securities:
Stock options and unvested stock awards				81,062
Diluted EPS
Net income plus assumed conversion		$2,464,840		5,177,314		$0.48

	Six Months Ended June 30, 2011
	Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income		$1,618,784	5,043,324		$0.32
Effect of dilutive securities:
Stock options and unvested stock awards				61,722
Diluted EPS:
Net income plus assumed conversion		$1,618,784		5,105,046		$0.32

XML

Investment Securities (Available For Sale Securities Continuous Unrealized Loss Position Fair Value) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		35
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 16,602,512	$ 14,722,888
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	177,538	(218,967)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	3,372,112	2,673,428
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	1,144,964	(1,388,799)
Invetment Securities, Continous Unrealized Loss Position, Fair Value	19,974,624	17,396,316
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	1,322,502	1,607,766
Residential collateralized mortgage obligations- non GSEs [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		1
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	206,518	251,723
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	10,204	(20,151)
Invetment Securities, Continous Unrealized Loss Position, Fair Value	206,518	251,723
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	10,204	20,151
Residential mortgage obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		1
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	5,113	5,280
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	4	(7)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	0	0
Invetment Securities, Continous Unrealized Loss Position, Fair Value	5,113	5,280
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	4	7
Obligations of State and Political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		3
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	522,653	1,049,362
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	1,017	(7,885)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	0	0
Invetment Securities, Continous Unrealized Loss Position, Fair Value	522,653	1,049,362
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	1,017	7,885
Trust preferred debt securities - single issuer [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		4
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,895,973	1,751,241
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	568,775	(712,055)
Invetment Securities, Continous Unrealized Loss Position, Fair Value	1,895,973	1,751,241
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	568,775	712,055
Trust Preferred Debt Securities Pooled [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		1
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	89,242	3,508
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	562,546	(643,066)
Invetment Securities, Continous Unrealized Loss Position, Fair Value	89,242	3,508
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	562,546	643,066
Corporate debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number Of Securities		25
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	16,074,746	13,668,246
Investment Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	176,517	(211,075)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,180,379	666,956
Investment Securities, Continuous Unrealized Loss Position, 12 months or Longer, Aggregate Losses	3,439	(13,527)
Invetment Securities, Continous Unrealized Loss Position, Fair Value	17,255,125	14,335,202
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	$ 179,956	$ 224,602

XML

Allowance for Loan Losses and Credit Quality Disclosure (Tables)

6 Months Ended

Jun. 30, 2012

Allowance for Loan Losses and Credit Quality Disclosure [Abstract]

Past Due Financing Receivables [Table Text Block]

The following table provides an aging of the loan portfolio by loan class at June 30, 2012:

	30-59 Days	60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Recorded Investment      > 90 Days Accruing	Nonaccrual Loans
Commercial
Construction	$              0	$              0	$0	$0	$59,650,806	$59,650,806	$               0	$0
Commercial Business	599,605	0	262,737	862,342	57,197,323	58,059,665	42,320	479,072
Commercial Real Estate	2,609,703	0	1,093,793	3,703,496	103,662,142	107,365,638	0	2,024,487
Mortgage Warehouse        Lines	0	0	0	0	230,776,678	230,776,678	0	0
Residential Real Estate	463,679	0	0	463,679	10,860,661	11,324,340	0	140,492
Consumer
Loans to Individuals	0	0	54,904	54,904	11,384,790	11,439,694	0	54,904
Other	0	0	0	0	227,448	227,448	0	0
Deferred Loan Fees	0	0	0	0	950,823	950,823	0	0
Total	$3,762,987	$ 0	$1,411,434	$5,084,421	$474,710,671	$479,795,092	$              42,320	$2,698,955

The following table provides an aging of the loan portfolio by loan class at December 31, 2011:

	30-59 Days	60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Recorded Investment      > 90 Days Accruing	Nonaccrual Loans
Commercial
Construction	$              0	$              0	$   140,055	$   140,055	$  49,145,728	$49,285,783	$                0	$    140,055
Commercial Business	364,743	564,152	122,535	1,051,430	49,733,244	50,784,674	0	669,166
Commercial Real Estate	0	245,874	503,877	749,751	98,887,225	99,636,976	0	1,443,220
Mortgage Warehouse Lines	0	0	0	0	249,345,831	249,345,831	0	0
Residential Real Estate	905,310	0	661,171	1,566,481	11,318,871	12,885,352	0	661,171
Consumer
Loans to Individuals	0	144,904	77,858	222,762	11,996,878	12,219,640	0	77,858
Other	0	0	0	0	255,556	255,556	0	0
Deferred Loan Costs	0	0	0	0	1,017,959	1,017,959	0	0
Total	$1,270,053	$   954,930	$1,505,496	$3,730,479	$471,701,292	$475,431,771	$                0	$ 2,991,470

Financing Receivable Credit Quality Indicators [Table Text Block]

The following table provides a breakdown of the loan portfolio by credit quality indicator at June 30, 2012.

Commercial Credit Exposure - By Internally Assigned Grade	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse Lines	Residential Real Estate
Grade:
Pass	$54,594,154	$55,393,231	$80,134,127	$230,776,678	$11,183,848
Special Mention	1,041,045	1,159,276	19,287,729	0	0
Substandard	4,015,607	1,364,009	7,795,550	0	140,492
Doubtful	0	143,149	148,232	0	0
Total	$59,650,806	$58,059,665	$107,365,638	$230,776,678	$11,324,340
Consumer Credit Exposure -      By Payment Activity	Loans To Individuals	Other
Performing	$11,384,790	$227,448
Nonperforming	54,904	0
Total	$11,439,694	$227,448

       The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2011.

Commercial Credit Exposure - By Internally Assigned Grade	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse Lines	Residential Real Estate
Grade:
Pass	$  44,106,827	$   47,973,545	$ 84,642,510	$249,345,831	$    12,224,181
Special Mention	5,038,901	1,657,993	10,574,489	0	142,477
Substandard	107,405	865,160	3,823,225	0	518,694
Doubtful	32,650	287,976	596,752	0	0
Total	$  49,285,783	$  50,784,674	$ 99,636,976	$249,345,831	$   12,885,352
Consumer Credit Exposure -      By Payment Activity	Loans To Individuals	Other
Performing	$  12,141,782	$    255,556
Nonperforming	77,858	0
Total	$  12,219,640	$    255,556

 

Allowance for Credit Losses on Financing Receivables [Table Text Block]

The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2012 and December 31, 2011:

Period-End Allowance for Credit Losses by Impairment Method – June 30, 2012
		Commercial	Commercial	Mortgage	Residential				Deferred	Total
	Construction	Business	Real Estate	Warehouse	Real Estate	Consumer	Other	Unallocated	Fees
Allowance for credit losses:
Ending Balance	$1,647,605	$903,401	$2,304,010	$1,153,883	$122,510	$123,213	$2,798	0	$0	$6,257,420
Ending Balance
Individually evaluated      for impairment	0	138,597	357,074	0	28,566	0	0	0	0	524,237
Collectively evaluated       for impairment	1,647,605	764,804	1,946,936	1,153,883	93,944	123,213	2,798	0	0	5,733,182
Loans receivables:
Ending Balance	$59,650,806	$58,059,665	$107,365,638	$230,776,678	$11,324,340	$11,439,694	$227,448	$0	$950,823	$479,795,092
Individually evaluated         for impairment	0	851,819	2,507,360	0	140,492	54,904	0	0	0	3,554,575
Collectively evaluated        for impairment	59,650,806	57,207,846	104,858,278	230,776,678	11,183,848	11,384,790	227,448	0	950,823	476,240,517

Period-End Allowance for Credit Losses by Impairment Method – December 31, 2011
		Commercial	Commercial	Mortgage	Residential				Deferred	Total
	Construction	Business	Real Estate	Warehouse	Real Estate	Consumer	Other	Unallocated	Fees
Allowance for credit losses:
Ending Balance	$    1,054,695	$   934,642	$    1,597,702	$    1,122,056	$     91,076	$   187,352	$   2,377	$    544,550	$      0	$5,534,450
Ending Balance
Individually evaluated      for impairment	0	283,424	186,055	0	11,619	77,858	0	0	0	558,956
Collectively evaluated       for impairment	1,054,695	651,218	1,411,647	1,122,056	79,457	109,494	2,377	544,550	0	4,975,494
Loans receivables:
Ending Balance	$49,285,783	$50,784,674	$99,636,976	$249,345,831	$12,885,352	$12,219,640	$255,556	0	$1,017,959	$475,431,771
Individually evaluated         for impairment	140,055	952,156	1,934,120	0	661,171	77,858	0	0	0	3,765,360
Collectively evaluated        for impairment	49,145,728	49,832,518	97,702,856	249,345,831	12,224,181	12,141,782	255,556	0	1,017,959	471,666,411

  

The allowance for loan loss by loan class at both June 30, 2012 and December 31, 2011, and related activity for the six months ended June 30, 2012, are as follows:

	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse	Residential Real Estate	Consumer	Other	Unallocated	Total
Balance - December 31, 2011	$1,054,695	$934,642	$1,597,702	$1,122,056	$91,076	$187,352	$2,377	$544,550	$5,534,450
Provision charged to operations	217,501	15,757	241,180	(115,451)	148,497	22,076	6,803	63,635	599,998
Loans charged off	(32,650)	(144,827)	0	0	0	(77,858)	(6,001)	0	(261,336)
Recoveries of loans charged off	3,403	5,427	0	0	0	0	0	0	8,830
Balance - March 31, 2012	$1,242,949	$810,999	$1,838,882	$1,006,605	$239,573	$131,570	$3,179	$608,185	$5,881,942
Provision charged to operations	429,656	111,410	464,946	147,278	13,631	(8,357)	(381)	(608,185)	549,998
Loans charged off	(25,000)	(20,199)	0	0	(130,694)	0	0	0	(175,893)
Recoveries of loans charged off	0	1,191	182	0	0	0	0	0	1,373
Balance - June 30, 2012	$1,647,605	$903,401	$2,304,010	$1,153,883	$122,510	$123,213	$2,798	0	$6,257,420

The allowance for loan loss by loan class at both June 30, 2011 and December 31, 2010, and related activity for the six months ended June 30, 2011, are as follows:

	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse	Residential Real Estate	Consumer	Other	Unallocated	Total
Balance - December 31, 2010	$1,744,068	$971,994	$1,723,865	$763,092	$67,828	$192,457	$1,910	$297,498	$5,762,712
Provision charged to operations	1,183,736	(55,760)	(318,432)	(344,826)	9,777	(1,990)	571	(73,078)	399,998
Loans charged off	(366,587)	(46,319)	-	-	-	-	-	-	(412,906)
Recoveries of loans charged off	-	239	-	-	-	-	-	-	239
Balance - March 31, 2011	$2,561,217	$870,154	$1,405,433	$418,266	$77,605	$190,467	$2,481	$224,420	$5,750,043
Provision charged to operations	52,940	48,806	215,679	110,442	(370)	(3,016)	(28)	(149,453)	275,000
Loans charged off	(158,900)	-	-	-	-	-	-	-	(158,900)
Recoveries of loans charged off	-	3,438	-	-	-	-	-	-	3,438
Balance - June 30, 2011	$2,455,257	$922,398	$1,621,112	$528,708	$77,235	$187,451	$2,453	$74,967	$5,869,581

Impaired Financing Receivables [Table Text Block]

The Bank adopted Accounting Standards Update ("ASU") No. 2011-02 on July 1, 2011. ASU No. 2011-02 provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring. In evaluating whether a restructuring constitutes a troubled debt restructuring, ASU No. 2011-02 requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties. As a result of our adoption of ASU No. 2011-02, we reassessed the terms of loan restructurings. The following table is a breakdown of troubled debt restructuring activity during the six months ended June 30, 2012.

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Number of Contracts	Pre-modification outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial	1	$137,028	$137,028
	Number of Contracts	Recorded Investment
Troubled Debt Restructurings During the Prior Twelve Months that subsequently Defaulted:
Commercial	1	$22,471
Residential Real Estate	1	$518,694

XML

Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES:
Net income	$ 2,464,840	$ 1,618,784
Adjustments to reconcile net income to net cash provided by operating activities-
Provision for loan losses	1,149,996	674,998
Provision for loss on other real estate owned	501,644	147,178
Depreciation and amortization	579,455	510,473
Net amortization of premiums and discounts on securities	750,689	815,173
Gains on sales of loans held for sale	(963,364)	(848,382)
Originations of loans held for sale	(79,079,430)	(47,402,373)
Proceeds from sales of loans held for sale	82,681,059	62,498,228
Income on Bank - owned life insurance	(225,098)	(198,659)
Share-based compensation expense	224,221	187,921
Decrease (increase) in accrued interest receivable	228,889	(276,159)
(Increase) decrease in other assets	211,685	(1,574,006)
Decrease in accrued interest payable	(175,606)	(240,064)
Increase (decrease)in accrued expenses and other liabilities	895,796	(914,212)
Net cash provided by operating activities	9,244,776	14,998,900
INVESTING ACTIVITIES:
Purchase of securities - available for sale	(28,280,554)	(69,849,189)
Purchase of securities - held to maturity		(83,188,354)
Proceeds from maturities and repayments of securities - Available for sale	24,322,808	44,610,442
Proceeds from maturities and repayments of securities - Held to maturity	18,892,905	22,600,347
Net (increase) decrease in loans	(5,260,752)	69,306,181
Capital expenditures	(635,328)	(347,008)
Additional investment in other real estate owned	(81,812)	(607,158)
Proceeds from sales of other real estate owned	855,030	1,629,315
Cash consideration received in connection with acquisitions of branches		101,539,588
Net cash (used in) provided by investing activities	9,812,297	85,694,164
FINANCING ACTIVITIES:
Exercise of stock options and issuance of vested shares under employee benefit programs	176,371	86,655
Exercise of stock options and issuance of vested shares	176,371	86,655
Purchase of Treasury Stock	(58,270)	(15,354)
Net increase (decrease) in demand, savings and time deposits	45,208,965	(12,517,290)
Net (decrease) increase in borrowings	(63,000,000)	(15,900,000)
Net cash used in financing activities	(17,672,934)	(28,345,989)
Increase (decrease) in cash and cash equivalents	1,384,139	72,347,075
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	15,195,259	17,710,501
CASH AND CASH EQUIVALENTS AT END OF PERIOD	16,579,398	90,057,576
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for - interest	2,858,581	3,880,534
Cash paid during the year for - Income taxes	887,000	857,000
Non-cash investing activities
Real estate acquired in full satisfaction of loans in foreclosure	$ 470,405	$ 3,107,664

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Consolidated Balance Sheets
Investment securities, held to maturity, fair value	$ 128,856,455	$ 147,621,280
Preferred stock, par value
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	5,101,907	5,096,054
Common stock, shares outstanding	5,093,725	5,094,503
Treasury stock, shares	8,182	1,551

XML

Fair Value Disclosures

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures

(10)  Fair Value Disclosures

U.S. GAAP has established a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset's or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company's financial assets and financial liabilities carried at fair value.

In general, fair value is based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and counterparty creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.  The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future values.  While management believes the Company's valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Securities Available for Sale.  Securities classified as available for sale are reported at fair value utilizing Level 1 and Level 2 inputs.  For these securities, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security's terms and conditions, among other things.

Impaired loans.  Loans included in the following table are those which the Company has measured and recognized 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 on the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.  The fair value consists of the loan balances less specific valuation allowances.

Other Real Estate Owned.  Foreclosed properties are adjusted to fair value less estimated selling costs at the time of foreclosure in preparation for transfer from portfolio loans to other real estate owned ("OREO"), thereby establishing a new accounting basis.  The Company subsequently adjusts the fair value of the OREO utilizing Level 3 inputs on a non-recurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2012:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies		$17,100,100		-		-		$17,100,100
Residential collateralized mortgage obligations- GSE		-		11,466,705		-		11,466,705
Residential collateralized mortgage obligations - non GSE		-		3,632,985		-		3,632,985
Residential mortgage backed securities – GSE		-		36,877,742		-		36,877,742
Obligations of State and Political subdivisions		-		5,739,097		-		5,739,097
Trust preferred debt securities – single issuer		-		1,895,973		-		1,895,973
Corporate debt securities		-		19,076,196		-		19,076,196
Restricted stock		-		1,723,800		-		1,723,800
Mutual fund		-		25,000		-		25,000
December 31, 2011:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies		$7,108,870		$12,363,819		-		$19,472,689
Residential collateralized mortgage obligations- GSE		-		13,898,133		-		13,898,133
Residential collateralized mortgage obligations - non GSE		-		4,300,444		-		4,300,444
Residential mortgage backed securities – GSE		-		42,687,209		-		42,687,209
Obligations of State and Political subdivisions		-		5,700,514		-		5,700,514
Trust preferred debt securities – single issuer		-		1,751,241		-		1,751,241
Corporate debt securities		-		1,435,944		-		1,435,944
Restricted stock		-		4,412,600		-		4,412,600
Mutual fund		-		25,000		-		25,000

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a non-recurring basis at June 30, 2012 and December 31, 2011 are as follows:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2012:
Impaired loans		-		-		$2,544,053		$2,544,053
Other real estate owned		-		-		3,000,619		3,000,619
December 31, 2011:
Impaired loans		-		-		$2,038,805		$2,038,805
Other real estate owned		-		-		491,536		491,536

Impaired loans, measured at fair value and included in the above table, consisted of 12 loans having an aggregate balance of $3,068,290 and specific loan loss allowances of $524,237 at June 30, 2012 and nine loans at December 31, 2011 having an aggregate balance of $2,597,761 and specific loan loss allowances of $558,956.

The following table presents additional qualitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

                                                  Quantitative Information about Level 3 Fair Value Measurements

	Fair Value Estimate	Valuation Techniques	Unobservable Input	Range of Adjustments
June 30, 2012
Impaired loans	$2,544,053	Appraisal of collateral (1)	Appraisal adjustments (1)	5-50%
Other Real Estate Owned	$3,000,619	Appraisal of collateral (1)	Appraisal adjustments (1),(2)	8-60%

(1)Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs that are not identifiable.

(2)Includes qualitative adjustments by management and estimated liquidation expenses

The fair values of other real estate owned was determined using appraisals, which may be discounted based on management's review and changes in market conditions.

The following is a summary of fair value versus the carrying value of all the Company's financial instruments.  For the Company and the Bank, as for most financial institutions, the bulk of its assets and liabilities are considered financial instruments.  Many of the financial instruments lack an available trading market as characterized by a willing buyer and willing seller engaging in an exchange transaction.  Therefore, significant estimations and present value calculations were used for the purpose of this note.  Changes in assumptions could significantly affect these estimates.

Estimated fair values have been determined by using the best available data and an estimation methodology suitable for each category of financial instruments as follows:

Cash and Cash Equivalents, Accrued Interest Receivable and Accrued Interest Payable (Carried at Cost). The carrying amounts reported in the balance sheet for cash and cash equivalents, accrued interest receivable and accrued interest payable approximate fair value.

Securities Held to Maturity (Carried at Amortized Cost). The fair values of securities held to maturity are determined in the same manner as for securities available for sale.

Loans Held For Sale (Carried at Lower of Aggregated Cost or Fair Value). The fair values of loans held for sale are determined, when possible, using quoted secondary market prices. If no such quoted market prices exist, fair values are determined using quoted prices for similar loans, adjusted for the specific attributes of the loans.

Gross Loans Receivable (Carried at Cost). The fair values of loans, excluding impaired loans subject to specific loss reserves, 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 re-price frequently and with no significant change in credit risk, fair values are based on carrying values.

Deposit Liabilities (Carried at Cost). The fair values disclosed for demand deposits (e.g., interest and non-interest demand and savings accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Borrowings and Subordinated Debentures (Carried at Cost). The carrying amounts of short-term borrowings approximate their fair values. The fair values of long-term FHLB advances and subordinated debentures are estimated using discounted cash flow analysis, based on quoted or estimated interest rates for new borrowings with similar credit risk characteristics, terms and remaining maturity. 

The estimated fair values, and the recorded book balances, at June 30, 2012 and December 31, 2011 are as follows:

	December 31, 2011
	Carrying			Fair
	Value			Value
Cash and cash equivalents		$15,195,259			$15,195,259
Securities available for sale		93,683,774			93,683,774
Securities held to maturity		142,474,423			147,621,280
Loans held for sale		19,234,111			19,234,111
Loans, net		469,897,000			471,634,000
Accrued interest receivable		2,996,848			2,996,848
Deposits		(623,862,485	)		(625,764,000	)
Borrowings		(88,300,000	)		(90,163,000	)
Redeemable subordinated debentures		(18,557,000	)		(18,557,000	)
Accrued interest payable		(1,186,511	)		(1,186,511	)

                                                                                                           June 30, 2012

	Carrying	Level 1		Level 2		Level 3		Fair
	Value	Inputs		Inputs		Inputs		Value
Cash and cash equivalents	$16,579,398	$	-		$16,579,398	$	-		$16,579,398
Securities available for sale	97,537,598		17,100,100		80,437,498		-		97,537,598
Securities held to maturity	122,992,218		-		128,856,455		-		128,856,455
Loans held for sale	16,595,846		16,595,846		-		-		16,595,846
Loans, net	473,537,672		-				476,920,000		476,920,000
Accrued interest receivable	2,767,959		-		2,767,959		-		2,767,959
Deposits	(669,071,450)		-		(670,964,000)		-		(670,964,000	)
Borrowings	(25,300,000)		-		(26,945,000)		-		(26,945,000	)
Redeemable subordinated debentures	(18,557,000)		-		(18,557,000)		-		(18,557,000	)
Accrued interest payable	(1,010,905)				(1,010,905)		-		(1,010,905	)

Loan commitments and standby letters of credit as of June 30, 2012 and December 31, 2011 are based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit is nominal.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 12, 2012
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012
Document Period End Date	Jun. 30, 2012
Current Fiscal Year End Date	--12-31
Entity Central Index Key	0001141807
Entity Registrant Name	1ST CONSTITUTION BANCORP
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,093,725

XML

Summary of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

1^st Constitution Capital Trust II, a subsidiary of the Company, is not included in the Company's consolidated financial statements as it is a variable interest entity and the Company is not the primary beneficiary.  All significant intercompany accounts and transactions have been eliminated in consolidation and certain prior period amounts have been reclassified to conform to current year presentation.  The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") including the instructions to Form 10-Q and Article 8 of Regulation S-X.  Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations.

Subsequent Events, Policy [Policy Text Block]

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2012 for items that should potentially be recognized or disclosed in these financial statements.  The evaluation was conducted through the date these financial statements were issued.

XML

Consolidated Statements of Income (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
INTEREST INCOME
Loans, including fees	$ 6,319,104	$ 5,167,439	$ 12,733,563	$ 10,521,646
Securities: Taxable	1,143,554	1,503,134	2,327,759	2,788,078
Securities: Tax-exempt	411,225	351,728	831,794	636,800
Federal funds sold and short-term investments	33,306	63,004	48,340	72,110
Total interest income	7,907,189	7,085,305	15,941,456	14,018,634
INTEREST EXPENSE
Deposits	1,079,048	1,530,274	2,265,522	2,928,404
Borrowings	103,639	103,712	221,561	210,632
Redeemable subordinated debentures	96,580	237,280	195,892	501,434
Total interest expense	1,279,267	1,871,266	2,682,975	3,640,470
Net interest income	6,627,922	5,214,039	13,258,481	10,378,164
PROVISION FOR LOAN LOSSES	549,998	275,000	1,149,996	674,998
Net interest income after provision for loan losses	6,077,924	4,939,039	12,108,485	9,703,166
NON-INTEREST INCOME
Service charges on deposit accounts	231,256	234,898	459,228	410,740
Gain on sales of loans	495,147	411,643	963,364	848,382
Income on bank-owned life insurance	113,176	103,522	225,098	198,659
Other income	348,387	390,249	705,441	707,281
Total non-interest income	1,187,966	1,140,312	2,353,131	2,165,062
NON-INTEREST EXPENSE
Salaries and employee benefits	3,154,903	2,843,948	6,095,253	5,420,612
Occupancy expense	613,534	580,969	1,337,320	1,147,707
Data processing expenses	252,545	313,776	516,120	617,249
FDIC insurance expenses	139,873	246,458	287,266	474,005
Other operating expenses	1,213,119	1,170,634	2,750,532	2,159,044
Total non-interest expenses	5,373,974	5,155,785	10,986,491	9,818,617
Income before income taxes	1,891,916	923,566	3,475,125	2,049,611
INCOME TAXES	593,808	94,650	1,010,285	430,827
Net income	$ 1,298,108	$ 828,916	$ 2,464,840	$ 1,618,784
NET INCOME PER COMMON SHARE
Basic	$ 0.25	$ 0.16	$ 0.48	$ 0.32
Diluted	$ 0.25	$ 0.16	$ 0.48	$ 0.32

XML

Allowance for Loan Losses and Credit Quality Disclosure

6 Months Ended

Jun. 30, 2012

Allowance for Loan Losses and Credit Quality Disclosure [Abstract]

Allowance for Loan Losses and Credit Quality Disclosure

(5)  Loans and Allowance for Loan Losses

The Company's primary lending emphasis is the origination of commercial and commercial real estate loans and mortgage warehouse lines of credit.  Based on the composition of the loan portfolio, the inherent primary risks are deteriorating credit quality, a decline in the economy, and a decline in New Jersey real estate market values.  Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels.

The following table provides an aging of the loan portfolio by loan class at June 30, 2012:

	30-59 Days	60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Recorded Investment      > 90 Days Accruing	Nonaccrual Loans
Commercial
Construction	$              0	$              0	$0	$0	$59,650,806	$59,650,806	$               0	$0
Commercial Business	599,605	0	262,737	862,342	57,197,323	58,059,665	42,320	479,072
Commercial Real Estate	2,609,703	0	1,093,793	3,703,496	103,662,142	107,365,638	0	2,024,487
Mortgage Warehouse        Lines	0	0	0	0	230,776,678	230,776,678	0	0
Residential Real Estate	463,679	0	0	463,679	10,860,661	11,324,340	0	140,492
Consumer
Loans to Individuals	0	0	54,904	54,904	11,384,790	11,439,694	0	54,904
Other	0	0	0	0	227,448	227,448	0	0
Deferred Loan Fees	0	0	0	0	950,823	950,823	0	0
Total	$3,762,987	$ 0	$1,411,434	$5,084,421	$474,710,671	$479,795,092	$              42,320	$2,698,955

The following table provides an aging of the loan portfolio by loan class at December 31, 2011:

	30-59 Days	60-89 Days	Greater than 90 Days	Total Past Due	Current	Total Loans Receivable	Recorded Investment      > 90 Days Accruing	Nonaccrual Loans
Commercial
Construction	$              0	$              0	$   140,055	$   140,055	$  49,145,728	$49,285,783	$                0	$    140,055
Commercial Business	364,743	564,152	122,535	1,051,430	49,733,244	50,784,674	0	669,166
Commercial Real Estate	0	245,874	503,877	749,751	98,887,225	99,636,976	0	1,443,220
Mortgage Warehouse Lines	0	0	0	0	249,345,831	249,345,831	0	0
Residential Real Estate	905,310	0	661,171	1,566,481	11,318,871	12,885,352	0	661,171
Consumer
Loans to Individuals	0	144,904	77,858	222,762	11,996,878	12,219,640	0	77,858
Other	0	0	0	0	255,556	255,556	0	0
Deferred Loan Costs	0	0	0	0	1,017,959	1,017,959	0	0
Total	$1,270,053	$   954,930	$1,505,496	$3,730,479	$471,701,292	$475,431,771	$                0	$ 2,991,470

Management reviews the adequacy of the allowance on at least a quarterly basis to ensure that the provision for loan losses has been charged against earnings in an amount necessary to maintain the allowance at a level that is adequate based on management's assessment of probable estimated losses.  The Company's methodology for assessing the adequacy of the allowance for loan losses consists of several key elements.  These elements include a specific reserve for impaired loans, an allocated reserve, and an unallocated portion.  

The Company consistently applies the following comprehensive methodology. During the quarterly review of the allowance for loan losses, the Company considers a variety of factors that include:

·General economic conditions;

·Trends in charge-offs;

·Trends and levels of delinquent loans;

·Trends and levels of non-performing loans, including loans over 90 days delinquent;

·Trends in volume and terms of loans;

·Levels of allowance for specific classified loans; and

·Credit concentrations.

The methodology includes the segregation of the loan portfolio into loan types with a further segregation into risk rating categories, such as special mention, substandard, doubtful, and loss. This allows for an allocation of the allowance for loan losses by loan type; however, the allowance is available to absorb any loan loss without restriction.  Larger balance, non-homogeneous loans representing significant individual credit exposures are evaluated individually through the internal loan review process.  It is this process that produces the watch list. The borrower's overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are evaluated. Based on these reviews, an estimate of probable losses for the individual larger-balance loans are determined, whenever possible, and used to establish specific loan loss reserves.  In general, for non-homogeneous loans not individually assessed, and for homogeneous groups, such as residential mortgages and consumer credits, the loans are collectively evaluated based on delinquency status, loan type, and historical losses. These loan groups are then internally risk rated.

The watch list includes loans that are assigned a rating of special mention, substandard, doubtful and loss.  Loans classified special mention have potential weaknesses that deserve management's close attention.  If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects.  Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable.  Loans rated as doubtful in whole, or in part, are placed in nonaccrual status.  Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses.

The specific reserve for impaired loans is established for specific loans which have been identified by management as being impaired. The specific portion of the allowance is the total amount of potential unconfirmed losses for these individual doubtful loans. To assist in determining the fair value of loan collateral, the Company often utilizes independent third party qualified appraisal firms which, in turn, employ their own criteria and assumptions that may include occupancy rates, rental rates, and property expenses, among others.

The second category of reserves consists of the allocated portion of the allowance.  The allocated portion of the allowance is determined by taking pools of loans outstanding that have similar characteristics and applying historical loss experience for each pool.  This estimate represents the potential unconfirmed losses within the portfolio. Individual loan pools are created for commercial and commercial real estate loans, construction loans, and various types of loans to individuals.  The historical estimation for each loan pool is then adjusted to account for current conditions, current loan portfolio performance, loan policy or management changes, or any other factor which may cause future losses to deviate from historical levels.

The Company may, from time to time, maintain an unallocated allowance to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable. Management must make estimates using assumptions and information that is often subjective and changing rapidly.

The following discusses the risk characteristics of each of our loan portfolio segments, commercial and consumer.

Commercial

The Company's primary lending emphasis is the origination of commercial and commercial real estate loans and mortgage warehouse lines of credit.  Based on the composition of the loan portfolio, the inherent primary risks are deteriorating credit quality, a decline in the economy, and a decline in New Jersey real estate market values.  Any one, or a combination, of these events may adversely affect the loan portfolio and may result in increased delinquencies, loan losses and increased future provision levels.

Consumer

The Company's loan portfolio consumer segment is comprised of residential real estate loans, home equity loans and other loans to individuals. Individual loan pools are created for the various types of loans to individuals.

In general, for homogeneous groups, such as residential mortgages and consumer credits, the loans are collectively evaluated based on delinquency status, loan type, and industry historical losses. These loan groups are then internally risk rated.

The Company considers the following credit quality indicators in assessing the risk in the loan portfolio:

·Consumer credit scores

·Internal credit risk grades

·Loan-to-value ratios

·Collateral

·Collection experience

The Company's internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies. The grades assigned and definitions are as follows, and loans graded excellent, above average, good and watch list are treated as "pass" for grading purposes:

1. Excellent - Loans that are based upon cash collateral held at the Bank and adequately margined. Loans that are based upon "blue chip" stocks listed on the major exchanges and adequately margined.

2. Above Average - Loans to companies whose balance sheets show excellent liquidity and long-term debt is on well-spread schedules of repayment easily covered by cash flow. Such companies have been consistently profitable and have diversification in their product lines or sources of revenue. The continuation of profitable operations for the foreseeable future is likely. Management is comprised of a mix of ages, experience, and backgrounds and management succession is in place. Sources of raw materials and service companies, the source of revenue is abundant. Future needs have been planned for. Character and ability of individuals or company principals are excellent. Loans to individuals supported by high net worths and liquid assets.

3. Good - Loans to companies whose balance sheets show good liquidity and cash flow adequate to meet maturities of long-term debt with a comfortable margin. Such company has established a profitable record over a number of years, and there has been growth in net worth. Operating ratios are in line with those of the industry, and expenses are in proper relationship to the volume of business done and the profits achieved. Management is well-balanced and competent in their responsibilities. Economic environment is favorable; however, competition is strong. The prospects for growth are good. Loans in this category do not meet the collateral requirements of loans in categories 1 and 2 above. Loans to individuals supported by good net worths but whose supporting assets are illiquid.

3w. Watch List - Included in this category are loans evidencing problems identified by Bank management requiring closer supervision. Such problem has not developed to the point which requires a Special Mention rating. This category also covers situations where the Bank does not have adequate current information upon which credit quality can be determined. The account officer has the obligation to correct these deficiencies within 30 days after the time of notification.

4. Special Mention - Loans or borrowing relationships that require more than the usual amount of attention by Bank management. Industry conditions may be adverse or weak. The borrower's ability to meet current payment schedules may be questionable, even though interest and principal are being paid as agreed. Heavy reliance has been placed on the collateral. Profits, if any, are interspersed with losses. Management is "one man" or weak or incompetent or there is no plan for management succession. Expectations of a loan loss are not immediate; however, if present trends continue, a loan loss could be expected.

5. Substandard - Loans in this category possess weaknesses that jeopardize the ultimate collection of total outstandings. These weaknesses require close supervision by Bank management. Current financial statements are unavailable and the loan is inadequately protected by the collateral pledged. This category will normally include loans that have been classified as substandard by the regulators.

6. Doubtful - Loans with weaknesses inherent in the substandard classification and where collection or liquidation in full is highly questionable. It is likely that the loan will not be collected in full and the Bank will suffer some loss which is not quantifiable at the time of review.

7. Loss - Loans considered uncollectable and of such little value that their continuance as an active asset is not warranted. Loans in this category should immediately be eliminated from the Bank's loan loss reserve. Any accrued interest should immediately be backed out of income.

The following table provides a breakdown of the loan portfolio by credit quality indicator at June 30, 2012.

Commercial Credit Exposure - By Internally Assigned Grade	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse Lines	Residential Real Estate
Grade:
Pass	$54,594,154	$55,393,231	$80,134,127	$230,776,678	$11,183,848
Special Mention	1,041,045	1,159,276	19,287,729	0	0
Substandard	4,015,607	1,364,009	7,795,550	0	140,492
Doubtful	0	143,149	148,232	0	0
Total	$59,650,806	$58,059,665	$107,365,638	$230,776,678	$11,324,340
Consumer Credit Exposure -      By Payment Activity	Loans To Individuals	Other
Performing	$11,384,790	$227,448
Nonperforming	54,904	0
Total	$11,439,694	$227,448

       The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2011.

Commercial Credit Exposure - By Internally Assigned Grade	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse Lines	Residential Real Estate
Grade:
Pass	$  44,106,827	$   47,973,545	$ 84,642,510	$249,345,831	$    12,224,181
Special Mention	5,038,901	1,657,993	10,574,489	0	142,477
Substandard	107,405	865,160	3,823,225	0	518,694
Doubtful	32,650	287,976	596,752	0	0
Total	$  49,285,783	$  50,784,674	$ 99,636,976	$249,345,831	$   12,885,352
Consumer Credit Exposure -      By Payment Activity	Loans To Individuals	Other
Performing	$  12,141,782	$    255,556
Nonperforming	77,858	0
Total	$  12,219,640	$    255,556

 

Impaired Loans Disclosures

Loans are considered to be impaired when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When a loan is placed on nonaccrual status, it is also considered to be impaired. Loans are placed on nonaccrual status when: (1) the full collection of interest or principal becomes uncertain; or (2) they are contractually past due 90 days or more as to interest or principal payments unless both well secured and in the process of collection.

The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2012 and December 31, 2011:

Period-End Allowance for Credit Losses by Impairment Method – June 30, 2012
		Commercial	Commercial	Mortgage	Residential				Deferred	Total
	Construction	Business	Real Estate	Warehouse	Real Estate	Consumer	Other	Unallocated	Fees
Allowance for credit losses:
Ending Balance	$1,647,605	$903,401	$2,304,010	$1,153,883	$122,510	$123,213	$2,798	0	$0	$6,257,420
Ending Balance
Individually evaluated      for impairment	0	138,597	357,074	0	28,566	0	0	0	0	524,237
Collectively evaluated       for impairment	1,647,605	764,804	1,946,936	1,153,883	93,944	123,213	2,798	0	0	5,733,182
Loans receivables:
Ending Balance	$59,650,806	$58,059,665	$107,365,638	$230,776,678	$11,324,340	$11,439,694	$227,448	$0	$950,823	$479,795,092
Individually evaluated         for impairment	0	851,819	2,507,360	0	140,492	54,904	0	0	0	3,554,575
Collectively evaluated        for impairment	59,650,806	57,207,846	104,858,278	230,776,678	11,183,848	11,384,790	227,448	0	950,823	476,240,517

Period-End Allowance for Credit Losses by Impairment Method – December 31, 2011
		Commercial	Commercial	Mortgage	Residential				Deferred	Total
	Construction	Business	Real Estate	Warehouse	Real Estate	Consumer	Other	Unallocated	Fees
Allowance for credit losses:
Ending Balance	$    1,054,695	$   934,642	$    1,597,702	$    1,122,056	$     91,076	$   187,352	$   2,377	$    544,550	$      0	$5,534,450
Ending Balance
Individually evaluated      for impairment	0	283,424	186,055	0	11,619	77,858	0	0	0	558,956
Collectively evaluated       for impairment	1,054,695	651,218	1,411,647	1,122,056	79,457	109,494	2,377	544,550	0	4,975,494
Loans receivables:
Ending Balance	$49,285,783	$50,784,674	$99,636,976	$249,345,831	$12,885,352	$12,219,640	$255,556	0	$1,017,959	$475,431,771
Individually evaluated         for impairment	140,055	952,156	1,934,120	0	661,171	77,858	0	0	0	3,765,360
Collectively evaluated        for impairment	49,145,728	49,832,518	97,702,856	249,345,831	12,224,181	12,141,782	255,556	0	1,017,959	471,666,411

  

The allowance for loan loss by loan class at both June 30, 2012 and December 31, 2011, and related activity for the six months ended June 30, 2012, are as follows:

	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse	Residential Real Estate	Consumer	Other	Unallocated	Total
Balance - December 31, 2011	$1,054,695	$934,642	$1,597,702	$1,122,056	$91,076	$187,352	$2,377	$544,550	$5,534,450
Provision charged to operations	217,501	15,757	241,180	(115,451)	148,497	22,076	6,803	63,635	599,998
Loans charged off	(32,650)	(144,827)	0	0	0	(77,858)	(6,001)	0	(261,336)
Recoveries of loans charged off	3,403	5,427	0	0	0	0	0	0	8,830
Balance - March 31, 2012	$1,242,949	$810,999	$1,838,882	$1,006,605	$239,573	$131,570	$3,179	$608,185	$5,881,942
Provision charged to operations	429,656	111,410	464,946	147,278	13,631	(8,357)	(381)	(608,185)	549,998
Loans charged off	(25,000)	(20,199)	0	0	(130,694)	0	0	0	(175,893)
Recoveries of loans charged off	0	1,191	182	0	0	0	0	0	1,373
Balance - June 30, 2012	$1,647,605	$903,401	$2,304,010	$1,153,883	$122,510	$123,213	$2,798	0	$6,257,420

The allowance for loan loss by loan class at both June 30, 2011 and December 31, 2010, and related activity for the six months ended June 30, 2011, are as follows:

	Construction	Commercial Business	Commercial Real Estate	Mortgage Warehouse	Residential Real Estate	Consumer	Other	Unallocated	Total
Balance - December 31, 2010	$1,744,068	$971,994	$1,723,865	$763,092	$67,828	$192,457	$1,910	$297,498	$5,762,712
Provision charged to operations	1,183,736	(55,760)	(318,432)	(344,826)	9,777	(1,990)	571	(73,078)	399,998
Loans charged off	(366,587)	(46,319)	-	-	-	-	-	-	(412,906)
Recoveries of loans charged off	-	239	-	-	-	-	-	-	239
Balance - March 31, 2011	$2,561,217	$870,154	$1,405,433	$418,266	$77,605	$190,467	$2,481	$224,420	$5,750,043
Provision charged to operations	52,940	48,806	215,679	110,442	(370)	(3,016)	(28)	(149,453)	275,000
Loans charged off	(158,900)	-	-	-	-	-	-	-	(158,900)
Recoveries of loans charged off	-	3,438	-	-	-	-	-	-	3,438
Balance - June 30, 2011	$2,455,257	$922,398	$1,621,112	$528,708	$77,235	$187,451	$2,453	$74,967	$5,869,581

When a loan is identified as impaired, the measurement of impairment is based on the present value of expected future cash flows, discounted at the loan's effective interest rate, except when the sole remaining source of repayment for the loan is the liquidation of the collateral.  In such cases, the current fair value of the collateral less selling costs is used.  If the value of the impaired loan is less than the recorded investment in the loan, the impairment is recognized through an allowance estimate or a charge to the allowance.  

Impaired Loans Receivables (By Class) – June 30, 2012
	Recorded Investment	Unpaid Principal Balance	Related Allowance	Quarter-End June 30, 2012 Average Recorded Investment	Quarter-End June 30, 2011 Average Recorded Investment	Year to Date 2012 Average Recorded Investment	Year to Date 2011 Average Recorded Investment	Quarter-End June 30, 2011 Interest Income Recognized	Quarter-End June 30, 2011 Interest Income Recognized	Year to Date 2012 Interest Income Recognized	Year to Date 2011 Interest Income Recognized
With no related allowance:
Commercial
Construction	$0	$ 0	$0	$35,802	$113,947	$71,603	$1,555,877	$0	$0	$0	$0
Commercial Business	431,381	474,063	0	423,129	348,094	415,353	286,550	0	0	0	0
Commercial Real Estate	0	0	0	81,666	292,682	208,536	358,490	0	0	0	0
Mortgage Warehouse Lines	0	0	0	0	0
Subtotal	431,381	474,063	0	540,597	754,723	695,492	2,200,917	0	0	0	0
Residential Real Estate	0	0	0	0	0	47,199	0	0	0	0	0
Consumer
Loans to Individuals	54,904	54,904	0	54,904	0	54,904	0	0	0	0	0
Other	0	0	0	0	0	0	0	0	0	0	0
Subtotal	54,904	54,904	0	54,904	0	54,904	0	0	0	0	0
Subtotal With no related allowance:	486,285	528,967	0	595,501	754,723	797,595	2,200,917	0	0	0	0
With an allowance:
Commercial
Construction	0	0	0	0	3,268,474	0	3,154,480	0	0	0	0
Commercial Business	420,438	565,265	138,597	435,032	832,399	429,700	593,070	3,790	0	7,439	0
Commercial Real Estate	2,507,360	2,614,922	357,074	2,313,770	1,111,122	1,952,730	1,047,746	6,792	0	14,209	0
Mortgage Warehouse Lines	0	0	0	0	0	0	0	0	0	0	0
Subtotal	2,927,798	3,180,187	495,671	2,748,802	5,211,995	2,382,430	4,795,296	10,582	0	21,648	0
Residential Real Estate	140,492	140,492	28,566	313,517	519,000	439,616	432,854	0	3,028	0	4,544
Consumer
Loans to Individuals	0	0	0	0	77,858	0	77,858	0	0	0	0
Other	0	0	0	0	0	0	0	0	0	0	0
Subtotal	0	0	0	0	77,858	0	77,858	0	0	0	0
Subtotal with an allowance:	3,068,290	3,320,679	524,237	3,062,319	5,808,853	2,822,046	5,306,008	10,582	3,028	21,648	4,544
Total:
Commercial	3,359,179	3,654,250	495,671	3,289,399	5,966,718	3,077,922	6,996,213	10,582	0	21,648	0
Residential    Real Estate	140,492	140,492	28,566	313,517	519,000	486,815	432,854	0	3,028	0	4,544
Consumer	54,904	54,904	0	54,904	77,858	54,904	77,858	0	0	0	0
Total	$3,554,575	$3,849,646	$524,237	$3,657,820	$6,563,576	$3,619,641	$7,506,925	$10,582	$3,028	$21,648	$4,544

Impaired Loans Receivables (By Class)
December 31 ,2011
	Recorded Investment	Unpaid Principal Balance	Related Allowance	Year to Date Average Recorded Investment	Year to Date Interest Income Recognized
With no related allowance:
Commercial
Construction	$140,055	$277,405	$0	$610,358	$0
Commercial Business	381,190	426,803	0	257,942	0
Commercial Real Estate	503,877	611,389	0	457,464	0
Mortgage Warehouse Lines	0	0	0	0	0
Subtotal	1,025,122	1,315,597	0	1,325,764	0
Residential Real Estate	142,477	142,477	0	11,873
Consumer
Loans to Individuals	0	0	0	0	0
Other	0	0	0	0	0
Subtotal	0	0	0	0	0
Subtotal with no Related Allowance	1,167,599	1,315,597	0	1,337,637	0
With an allowance:
Commercial
Construction	0	0	0	2,389,162	0
Commercial Business	570,966	570,966	283,424	791,808	10,001
Commercial Real Estate	1,430,243	1,430,243	186,055	1,036,007	2,294
Mortgage Warehouse Lines	0	0	0	0	0
Subtotal	2,001,209	2,001,209	469,479	4,216,977	12,295
Residential Real Estate	518,694	518,694	11,619	490,081	0
Consumer
Loans to Individuals	77,858	77,858	77,858	77,858	0
Other	0	0	0	0	0
Subtotal	77,858	77,858	77,858	77,858	0
Subtotal with an Allowance	2,597,761	2,597,761	558,956	4,784,916	12,295
Total:
Commercial	3,026,331	3,316,806	469,479	5,542,741	12,295
Residential Real Estate	661,171	518,694	11,619	501,954	0
Consumer	77,858	77,858	77,858	77,858	0
Total	$3,765,360	$3,913,358	$558,956	$6,122,553	$12,295

The Bank adopted Accounting Standards Update ("ASU") No. 2011-02 on July 1, 2011. ASU No. 2011-02 provides additional guidance to creditors for evaluating whether a modification or restructuring of a receivable is a troubled debt restructuring. In evaluating whether a restructuring constitutes a troubled debt restructuring, ASU No. 2011-02 requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties. As a result of our adoption of ASU No. 2011-02, we reassessed the terms of loan restructurings. The following table is a breakdown of troubled debt restructuring activity during the six months ended June 30, 2012.

	Number of Contracts	Pre-modification outstanding Recorded Investment	Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial	1	$137,028	$137,028
	Number of Contracts	Recorded Investment
Troubled Debt Restructurings During the Prior Twelve Months that subsequently Defaulted:
Commercial	1	$22,471
Residential Real Estate	1	$518,694

If the Bank determines that a borrower has suffered deterioration in its financial condition, a restructuring of the loan terms may occur. Such loan restructurings may include, but are not limited to, reductions in principal or interest, reductions in interest rates, and extensions of the maturity date. When modifications are implemented, such loans meet the definition of a troubled debt restructuring. The modifications employed by the Bank during the six month period ended June 30, 2012 resulted in lower amortization payments for a limited time period without any reduction in the interest rate. The lower payments are determined by an analysis of the borrower's cash flow ability to meet the modified terms while anticipating an improved financial condition to enable a resumption of the original payment terms.

XML

Investment Securities

6 Months Ended

Jun. 30, 2012

Investment Securities [Abstract]

Investment Securities

(4)           Investment Securities

 Amortized cost, gross unrealized gains and losses, and the estimated fair value by security type are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
June 30, 2012:	Cost		Gains		Losses		Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies		$16,984,686		$115,414		$             0		$17,100,100
Residential collateralized     mortgage obligations – GSE		11,038,324		428,381		0		11,466,705
Residential collateralized      mortgage obligations – non-GSE		3,522,276		120,913		(10,204)		3,632,985
Residential mortgage      backed securities – GSE		34,832,648		2,045,098		(4)		36,877,742
Obligations of State and
Political subdivisions		5,350,838		389,276		(1,017)		5,739,097
Trust preferred debt securities – single issuer		2,464,748		0		(568,775)		1,895,973
Corporate Debt Securities		19,219,511		24,192		(167,507)		19,076,196
Restricted stock		1,723,800		0		0		1,723,800
Mutual fund		25,000		0		0		25,000
		$95,161,831		$3,123,274		($747,507)		$97,537,598

June 30, 2012:	Amortized Cost	Other-Than-Temporary Impairment Recognized In Accumulated Other Comprehensive Income	Carrying Value	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Held to maturity-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and               agencies	$3,098,502	$                     0	$3,098,502	$39,763	$              0	$3,138,265
Residential collateralized         Mortgage obligations – GSE	22,705,219	0	22,705,219	1,105,555	0	23,810,774
Residential collateralized        Mortgage obligations - non-GSE	13,471,005	0	13,471,005	760,872	0	14,231,877
Residential mortgage backed         securities – GSE	18,054,413	0	18,054,413	945,468	0	18,999,881
Obligations of State and
Political subdivisions	43,109,946	0	43,109,946	2,996,861	0	46,106,807
Trust preferred debt securities – pooled	651,788	(500,944)	150,844	0	(61,602)	89,242
Corporate debt securities	22,402,289	0	22,402,289	89,769	(12,449)	22,479,609
	$123,493,162	($500,944)	$122,992,218	$5,938,288	($74,051)	$128,856,455

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2011:	Cost		Gains		Losses			Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies	$	19,400,856	$	71,833	$	0		$	19,472,689
Residential collateralized     mortgage obligations – GSE		13,421,544		476,589		0			13,898,133
Residential collateralized      mortgage obligations – non-GSE		4,177,115		143,480		(20,151	)		4,300,444
Residential mortgage      backed securities – GSE		40,655,157		2,032,059		(7	)		42,687,209
Obligations of State and
Political subdivisions		5,366,145		339,747		(5,378	)		5,700,514
Trust preferred debt securities – single issuer		2,463,296		0		(712,055	)		1,751,241
Corporate Debt Securities		1,443,762		0		(7,818	)		1,435,944
Restricted stock		4,412,600		0		0			4,412,600
Mutual fund		25,000		0		0			25,000
	$	91,365,475	$	3,063,708	$	(745,409	)	$	93,683,774

December 31, 2011:	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Income			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and          agencies	$	11,118,649	$	0		$	11,118,649	$	59,571	$	0		$	11,178,220
Residential collateralized         mortgage obligations – GSE		24,705,415		0			24,705,415		1,007,737		0			25,713,152
Residential mortgage backed         securities – GSE		14,386,327		0			14,386,327		704,792		0			15,091,119
Residential mortgage backed         securities – non-GSE		20,260,354		0			20,260,354		801,882		0			21,062,236
Obligations of State and
Political subdivisions		46,820,985		0			46,820,985		2,848,587		(2,507	)		49,667,065
Trust preferred debt securities – pooled		646,574		(500,944	)		145,630		0		(142,122	)		3,508
Corporate debt securities		25,037,063		0			25,037,063		85,701		(216,784	)		24,905,980
	$	142,975,367	$	(500,944	)	$	142,474,423	$	5,508,270	$	(361,413	)	$	147,621,280

Restricted stock at June 30, 2012 and December 31, 2011 consisted of $1,708,800 and $4,397,600, respectively, of Federal Home Loan Bank of New York stock and $15,000 of Atlantic Central Bankers Bank stock.

The amortized cost and estimated fair value of investment securities at June 30, 2012, 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.  Restricted stock is included in "Available for sale - Due in one year or less."

  

	Amortized Cost		Fair Value
Available for sale-
Due in one year or less
U.S. Treasury securities and obligations of U.S. Government                        sponsored corporations ("GSE") and agencies	$	6,033,171	$	6,063,510
Residential backed securities-GSE		36,231		38,052
Corporate Debt Securities		1,755,664		1,760,441
Restricted Stock		1,723,800		1,723,800
Mutual Fund		25,000		25,000
	$	9,573,866	$	9,610,803
Due after one year through five years
U.S. Treasury securities and obligations of                     US Government sponsored corporations ("GSE")and agencies	$	10,951,515	$	11,036,590
Residential mortgage backed securities-GSE		288,221		304,807
Obligations of State and Political subdivisions		593,820		597,801
Corporate Debt Securities		16,376,971		16,242,005
	$	28,210,527	$	28,181,203
Due after five years through ten years
Residential collateralized mortgage obligations -GSE	$	168,877	$	174,044
Residential mortgage backed Securities - GSE		3,357,223		3,662,711
Obligations of State and Political Subdivisions		2,712,683		2,991,213
	$	6,238,783	$	6,827,968
Due after ten years
Residential collateralized mortgage obligations -GSE	$	10,869,447	$	11,292,661
Residential collateralized mortgage obligations –non GSE		3,522,276		3,632,985
Residential mortgage backed securities - GSE		31,150,973		32,872,172
Obligations of State and Political subdivisions		2,044,335		2,150,083
Trust Preferred Debt Securities-single issuer		2,464,749		1,895,973
Corporate Debt Securities		1,086,876		1,073,750
	$	51,138,655	$	52,917,624
Total	$	95,161,831	$	97,537,598

Held to maturity-
Due in one year or less
Obligations of State and Political subdivisions	$	1,665,786	$	1,669,328
Corporate Debt Securities	$	13,475,530	$	13,523,475
	$	15,141,316	$	15,192,803
Due after one year through five years
U.S. Treasury securities and obligations of                     US Government sponsored corporations ("GSE") and agencies	$	3,098,502	$	3,138,265
Obligations of State and Political subdivisions		5,198,416		5,410,645
Corporate Debt Securities		8,926,759		8,956,134
	$	17,223,677	$	17,505,044
Due after five years through ten years
Residential collateralized mortgage obligations                             – GSE	$	635,319	$	651,756
Residential mortgage backed securities – GSE		4,016,700		4,144,974
Obligations of State and Political subdivisions		22,961,646		24,580,362
	$	27,613,665	$	29,377,092
Due after ten years
U.S. Treasury securities and obligations of US                            Government sponsored corporations                            ("GSE") and agencies	$	0	$	0
Residential collateralized mortgage obligations - GSE		22,069,900		23,159,018
Residential collateralized mortgage obligations – non GSE		13,471,005		14,231,877
Residential mortgage backed securities - GSE		14,037,713		14,854,907
Obligations of State and Political subdivisions		13,284,098		14,446,472
Trust Preferred Debt Securities - Pooled		651,788		89,242
	$	63,514,504	$	66,781,516
Total	$	123,493,162	$	128,856,455

Gross unrealized losses on securities and the estimated fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2012 and December 31, 2011 are as follows:

June 30, 2012			Less than 12 months				12 months or longer				Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Residential collateralized mortgage        obligations – non-GSE		1		$ 0		$0		$206,518		$(10,204)		$206,518		$(10,204)
Residential mortgage backed securities - GSE		1		5,113		(4)		0		0		5,113		(4)
Obligations of State and Political     Subdivisions		1		522,653		(1,017)		0		0		522,653		(1,017)
Trust preferred debt securities –         single issuer		4		0		0		1,895,973		(568,775)		1,895,973		(568,775)
Trust preferred debt securities –          pooled		1		0		0		89,242		(562,546)		89,242		(562,546)
Corporate Debt Securities		21		16,074,746		(176,517)		1,180,379		(3,439)		17,255,125		(179,956)
Total temporarily impaired securities		29		$16,602,512		($177,538)		$3,372,112		($1,144,964)		$19,974,624		($1,322,502)

December 31, 2011		Less than 12 months					12 months or longer					Total
	Number of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Residential collateralized mortgage      Obligations – non-GSE	1	$	0	$	0		$	251,723	$	(20,151	)	$	251,723	$	(20,151	)
Residential mortgage backed securities      GSE	1		5,280		(7	)		0		0			5,280		(7	)
Obligations of State and Political      Subdivisions	3		1,049,362		(7,885	)		0		0			1,049,362		(7,885	)
Trust preferred debt securities –         Single issuer	4		0		0			1,751,241		(712,055	)		1,751,241		(712,055	)
Trust preferred debt securities –         Pooled	1		0		0			3,508		(643,066	)		3,508		(643,066	)
Corporate debt securities	25		13,668,246		(211,075	)		666,956		(13,527	)		14,335,202		(224,602	)
Total temporarily impaired securities	35	$	14,722,888	$	(218,967	)	$	2,673,428	$	(1,388,799	)	$	17,396,316	$	(1,607,766	)

Residential collateralized mortgage obligations and residential mortgaged-backed securities: The unrealized losses on investments in residential collateralized residential mortgage obligations and mortgage-backed securities were caused by interest rate increases. The contractual cash flows of these securities are guaranteed by the issuer, which are generally government or government sponsored agencies. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Obligations of State and Political Subdivisions:  The unrealized losses on investments in these securities were caused by interest rate increases.  It is expected that the securities would not be settled at a price less than the amortized cost of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Corporate debt securities:   The unrealized losses on investments in corporate debt securities were caused by interest rate increases.  None of the corporate issuers have defaulted on interest payments.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Trust preferred debt securities – single issuer:  The investments in these securities with unrealized losses are comprised of four corporate trust preferred securities that mature in 2027, all of which were single-issuer securities.   The contractual terms of the trust preferred securities do not allow the issuer to settle the securities at a price less than the face value of the trust preferred securities, which is greater than the amortized cost of the trust preferred securities.  None of the corporate issuers have defaulted on interest payments. Because the decline in fair value is attributable to widening of interest rate spreads, the lack of an active trading market for these securities and, to a lesser degree, market concerns on the issuers' credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Trust preferred debt security – pooled:  This trust preferred debt security was issued by a two issuer pool (Preferred Term Securities XXV, Ltd. co-issued by Keefe, Bruyette and Woods, Inc. and First Tennessee ("PreTSL XXV")), consisting primarily of financial institution holding companies.  During 2009, the Company recognized an other-than-temporary impairment charge of $864,727, of which $363,783 was determined to be a credit loss and charged to operations and $500,944 was recognized in other comprehensive income (loss) component of shareholders' equity. 

The primary factor used to determine the credit portion of the impairment loss to be recognized in the income statement for this security was the discounted present value of projected cash flow where that present value of cash flow was less than the amortized cost basis of the security. The present value of cash flow was developed using an EITF 99-20 model that considered performing collateral ratios, the level of subordination to senior tranches of the security, credit ratings of and projected credit defaults in the underlying collateral

                On a quarterly basis, management evaluates this security to determine if there is any additional other-than-temporary impairment.  As of June 30, 2012, our evaluation was as follows:

a.We obtained the PreTSL XXV Depository Institutions Issuer List as of June 30, 2012 from the FTN Financial Corp. ("FTN") website and reviewed the financial ratios and capital levels of each individual financial institution issuer.

b.We sorted the financial institutions on the issuer list to develop three "buckets" (or categories) for further deferred/default analysis based upon the indicated "Texas Ratio." The Texas Ratio is calculated by dividing the institution's Non-Performing Assets plus loans 90 days past due by the combined total of Tangible Equity plus the Allowance for Loan Losses. The three buckets consisted of those institutions with a Texas Ratio of:

(1) Above 100;

                                    (2) 75 to 100; and

                                    (3) Below 75.

c.We then applied the following asset specific deferral/default assumptions to each of these buckets:

                             (1) Above 100 – 100% default; 0% recovery;

                               (2) 75 to 100 – 100% deferred; 15% recovery at 2 years from initial date of deferral; and

                               (3) Below 75 – no deferral/default.

d.We then ran a cash flow projection to analyze the impact of future deferral/default activity by applying the following assumption on those institutions in bucket (3) of our analysis:

·Defaults at 75 basis points applied annually; 15% recovery with a 2-year lag from the initial date of deferral.

Our rationale for these metrics is as follows: (1) the FDIC lists the number of bank failures each year from 1934 – 2008. Comparing bank failures to the number of FDIC institutions produces an annual average default rate of 36 basis points. Given the continuing uncertain economic environment, we believe double this amount, or 75 basis points, to be an appropriate measurement for defaults; and (2) Standard & Poor's published "Global Methodology for Rating Trust Preferred/Hybrid Securities Revised" on November 21, 2008. This analysis uses a recovery assumption of 15%, which we also deem an appropriate measurement.

Our position is that it is appropriate to apply this future default factor in our analysis as it is not realistic to assume no adverse conditions will occur over the remaining 25 year stated maturity of this pooled security even though the individual institutions are currently performing according to terms.

e.This June 30, 2012 projection of future cash flows produced a present value factor that exceeded the carrying value of the pooled trust preferred security; therefore, management concluded that no OTTI issues were present at June 30, 2012.

. A number of factors or combinations of factors could cause management to conclude in one or more future reporting periods that an unrealized loss that exists with respect to PreTSL XXV constitutes an additional credit impairment. These factors include, but are not limited to, failure to make interest payments, an increase in the severity of the unrealized loss, an increase in the continuous duration of the unrealized loss without an impairment in value or changes in market conditions and/or industry or issuer specific factors that would render management unable to forecast a full recovery in value. In addition, the fair value of trust preferred securities could decline if the overall economy and the financial condition of the issuers continue to deteriorate and there remains limited liquidity for this security.

The following table sets forth information with respect to this security at June 30, 2012:

Security	Class	Book Value	Fair Value	Unrealized  Gain (Loss)	Percent of  Underlying  Collateral Performing	Percent of Underlying Collateral In Deferral (1)	Percent of Underlying Collateral In Default  (1)	Expected Deferrals and Defaults as a % of Remaining Performing Collateral	Moody's S&P / Ratings	Excess Subordination (2)
										Amount	%  of  Current Performing Collateral
PreTSL  XXV	B-1	$651,788	$89,242	($562,546)	65.8%	16.7%	17.5%	15.6%	C/ NR	$102,500,000	20.0%

Notes to table above:

(1)           This percentage represents the amount of specific deferrals / defaults that have occurred, plus those that are known for the following quarters to the total amount of original collateral. Fewer deferrals / defaults produce a lower percentage.

(2)           "Excess subordination" amount is the additional defaults / deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a "break in yield". This amount assumes that all currently performing collateral continues to perform.  A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity.  The "percent of underlying collateral performing" is the ratio of the "excess subordination amount" to current performing collateral - a higher percent means there is more excess subordination to absorb additional defaults / deferrals, and the better our security is protected from loss.

The following table presents a cumulative roll forward of the amount of other-than-temporary impairment related to credit losses, all of which relate to PreTSL XXV, which have been recognized in earnings for debt securities held to maturity and not intended to be sold.

(in thousands)	Three and six months ended June 30, 2012	Three and six months ended June 30, 2011
Balance at beginning of period	$364	$364
Change during the period	-	-
Balance at end of period	$364	$364

XML

Investment Securities (Tables)

6 Months Ended

Jun. 30, 2012

Investment Securities [Abstract]

Available-for-sale Securities [Table Text Block]

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
June 30, 2012:	Cost		Gains		Losses		Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies		$16,984,686		$115,414		$             0		$17,100,100
Residential collateralized     mortgage obligations – GSE		11,038,324		428,381		0		11,466,705
Residential collateralized      mortgage obligations – non-GSE		3,522,276		120,913		(10,204)		3,632,985
Residential mortgage      backed securities – GSE		34,832,648		2,045,098		(4)		36,877,742
Obligations of State and
Political subdivisions		5,350,838		389,276		(1,017)		5,739,097
Trust preferred debt securities – single issuer		2,464,748		0		(568,775)		1,895,973
Corporate Debt Securities		19,219,511		24,192		(167,507)		19,076,196
Restricted stock		1,723,800		0		0		1,723,800
Mutual fund		25,000		0		0		25,000
		$95,161,831		$3,123,274		($747,507)		$97,537,598

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2011:	Cost		Gains		Losses			Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and agencies	$	19,400,856	$	71,833	$	0		$	19,472,689
Residential collateralized     mortgage obligations – GSE		13,421,544		476,589		0			13,898,133
Residential collateralized      mortgage obligations – non-GSE		4,177,115		143,480		(20,151	)		4,300,444
Residential mortgage      backed securities – GSE		40,655,157		2,032,059		(7	)		42,687,209
Obligations of State and
Political subdivisions		5,366,145		339,747		(5,378	)		5,700,514
Trust preferred debt securities – single issuer		2,463,296		0		(712,055	)		1,751,241
Corporate Debt Securities		1,443,762		0		(7,818	)		1,435,944
Restricted stock		4,412,600		0		0			4,412,600
Mutual fund		25,000		0		0			25,000
	$	91,365,475	$	3,063,708	$	(745,409	)	$	93,683,774

Held-to-maturity Securities [Table Text Block]

June 30, 2012:	Amortized Cost	Other-Than-Temporary Impairment Recognized In Accumulated Other Comprehensive Income	Carrying Value	Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
Held to maturity-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and               agencies	$3,098,502	$                     0	$3,098,502	$39,763	$               0	$3,138,265
Residential collateralized         Mortgage obligations – GSE	22,705,219	0	22,705,219	1,105,555	0	23,810,774
Residential collateralized        Mortgage obligations - non-GSE	13,471,005	0	13,471,005	760,872	0	14,231,877
Residential mortgage backed         securities – GSE	18,054,413	0	18,054,413	945,468	0	18,999,881
Obligations of State and
Political subdivisions	43,109,946	0	43,109,946	2,996,861	0	46,106,807
Trust preferred debt securities – pooled	651,788	(500,944)	150,844	0	(61,602)	89,242
Corporate debt securities	22,402,289	0	22,402,289	89,769	(12,449)	22,479,609
	$123,493,162	($500,944)	$122,992,218	$5,938,288	($74,051)	$128,856,455

December 31, 2011:	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Income			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations ("GSE") and          agencies	$	11,118,649	$	0		$	11,118,649	$	59,571	$	0		$	11,178,220
Residential collateralized         mortgage obligations – GSE		24,705,415		0			24,705,415		1,007,737		0			25,713,152
Residential mortgage backed         securities – GSE		14,386,327		0			14,386,327		704,792		0			15,091,119
Residential mortgage backed         securities – non-GSE		20,260,354		0			20,260,354		801,882		0			21,062,236
Obligations of State and
Political subdivisions		46,820,985		0			46,820,985		2,848,587		(2,507	)		49,667,065
Trust preferred debt securities – pooled		646,574		(500,944	)		145,630		0		(142,122	)		3,508
Corporate debt securities		25,037,063		0			25,037,063		85,701		(216,784	)		24,905,980
	$	142,975,367	$	(500,944	)	$	142,474,423	$	5,508,270	$	(361,413	)	$	147,621,280

Investments Classified by Contractual Maturity Date [Table Text Block]

  

	Amortized Cost		Fair Value
Available for sale-
Due in one year or less
U.S. Treasury securities and obligations of U.S. Government                        sponsored corporations ("GSE") and agencies	$	6,033,171	$	6,063,510
Residential backed securities-GSE		36,231		38,052
Corporate Debt Securities		1,755,664		1,760,441
Restricted Stock		1,723,800		1,723,800
Mutual Fund		25,000		25,000
	$	9,573,866	$	9,610,803
Due after one year through five years
U.S. Treasury securities and obligations of                     US Government sponsored corporations ("GSE")and agencies	$	10,951,515	$	11,036,590
Residential mortgage backed securities-GSE		288,221		304,807
Obligations of State and Political subdivisions		593,820		597,801
Corporate Debt Securities		16,376,971		16,242,005
	$	28,210,527	$	28,181,203
Due after five years through ten years
Residential collateralized mortgage obligations -GSE	$	168,877	$	174,044
Residential mortgage backed Securities - GSE		3,357,223		3,662,711
Obligations of State and Political Subdivisions		2,712,683		2,991,213
	$	6,238,783	$	6,827,968
Due after ten years
Residential collateralized mortgage obligations -GSE	$	10,869,447	$	11,292,661
Residential collateralized mortgage obligations –non GSE		3,522,276		3,632,985
Residential mortgage backed securities - GSE		31,150,973		32,872,172
Obligations of State and Political subdivisions		2,044,335		2,150,083
Trust Preferred Debt Securities-single issuer		2,464,749		1,895,973
Corporate Debt Securities		1,086,876		1,073,750
	$	51,138,655	$	52,917,624
Total	$	95,161,831	$	97,537,598

Held to maturity-
Due in one year or less
Obligations of State and Political subdivisions	$	1,665,786	$	1,669,328
Corporate Debt Securities	$	13,475,530	$	13,523,475
	$	15,141,316	$	15,192,803
Due after one year through five years
U.S. Treasury securities and obligations of                     US Government sponsored corporations ("GSE") and agencies	$	3,098,502	$	3,138,265
Obligations of State and Political subdivisions		5,198,416		5,410,645
Corporate Debt Securities		8,926,759		8,956,134
	$	17,223,677	$	17,505,044
Due after five years through ten years
Residential collateralized mortgage obligations                             – GSE	$	635,319	$	651,756
Residential mortgage backed securities – GSE		4,016,700		4,144,974
Obligations of State and Political subdivisions		22,961,646		24,580,362
	$	27,613,665	$	29,377,092
Due after ten years
U.S. Treasury securities and obligations of US                            Government sponsored corporations                            ("GSE") and agencies	$	0	$	0
Residential collateralized mortgage obligations - GSE		22,069,900		23,159,018
Residential collateralized mortgage obligations – non GSE		13,471,005		14,231,877
Residential mortgage backed securities - GSE		14,037,713		14,854,907
Obligations of State and Political subdivisions		13,284,098		14,446,472
Trust Preferred Debt Securities - Pooled		651,788		89,242
	$	63,514,504	$	66,781,516
Total	$	123,493,162	$	128,856,455

Investment Securities, Continuous Unrealized Loss Position, Fair Value [Table Text Block]

June 30, 2012			Less than 12 months				12 months or longer				Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Residential collateralized mortgage        obligations – non-GSE		1		$ 0		$0		$206,518		$(10,204)		$206,518		$(10,204)
Residential mortgage backed securities - GSE		1		5,113		(4)		0		0		5,113		(4)
Obligations of State and Political     Subdivisions		1		522,653		(1,017)		0		0		522,653		(1,017)
Trust preferred debt securities –         single issuer		4		0		0		1,895,973		(568,775)		1,895,973		(568,775)
Trust preferred debt securities –          pooled		1		0		0		89,242		(562,546)		89,242		(562,546)
Corporate Debt Securities		21		16,074,746		(176,517)		1,180,379		(3,439)		17,255,125		(179,956)
Total temporarily impaired securities		29		$16,602,512		($177,538)		$3,372,112		($1,144,964)		$19,974,624		($1,322,502)

December 31, 2011		Less than 12 months					12 months or longer					Total
	Number of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Residential collateralized mortgage      Obligations – non-GSE	1	$	0	$	0		$	251,723	$	(20,151	)	$	251,723	$	(20,151	)
Residential mortgage backed securities      GSE	1		5,280		(7	)		0		0			5,280		(7	)
Obligations of State and Political      Subdivisions	3		1,049,362		(7,885	)		0		0			1,049,362		(7,885	)
Trust preferred debt securities –         Single issuer	4		0		0			1,751,241		(712,055	)		1,751,241		(712,055	)
Trust preferred debt securities –         Pooled	1		0		0			3,508		(643,066	)		3,508		(643,066	)
Corporate debt securities	25		13,668,246		(211,075	)		666,956		(13,527	)		14,335,202		(224,602	)
Total temporarily impaired securities	35	$	14,722,888	$	(218,967	)	$	2,673,428	$	(1,388,799	)	$	17,396,316	$	(1,607,766	)

Schedule of Unrealized Loss on Investments [Table Text Block]

Security	Class	Book Value	Fair Value	Unrealized  Gain (Loss)	Percent of  Underlying  Collateral Performing	Percent of Underlying Collateral In Deferral (1)	Percent of Underlying Collateral In Default  (1)	Expected Deferrals and Defaults as a % of Remaining Performing Collateral	Moody's S&P / Ratings	Excess Subordination (2)
										Amount	%  of  Current Performing Collateral
PreTSL  XXV	B-1	$651,788	$89,242	($562,546)	65.8%	16.7%	17.5%	15.6%	C/ NR	$102,500,000	20.0%

Notes to table above:

(1)           This percentage represents the amount of specific deferrals / defaults that have occurred, plus those that are known for the following quarters to the total amount of original collateral. Fewer deferrals / defaults produce a lower percentage.

(2)           "Excess subordination" amount is the additional defaults / deferrals necessary in the next reporting period to deplete the entire credit enhancement (excess interest and over-collateralization) beneath our tranche within each pool to the point that would cause a "break in yield". This amount assumes that all currently performing collateral continues to perform.  A break in yield means that our security would not be expected to receive all the contractual cash flows (principal and interest) by maturity.  The "percent of underlying collateral performing" is the ratio of the "excess subordination amount" to current performing collateral - a higher percent means there is more excess subordination to absorb additional defaults / deferrals, and the better our security is protected from loss.

Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block]

(in thousands)	Three and six months ended June 30, 2012	Three and six months ended June 30, 2011
Balance at beginning of period	$364	$364
Change during the period	-	-
Balance at end of period	$364	$364

XML

Investment Securities (Policies)

6 Months Ended

Jun. 30, 2012

Investment Securities [Abstract]

Marketable Securities, Other-Than-Temporary Impairment Quarterly Evaluation Policy [Policy Text Block]

XML

Other Comprehensive Income and Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2012

Other Comprehensive Income and Accumulated Other Comprehensive Income [Abstract]

Other Comprehensive Income and Accumulated Other Comprehensive Income

(8)  Other Comprehensive Income and Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income and their related income tax effects were as follows:

	June 30,		December 31,
	2012		2011
Unrealized holding gains on securities available for sale	$2,375,768		$2,318,299
Related income tax effect		(807,760)		(788,221)
		1,568,008		1,530,078
Unrealized impairment loss on held to maturity security		(500,944)		(500,944)
Related income tax effect		170,321		170,321
		(330,623)		(330,623)
Pension liability		(172,220)		(178,661)
Related income tax effect		68,079		70,668
		(104,141)		(107,993)
Accumulated other comprehensive income		$1,133,244		$1,091,462

The components of other comprehensive income and their related income tax effects for the three and six month periods ended June 30, 2011 and 2010 are as follows:

 

	Three months ended June 30,		Six months ended June 30,
	2012	2011	2012	2011
Unrealized holding gains on securities available for sale	$42,628	$1,418,929	$57,469	$1,241,357
Related income tax effect	(14,493)	(482,436)	(19,539)	(422,061)
	28,135	936,493	37,930	819,296
Unrealized holding loss on interest rate swap contract	-	179,773	-	353,552
Related income tax effect	-	(72,582)	-	(141,990)
	-	107,191	-	211,562
Pension liability	3,220	3,219	6,441	6,438
Related income tax effect	(1,294)	(1,293)	(2,589)	(2,585)
	1,926	1,926	3,852	3,853
Other comprehensive income	$30,061	$1,045,610	$41,782	$1,034,711

XML

Share-Based Compensation

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Share-Based Compensation

(6) Share-Based Compensation

The Company establishes fair value for its equity awards to determine its cost and recognizes the related expense for stock options over the vesting period using the straight-line method.  The grant date fair value for stock options is calculated using the Black-Scholes option valuation model.

The Company's stock-based incentive plans (the "Stock Plans") authorize the issuance of an aggregate of 1,298,193 shares of the Company's common stock (as adjusted for stock dividends) pursuant to awards that may be granted in the form of stock options to purchase common stock ("Options") and awards of shares of common stock ("Stock Awards").  The purpose of the Stock Plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, employees and other persons to promote the success of the Company.  Under the Stock Plans, options have a term of ten years after the date of grant, subject to earlier termination in certain circumstances.  Options are granted with an exercise price at the then fair market value of the Company's common stock.  As of June 30, 2012, there were 123,974 shares of common stock (as adjusted for the 5% stock dividend declared December 15, 2011 and paid February 2, 2012 to shareholders of record on January 17, 2012) available for future grants under the Stock Plans.

Stock-based compensation expense related to Options was $48,777 and $27,200 for the six months ended June 30, 2012 and 2011, respectively.

Transactions under the Stock Plans during the six months ended June 30, 2012 are summarized as follows:

			Weighted
			Average
		Weighted	Remaining	Aggregate
	Number of	Average	Contractual	Intrinsic
Stock Options	Shares	Exercise Price	Term (years)	Value
Outstanding at January 1, 2012	196,906	$9.66
Granted	26,670	6.42
Exercised	(327)	5.96
Forfeited	-	-
Expired	-	-
Outstanding at June 30, 2012	223,249	$9.28	6.1	$293,458
Exercisable at June 30, 2012	162,094	$10.25	5.1	$104,972

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the six months ended June 30, 2012 are as follows:

            Fair value of options granted                                            $2.20

            Risk-free rate of return                                                       0.84%

Expected option life in years                                                   7

Expected volatility                                                              31.48%

Expected dividends ⁽¹⁾                                                                 -

(1) To date, the Company has not paid cash dividends on its common stock.

As of June 30, 2012, there was approximately $146,906 of unrecognized compensation cost related to nonvested stock option based compensation arrangements granted under the Company's stock incentive plans. That cost is expected to be recognized over the next three years.

The following table summarizes nonvested restricted shares for the six months ended June 30, 2012 (as adjusted to reflect the 5% stock dividend declared in December 2011):

		Average
	Number of	Grant Date
Non-vested shares	Shares	Fair Value
Non-vested at January 1, 2012	151,753	$6.87
Granted	1,995	6.42
Vested	(20,875)	8.12
Forfeited	-	-
Non-vested at June 30, 2012	132,873	$6.67

The value of restricted shares is based upon the closing price of the common stock on the date of grant. The shares generally vest over a four year service period with compensation expense recognized on a straight-line basis.

Stock based compensation expense related to stock grants was $175,444 and $160,721 for the six months ended June 30, 2012 and 2011.

As of June 30, 2012, there was approximately $661,325 of unrecognized compensation cost related to nonvested stock grants that will be recognized over the next four years.

XML

Benefit Plans

6 Months Ended

Jun. 30, 2012

Benefit Plans [Abstract]

Benefit Plans

(7)  Benefit Plans

The Company has a 401(k) plan which covers substantially all employees with six months or more of service.  The Company's contributions to the 401(k) plan are expensed as incurred.

The Company also provides retirement benefits to certain employees under supplemental executive retirement plans (the "SERPs").  The SERPs are unfunded and the Company accrues actuarially determined benefit costs over the estimated service period of the employees in the SERPs.  The Company recognizes the over funded or under funded status of a defined benefit post-retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and recognizes changes in that funded status in the year in which the changes occur, through comprehensive income.

The components of net periodic expense for the Company's SERPs for the three and six months ended June 30, 2012 and 2011 are as follows:

	Three months ended June 30,		Six months ended June 30,
	2012	2011	2012	2011
Service cost	$61,823	$68,425	$123,646	$136,850
Interest cost	50,073	57,057	100,146	114,114
Actuarial (gain) loss recognized	5,300	(2,062)	10,600	(4,124)
Prior service cost recognized	24,858	19,859	49,716	39,718
	$142,054	$143,279	$284,108	$286,558

XML

Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

 (9)  Recent Accounting Pronouncement

   ASU 2011-11 (Disclosures about offsetting Assets and Liabilities)

On December 19, 2011, The FASB issued Accounting Standards Update (ASU) 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities." This new guidance affects all entities with financial instruments or derivatives that are either presented on a net basis in the balance sheet or subject to an enforceable master netting arrangement or a similar arrangement. The ASU does not change existing offsetting criteria in U.S. generally accepted accounting principles (U.S. GAAP) or the permitted balance sheet presentation for items meeting the criteria. To help financial statement users better assess the effect or potential effect of offsetting arrangements on an entity's financial position, the new guidance requires disclosures in the financial statement notes that provide both net and gross information about assets and liabilities that have been offset and the related arrangements.

The new disclosure requirements in the ASU are intended to enhance comparability between financial statements prepared using U.S. GAAP and those prepared in accordance with International Financial Reporting Standards (IFRS). The eligibility criteria for offsetting are different in U.S. GAAP and IFRS. In January 2011, the FASB and the International Accounting Standards Board issued an exposure draft proposing new common criteria for offsetting, but the boards could not agree. The FASB voted to retain existing U.S. GAAP guidance on offsetting and to require expanded disclosures for financial instruments and derivative instruments that are either offset in the balance sheet or eligible for offset subject to a master netting arrangement or similar arrangement.

The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Disclosures required by the amendments should be provided retrospectively for all comparative periods. The FASB has published a short recap highlighting the significant issues the ASU addresses. The Company does not expect the adoption of this ASU to have a material impact on the Company's consolidated financial position or results of operations.

ASU 2011-08 (Testing for Goodwill for Impairment)

In September, 2011, the FASB issued Accounting Standards Update (ASU) 2011-08, "Testing Goodwill for Impairment". The purpose of this ASU is to simplify how entities test goodwill for impairment by adding a new first step to the preexisting goodwill impairment test under ASC Topic 350, Intangibles-Goodwill and other. This amendment gives the entity the option to first assess a variety of qualitative factors such as economic conditions, cash flows, and competition to determine whether it was more likely than not that the fair value of goodwill has fallen below its carrying value. If the entity determines that it is not likely that the fair value has fallen below its carrying value, then the entity will not have to complete the original two-step test under Topic 350. The amendments in this ASU are effective for impairment tests performed for fiscal years beginning after December 15, 2011. The Company is evaluating the impact of this ASU on its consolidated financial statements.

ASU 2011-05 (Presentation of Comprehensive Income)

The provisions of this ASU amend FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The ASU prohibits the presentation of the components of comprehensive income in the statement of shareholders' equity. Reporting entities are allowed to present either a statement of comprehensive income, which reports both net income and other comprehensive income, or separate, but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all three presentations were acceptable. Regardless of the presentation selected, the reporting entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this ASU are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities.

ASU 2011-12, "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income ("AOCI") in Accounting Standards Update No. 2011-05," was issued by the FASB on December 23, 2011. This ASU defers the implementation of only those provisions in ASU 2011-05 dealing with the presentation of items reclassified out of AOCI.

The amendments in ASU 2011-12 and ASU 2011-05 are effective at the same time: For public entities, the guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The requirements are effective for nonpublic entities for fiscal years ending after December 15, 2012. The FASB has published a short recap of the reasons for the ASU 2011-12 deferrals. The adoption of this guidance did not have any impact on the Company's consolidated financial position or results of operations.

ASU 2011-04 (Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs)

This ASU amends FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The ASU clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity's shareholders' equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of Level 3 assets. The ASU also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The ASU also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in Level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as Level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of this ASU did not affect the Company's consolidated financial position or results of operations.

 

XML

Investment Securities (Held To Maturity Securities) (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 123,493,162	$ 142,975,367
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	(500,944)	(500,944)
Carrying Value	122,992,218	142,474,423
Gross Unrealized Gains	5,938,288	5,508,270
Unrealized Losses	(74,051)	(361,413)
Fair Value	128,856,455	147,621,280
U.S Treasury securities and obligations of U.S. Government sponsored corporations("GSE') and agencies [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	3,098,502	11,118,649
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	0	0
Carrying Value	3,098,502	11,118,649
Gross Unrealized Gains	39,763	59,571
Unrealized Losses	0	0
Fair Value	3,138,265	11,178,220
Residential collateralized mortgage obligations- GSE [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	22,705,219	24,705,415
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	0	0
Carrying Value	22,705,219	24,705,415
Gross Unrealized Gains	1,105,555	1,007,737
Unrealized Losses	0	0
Fair Value	23,810,774	25,713,152
Residential collateralized mortgage obligations- non GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	13,471,005
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	0
Carrying Value	13,471,005
Gross Unrealized Gains	760,872
Unrealized Losses	0
Fair Value	14,231,877
Residential mortgage obligations- GSE [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	18,054,413	14,386,327
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	0	0
Carrying Value	18,054,413	14,386,327
Gross Unrealized Gains	945,468	704,792
Unrealized Losses	0	0
Fair Value	18,999,881	15,091,119
Residential mortgage back Securities- non-GSE [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		20,260,354
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income		0
Carrying Value		20,260,354
Gross Unrealized Gains		801,882
Unrealized Losses		0
Fair Value		21,062,236
Obligations of State and Political subdivisions [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	43,109,946	46,820,985
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	0	0
Carrying Value	43,109,946	46,820,985
Gross Unrealized Gains	2,996,861	2,848,587
Unrealized Losses	0	(2,507)
Fair Value	46,106,807	49,667,065
Trust preferred debt securities - single issuer [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	651,788	646,574
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	(500,944)	(500,944)
Carrying Value	150,844	145,630
Gross Unrealized Gains	0	0
Unrealized Losses	(61,602)	(142,122)
Fair Value	89,242	3,508
Corporate debt securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	22,402,289	25,037,063
Other-Than Temporary Impairment Recognized In Accumulated Other Comprehensive Income	0	0
Carrying Value	22,402,289	25,037,063
Gross Unrealized Gains	89,769	85,701
Unrealized Losses	(12,449)	(216,784)
Fair Value	$ 22,479,609	$ 24,905,980

XML

Other Comprehensive Income and Accumulated Other Comprehensive Income (Schedule Of Other Comprehensive Income) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Other Comprehensive Income and Accumulated Other Comprehensive Income [Abstract]
Unrealized holding gains on securities available for sale	$ 42,628	$ 1,418,929	$ 57,469	$ 1,241,357
Related income tax effect	(14,493)	(482,436)	(19,539)	(422,061)
Total, Unrealized gains on securities available for sale	28,135	936,493	37,930	819,296
Unrealized holding loss on interest rate swap contract		179,773		353,552
Related income tax effect		(72,582)		(141,990)
Total, Unrealized holding loss on interest rate swap contract		107,191		211,562
Pension liability	3,220	3,219	6,441	6,438
Related income tax effect	(1,294)	(1,293)	(2,589)	(2,585)
Total, Pension liability	1,926	1,926	3,852	3,853
Other comprehensive income	$ 30,061	$ 1,045,610	$ 41,782	$ 1,034,711

XML

Recent Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

On December 19, 2011, The FASB issued Accounting Standards Update (ASU) 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities." This new guidance affects all entities with financial instruments or derivatives that are either presented on a net basis in the balance sheet or subject to an enforceable master netting arrangement or a similar arrangement. The ASU does not change existing offsetting criteria in U.S. generally accepted accounting principles (U.S. GAAP) or the permitted balance sheet presentation for items meeting the criteria. To help financial statement users better assess the effect or potential effect of offsetting arrangements on an entity's financial position, the new guidance requires disclosures in the financial statement notes that provide both net and gross information about assets and liabilities that have been offset and the related arrangements.

The new disclosure requirements in the ASU are intended to enhance comparability between financial statements prepared using U.S. GAAP and those prepared in accordance with International Financial Reporting Standards (IFRS). The eligibility criteria for offsetting are different in U.S. GAAP and IFRS. In January 2011, the FASB and the International Accounting Standards Board issued an exposure draft proposing new common criteria for offsetting, but the boards could not agree. The FASB voted to retain existing U.S. GAAP guidance on offsetting and to require expanded disclosures for financial instruments and derivative instruments that are either offset in the balance sheet or eligible for offset subject to a master netting arrangement or similar arrangement.

The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Disclosures required by the amendments should be provided retrospectively for all comparative periods. The FASB has published a short recap highlighting the significant issues the ASU addresses. The Company does not expect the adoption of this ASU to have a material impact on the Company's consolidated financial position or results of operations.

ASU 2011-08 (Testing for Goodwill for Impairment)

In September, 2011, the FASB issued Accounting Standards Update (ASU) 2011-08, "Testing Goodwill for Impairment". The purpose of this ASU is to simplify how entities test goodwill for impairment by adding a new first step to the preexisting goodwill impairment test under ASC Topic 350, Intangibles-Goodwill and other. This amendment gives the entity the option to first assess a variety of qualitative factors such as economic conditions, cash flows, and competition to determine whether it was more likely than not that the fair value of goodwill has fallen below its carrying value. If the entity determines that it is not likely that the fair value has fallen below its carrying value, then the entity will not have to complete the original two-step test under Topic 350. The amendments in this ASU are effective for impairment tests performed for fiscal years beginning after December 15, 2011. The Company is evaluating the impact of this ASU on its consolidated financial statements.

ASU 2011-05 (Presentation of Comprehensive Income)

The provisions of this ASU amend FASB ASC Topic 220, Comprehensive Income, to facilitate the continued alignment of U.S. GAAP with International Accounting Standards. The ASU prohibits the presentation of the components of comprehensive income in the statement of shareholders' equity. Reporting entities are allowed to present either a statement of comprehensive income, which reports both net income and other comprehensive income, or separate, but consecutive, statements of net income and other comprehensive income. Under previous GAAP, all three presentations were acceptable. Regardless of the presentation selected, the reporting entity is required to present all reclassifications between other comprehensive and net income on the face of the new statement or statements. The provisions of this ASU are effective for fiscal years and interim periods beginning after December 31, 2011 for public entities.

ASU 2011-12, "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income ("AOCI") in Accounting Standards Update No. 2011-05," was issued by the FASB on December 23, 2011. This ASU defers the implementation of only those provisions in ASU 2011-05 dealing with the presentation of items reclassified out of AOCI.

The amendments in ASU 2011-12 and ASU 2011-05 are effective at the same time: For public entities, the guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The requirements are effective for nonpublic entities for fiscal years ending after December 15, 2012. The FASB has published a short recap of the reasons for the ASU 2011-12 deferrals. The adoption of this guidance did not have any impact on the Company's consolidated financial position or results of operations.

ASU 2011-04 (Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs)

This ASU amends FASB ASC Topic 820, Fair Value Measurements, to bring U.S. GAAP for fair value measurements in line with International Accounting Standards. The ASU clarifies existing guidance for items such as: the application of the highest and best use concept to non-financial assets and liabilities; the application of fair value measurement to financial instruments classified in a reporting entity's shareholders' equity; and disclosure requirements regarding quantitative information about unobservable inputs used in the fair value measurements of Level 3 assets. The ASU also creates an exception to Topic 820 for entities which carry financial instruments within a portfolio or group, under which the entity is now permitted to base the price used for fair valuation upon a price that would be received to sell the net asset position or transfer a net liability position in an orderly transaction. The ASU also allows for the application of premiums and discounts in a fair value measurement if the financial instrument is categorized in Level 2 or 3 of the fair value hierarchy. Lastly, the ASU contains new disclosure requirements regarding fair value amounts categorized as Level 3 in the fair value hierarchy such as: disclosure of the valuation process used; effects of and relationships between unobservable inputs; usage of nonfinancial assets for purposes other than their highest and best use when that is the basis of the disclosed fair value; and categorization by level of items disclosed at fair value, but not measured at fair value for financial statement purposes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of this ASU did not affect the Company's consolidated financial position or results of operations.

XML

Benefit Pans (Tables)

6 Months Ended

Jun. 30, 2012

Benefit Plans [Abstract]

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

	Three months ended June 30,		Six months ended June 30,
	2012	2011	2012	2011
Service cost	$61,823	$68,425	$123,646	$136,850
Interest cost	50,073	57,057	100,146	114,114
Actuarial (gain) loss recognized	5,300	(2,062)	10,600	(4,124)
Prior service cost recognized	24,858	19,859	49,716	39,718
	$142,054	$143,279	$284,108	$286,558

XML

Benefit Pans (Schedule Of Defined Benefit Plans Disclosures) (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Benefit Plans [Abstract]
Service cost	$ 61,823	$ 68,425	$ 123,646	$ 136,850
Interest cost	50,073	57,057	100,146	114,114
Actuarial (gain) loss recognized	5,300	(2,062)	10,600	(4,124)
Prior service cost recognized	24,858	19,859	49,716	39,718
Defined Benefit Plan, Net Periodic Benefit Cost, Total	$ 142,054	$ 143,279	$ 284,108	$ 286,558

XML

Allowance for Loan Losses and Credit Quality Disclosure (Financing Receivable Credit Quality Indicators) (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	$ 479,795,092	$ 475,431,771
Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	59,650,806	49,285,783
Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	58,059,665	50,784,674
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	107,365,638	99,636,976
Mortgage Warehouse Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	230,776,678	249,345,831
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	11,324,340	12,885,352
Loans to Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	11,439,694	12,219,640
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	227,448	255,556
Pass [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	54,594,154	44,106,827
Pass [Member] | Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	55,393,231	47,973,545
Pass [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	80,134,127	84,642,510
Pass [Member] | Mortgage Warehouse Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	230,776,678	249,345,831
Pass [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	11,183,848	12,224,181
Special Mention [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	1,041,045	5,038,901
Special Mention [Member] | Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	1,159,276	1,657,993
Special Mention [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	19,287,729	10,574,489
Special Mention [Member] | Mortgage Warehouse Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	0	0
Special Mention [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	0	142,477
Substandard [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	4,015,607	107,405
Substandard [Member] | Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	1,364,009	865,160
Substandard [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	7,795,550	3,823,225
Substandard [Member] | Mortgage Warehouse Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	0	0
Substandard [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	140,492	518,694
Doubtful [Member] | Construction [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	0	32,650
Doubtful [Member] | Commercial Business [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	143,149	287,976
Doubtful [Member] | Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	148,232	596,752
Doubtful [Member] | Mortgage Warehouse Lines [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	0	0
Doubtful [Member] | Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	0	0
Performing [Member] | Loans to Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	11,384,790	12,141,782
Performing [Member] | Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	227,448	255,556
Nonperforming [Member] | Loans to Individuals [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	54,904	77,858
Nonperforming [Member] | Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Gross Loans	$ 0	$ 0

XML

Consolidated Statements of Comprehensive Income (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Statements of Comprehensive Income
NET INCOME	$ 1,298,108	$ 828,916	$ 2,464,840	$ 1,618,784
Other comprehensive income, net of tax
Unrealized gains on securities available for sale	28,135	936,493	37,930	819,296
Pension liability	1,926	1,926	3,852	3,853
Unrealized gain on interest rate swap contract		107,191		211,562
Other comprehensive income	30,061	1,045,610	41,782	1,034,711
Comprehensive income	$ 1,328,169	$ 1,874,526	$ 2,506,622	$ 2,653,495

XML

Net Income Per Common Share

6 Months Ended

Jun. 30, 2012

Net Income Per Common Share [Abstract]

Net Income Per Common Share

(3) Net Income Per Common Share

Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during each period.

Diluted net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding, as adjusted for the assumed exercise of potential common stock warrants, common stock options and unvested restricted stock awards (as defined below), using the treasury stock method. All share information has been adjusted for the effect of a 5% common stock dividend declared December 15, 2011 and paid on February 2, 2012 to shareholders of record on January 17, 2012.

The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per common share (EPS) calculations.  Dilutive securities in the tables below exclude common stock options and warrants with exercise prices that exceed the average market price of the Company's common stock during the periods presented.  Inclusion of these common stock options and warrants would be anti-dilutive to the diluted earnings per common share calculation.

	Three Months Ended June 30, 2012
	Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income		$1,298,108	5,096,317		$0.25
Effect of dilutive securities:
Stock options and unvested stock awards				102,094
Diluted EPS:
Net income plus assumed conversion		$1,298,108		5,198,411		$0.25

	Three Months Ended June 30, 2011
	Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income		$828,916	5,043,504		$0.16
Effect of dilutive securities:
Stock options and unvested stock awards				48,938
Diluted EPS
Net income plus assumed conversion		$828,916		5,092,442		$0.16

	Six Months Ended June 30, 2012
	Income		Weighted- average shares		Per share Amount
Basic earnings per share:
Net income		$2,464,840	5,096,252		$0.48
Effect of dilutive securities:
Stock options and unvested stock awards				81,062
Diluted EPS
Net income plus assumed conversion		$2,464,840		5,177,314		$0.48

	Six Months Ended June 30, 2011
	Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income		$1,618,784	5,043,324		$0.32
Effect of dilutive securities:
Stock options and unvested stock awards				61,722
Diluted EPS:
Net income plus assumed conversion		$1,618,784		5,105,046		$0.32

XML

Other Comprehensive Income and Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2012

Other Comprehensive Income and Accumulated Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	June 30,		December 31,
	2012		2011
Unrealized holding gains on securities available for sale	$2,375,768		$2,318,299
Related income tax effect		(807,760)		(788,221)
		1,568,008		1,530,078
Unrealized impairment loss on held to maturity security		(500,944)		(500,944)
Related income tax effect		170,321		170,321
		(330,623)		(330,623)
Pension liability		(172,220)		(178,661)
Related income tax effect		68,079		70,668
		(104,141)		(107,993)
Accumulated other comprehensive income		$1,133,244		$1,091,462

Schedule Of Other Comprehensive Income (Loss) [Table Text Block]

	Three months ended June 30,		Six months ended June 30,
	2012	2011	2012	2011
Unrealized holding gains on securities available for sale	$42,628	$1,418,929	$57,469	$1,241,357
Related income tax effect	(14,493)	(482,436)	(19,539)	(422,061)
	28,135	936,493	37,930	819,296
Unrealized holding loss on interest rate swap contract	-	179,773	-	353,552
Related income tax effect	-	(72,582)	-	(141,990)
	-	107,191	-	211,562
Pension liability	3,220	3,219	6,441	6,438
Related income tax effect	(1,294)	(1,293)	(2,589)	(2,585)
	1,926	1,926	3,852	3,853
Other comprehensive income	$30,061	$1,045,610	$41,782	$1,034,711

XML

Investment Securities (Gain Loss On Investments) (Details) (USD $)	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2009
Investment Securities [Abstract]
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Credit Losses on Debt Securities Held	$ 364,000	$ 364,000	$ 500,944

XML

Benefit Plans (Policy)

6 Months Ended

Jun. 30, 2012

Benefit Plans [Abstract]

Pension and Other Postretirement Plans, Policy [Policy Text Block]

The Company has a 401(k) plan which covers substantially all employees with six months or more of service.  The Company's contributions to the 401(k) plan are expensed as incurred.

The Company also provides retirement benefits to certain employees under supplemental executive retirement plans (the "SERPs").  The SERPs are unfunded and the Company accrues actuarially determined benefit costs over the estimated service period of the employees in the SERPs.  The Company recognizes the over funded or under funded status of a defined benefit post-retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and recognizes changes in that funded status in the year in which the changes occur, through comprehensive income.