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 September 30, 2013

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 November 12, 2013, there were 5,988,867 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 September 30, 2013
	and December 31, 2012	1
	Consolidated Statements of Income
	(unaudited) for the Three Months and Nine Months Ended
	September 30, 2013 and September 30, 2012	2
	Consolidated Statements of Comprehensive Income
	(unaudited) for the Three Months and Nine Months
	Ended September 30, 2013 and September 30, 2012	3
	Consolidated Statements of Changes in Shareholders’ Equity
	(unaudited) for the Nine Months Ended
	September 30, 2013 and September 30, 2012	4
	Consolidated Statements of Cash Flows
	(unaudited) for the Nine Months Ended
	September 30, 2013 and September 30, 2012	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	56
PART II.	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 6.	Exhibits	58
SIGNATURES		59

PART I. FINANCIAL INFORMATION

Item 1.                                Financial Statements.

1st Constitution Bancorp and Subsidiaries

Consolidated Balance Sheets

(unaudited)

	September 30, 2013		December 31, 2012
ASSETS
CASH AND DUE FROM BANKS	$	123,803,713	$	14,033,501
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS		11,425		11,420
Total cash and cash equivalents		123,815,138		14,044,921
INVESTMENT SECURITIES:
Available for sale, at fair value		101,557,211		109,840,965
Held to maturity (fair value of $152,186,281 and $121,839,363 at September 30, 2013, and December 31, 2012, respectively)		150,572,922		116,027,900
Total securities		252,130,133		225,868,865
LOANS HELD FOR SALE		14,535,681		35,960,262
LOANS		362,549,473		521,814,110
Less- Allowance for loan losses		(6,820,180)		(7,151,212	)
Net loans		355,729,293		514,662,898
PREMISES AND EQUIPMENT, net		10,172,487		10,630,295
ACCRUED INTEREST RECEIVABLE		2,143,535		2,872,099
BANK-OWNED LIFE INSURANCE		15,374,712		15,026,506
OTHER REAL ESTATE OWNED		2,808,554		8,332,601
OTHER ASSETS		13,459,319		13,569,935
Total assets	$	790,168,852	$	840,968,382
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits
Non-interest bearing	$	147,179,144	$	152,334,759
Interest bearing		539,764,810		555,354,716
Total deposits		686,943,954		707,689,475
BORROWINGS		10,000,000		42,400,000
REDEEMABLE SUBORDINATED DEBENTURES		18,557,000		18,557,000
ACCRUED INTEREST PAYABLE		787,927		1,057,779
ACCRUED EXPENSES AND OTHER LIABILITIES		6,727,851		6,210,596
Total liabilities		723,016,732		775,914,850
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; 6,008,223 and 5,985,275 shares issued and 5,988,867 and 5,977,924 shares outstanding as of September 30, 2013 and December 31, 2012 respectively		49,395,322		48,716,032
Retained earnings		19,999,881		15,594,293
Treasury Stock, at cost, 19,356 shares 7,351 shares at September 30, 2013 and December 31, 2012, respectively		(177,537)		(61,086	)
Accumulated other comprehensive (loss) income		(2,065,546)		804,293
Total shareholders’ equity		67,152,120		65,053,532
Total liabilities and shareholders’ equity	$	790,168,852	$	840,968,382

See accompanying notes to consolidated financial statements.

1

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Income

(unaudited)

	Three months ended September 30,				Nine months ended September 30,
INTEREST INCOME	2013		2012		2013		2012
Loans, including fees	$	5,701,804	$	6,966,886	$	17,319,258	$	19,700,449
Securities
Taxable		980,004		1,103,011		2,818,800		3,430,770
Tax-exempt		575,301		409,774		1,633,799		1,241,568
Federal funds sold and short-term investments		81,745		6,975		221,087		55,315
Total interest income		7,338,854		8,486,646		21,992,944		24,428,102
INTEREST EXPENSE
Deposits		842,372		1,026,154		2,668,306		3,291,676
Borrowings		103,122		119,223		310,649		340,784
Redeemable subordinated debentures		88,338		96,867		263,982		292,759
Total interest expense		1,033,832		1,242,244		3,242,937		3,925,219
Net interest income		6,305,022		7,244,402		18,750,007		20,502,883
PROVISION FOR LOAN LOSSES		539,998		499,998		776,664		1,649,994
Net interest income after provision for loan losses		5,765,024		6,744,404		17,973,343		18,852,889
NON-INTEREST INCOME
Service charges on deposit accounts		231,169		243,443		675,839		702,671
Gain on sales of loans		641,966		509,138		1,852,821		1,472,502
Income on bank-owned life insurance		115,840		112,276		348,206		337,374
Other income		627,573		451,870		1,796,104		1,157,311
Total non-interest income		1,616,548		1,316,727		4,672,970		3,669,858
NON-INTEREST EXPENSE
Salaries and employee benefits		3,060,143		3,061,065		9,458,247		9,156,318
Occupancy expense		629,922		523,126		1,930,227		1,860,446
Data processing expenses		273,272		257,990		868,960		774,110
FDIC insurance expenses		111,562		139,694		146,249		426,960
Other operating expenses		1,178,584		2,201,299		4,095,068		4,951,831
Total non-interest expenses		5,253,483		6,183,174		16,498,751		17,169,665
Income before income taxes		2,128,089		1,877,957		6,147,562		5,353,082
INCOME TAXES		604,851		523,038		1,741,974		1,533,323
Net income	$	1,523,238	$	1,354,919	$	4,405,588	$	3,819,759
NET INCOME PER SHARE
Basic	$	0.25	$	0.25	$	0.74	$	0.71
Diluted	$	0.25	$	0.25	$	0.72	$	0.70

See accompanying notes to consolidated financial statements.

2

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

	Three months ended  September 30,				Nine months ended September 30,
	2013		2012		2013		2012
NET INCOME	$	1,523,238	$	1,354,919	$	4,405,588	$	3,819,759
Other comprehensive (loss) income, net of tax:
Unrealized holding  gains (losses) on securities       available for sale		(35,468)		430,698		(2,947,683)		468,628
Pension liability		37,960		1,925		77,844		5,777
Other comprehensive (loss) income		2,492		432,623		(2,869,839)		474,405
Comprehensive income	$	1,525,730	$	1,787,542	$	1,535,749	$	4,294,164

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 Nine Months Ended September 30, 2013 and 2012

(unaudited)

	Common Stock		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income		Total Shareholders’ Equity
BALANCE, January 1, 2012	$	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		442,918				13,843					456,761
Share-based compensation		73,965									73,965
Treasury stock purchased						(80,344	)				(80,344	)
Net income for the nine months ended September 30, 2012				3,819,759							3,819,759
Other comprehensive income									474,405		474,405
Balance, September 30, 2012	$	41,364,812	$	16,890,365	$	(76,723	)	$	1,565,867	$	59,744,321
Balance, January 1, 2013	$	48,716,032	$	15,594,293	$	(61,086	)	$	804,293	$	65,053,532
Exercise of stock options, net, and issuance of vested       shares under employee benefit programs		603,342									603,342
Share-based compensation		75,948									75,948
Treasury stock purchased						(116,451	)				(116,451	)
Net Income for the nine months      ended September 30, 2013				4,405,588							4,405,588
Other comprehensive (loss)									(2,869,839)		(2,869,839	)
Balance, September 30, 2013	$	49,395,322	$	19,999,881	$	(177,537	)	$	(2,065,546)	$	67,152,120

See accompanying notes to consolidated financial statements.

4

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended September 30,
	2013			2012
OPERATING ACTIVITIES:
Net income	$	4,405,588		$	3,819,759
Adjustments to reconcile net income
to net cash provided by operating activities-
Provision for loan losses		776,664			1,649,994
Provision for loss on other real estate owned		662,918			1,195,288
Depreciation and amortization		805,823			884,595
Net amortization of premiums and discounts on securities		868,639			1,109,664
Gains on sales of other real estate owned		(292,170	)		-
Gains on sales of loans held for sale		(1,852,821	)		(1,472,502	)
Originations of loans held for sale		(114,126,927	)		(128,302,763	)
Proceeds from sales of loans held for sale		137,972,505			126,526,811
Income on Bank–owned life insurance		(348,206	)		(337,374	)
Share-based compensation expense		380,471			336,898
Decrease (increase) in accrued interest receivable		728,564			318,198
Decrease (increase)  in other assets		925,461			(122,026	)
Decrease in accrued interest payable		(269,852	)		(263,258	)
Increase (decrease) in accrued expenses and other liabilities		517,255			(35,727	)
Net cash provided by operating activities		31,153,912			5,307,557
INVESTING ACTIVITIES:
Purchases of securities -
Available for sale		(16,947,137	)		(31,800,023	)
Held to maturity		(62,560,993	)		(6,602,385	)
Proceeds from maturities and prepayments of securities -
Available for sale		20,423,187			28,843,391
Held to maturity		27,488,848			24,829,152
Net decrease (increase) in loans		155,845,716			(22,860,591	)
Capital expenditures		(147,040	)		(815,581	)
Additional investment in other real estate owned		(11,500	)		(144,454	)
Proceeds from sales of other real estate owned		7,183,854			1,686,389
Net cash provided by (used in) investing activities		131,274,935			(6,864,102	)
FINANCING ACTIVITIES:
Exercise of stock options and issuance of vested shares		603,342			456,761
Purchase of Treasury Stock		(116,451	)		(80,344	)
Net (decrease) increase  in demand, savings and time deposits		(20,745,521	)		37,135,047
Net decrease in borrowings		(32,400,000	)		(37,150,000	)
Net cash (used in) provided by financing activities		(52,658,630	)		361,464
Increase (decrease) in cash and cash equivalents		109,770,217			(1,195,081	)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD		14,044,921			15,195,259
CASH AND CASH EQUIVALENTS
AT END OF PERIOD	$	123,815,138		$	14,000,178
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest	$	3,512,789		$	4,188,477
Income taxes		1,721,000			1,787,000
Non-cash investing activities
Real estate acquired in full satisfaction of loans in foreclosure	$	2,311,225		$	553,762

See accompanying notes to consolidated financial statements.

5

1st Constitution Bancorp and Subsidiaries

Notes To Consolidated Financial Statements

September 30, 2013 (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, LLC,  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, 2012, filed with the SEC on March 22, 2013.

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 September 30, 2013 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)  Entry into a Material Definitive Agreement

On August 14, 2013, the Company and the Bank entered into an Agreement and Plan of Merger, which was subsequently amended on September 19, 2013 by the First Amendment to Agreement and Plan of Merger (the Agreement and Plan of Merger and the First Amendment to Agreement and Plan of Merger are hereinafter referred to as the “Merger Agreement”), with Rumson-Fair Haven Bank & Trust Company (“RFHB”), providing for the merger of RFHB with and into the Bank, with the Bank as the surviving entity (the “Merger”).

Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of common stock of RFHB will be converted into the right to receive, at the election of the holder of such common stock of RFHB, (i) cash consideration of $7.50 or (ii) 0.7772 of a share of common stock of the Company, or a combination of both, subject to the payment of cash in lieu of fractional shares and customary proration and allocation procedures, if necessary, to assure that 60% of the outstanding shares of common stock of RFHB are exchanged for cash and 40% of the outstanding shares of common stock of RFHB are exchanged for shares of common stock of the Company.  In addition, each outstanding option to acquire shares of common stock of RFHB will be terminated and converted to the right to receive cash and equal to the product of (i) the aggregate number of shares of common stock of RFHB underlying such outstanding option multiplied by (ii) the excess, if any, of $7.50 over the per share exercise price of such outstanding option.  Stock awards will be converted into shares of common stock of the Company.  Each outstanding share of common stock of the Company will remain outstanding and unaffected by the Merger.

Under New Jersey banking law, shareholders of RFHB can elect to dissent from the Merger.  Any shareholder electing to dissent shall be entitled to a cash payment for such shares only to the extent permitted by and in accordance with New Jersey Banking law.

The Merger Agreement contains typical representations, warranties, and covenants of the Company, the Bank and RFHB, including, among others, covenants that require, during the period between the execution of the Merger Agreement and consummation of the Merger, (i) RFHB to use commercially reasonable efforts to conduct its business in the ordinary course and consistent with past banking practice and prudent banking practice; and (ii) RFHB to not, subject to certain exceptions generally related to the Board’s evaluation and exercise of its fiduciary duties, (a) solicit  proposals relating to alternative business combination transactions or (b) enter into discussions or negotiations or provide confidential information in connection with any proposals for alternative business combination transactions.

6

The Merger Agreement provides certain termination rights for the Company, the Bank and RFHB, and further provides that upon termination of the Merger Agreement under certain circumstances, RFHB will be obligated to pay the Company a termination fee of $1,000,000 and out of pocket expenses incurred by the Company and the Bank in connection with the Merger of up to $275,000; provided, however, that the sum of the termination fee and such out-of-pocket expenses shall not exceed $1,275,000.

Completion of the Merger is subject to customary closing conditions, including (i) receipt of the requisite approval of the shareholders of RFHB, (ii) receipt of regulatory approvals, (iii) the absence of any law or order prohibiting the closing and (iv) and the effectiveness of the registration statement to be filed by the Company with respect to the common stock to be issued in the Merger.  In addition, each party’s obligation to consummate the merger is subject to certain other conditions, including the accuracy of the representations and warranties of the other party and compliance of the other party with its covenants in all material respects.

(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 20, 2012 and paid on January 31, 2013 to shareholders of record on January 14, 2013.

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 September 30, 2013
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	1,523,238	5,991,480		$	0.25
Effect of dilutive securities:
Stock options and unvested stock awards				155,182
Diluted EPS:
Net income plus assumed conversion	$	1,523,238		6,146,662	$	0.25

	Three Months Ended September 30, 2012
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	1,354,919		5,378,854	$	0.25
Effect of dilutive securities:
Stock options and unvested stock awards				130,019
Diluted EPS:
Net income plus assumed conversion	$	1,354,919		5,508,873	$	0.25

7

	Nine Months Ended September 30, 2013
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per share:
Net income	$	4,405,588	5,960,294		$	0.74
Effect of dilutive securities:
Stock options and unvested stock awards				128,539
Diluted EPS:
Net income plus assumed conversion	$	4,405,588		6,088,833	$	0.72

	Nine Months Ended September 30, 2012
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	3,819,759	5,360,395		$	0.71
Effect of dilutive securities:
Stock options and unvested stock awards				96,107
Diluted EPS:
Net income plus assumed conversion	$	3,819,759		5,456,502	$	0.70

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
September 30, 2013:	Cost		Gains		Losses		Value
Available for sale
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	22,382,475	$	33,857	$	(789,667)	$	21,626,665
Residential collateralized     mortgage obligations – GSE		4,031,094		165,347		-		4,196,441
Residential collateralized      mortgage obligations – non-GSE		3,001,533		70,080		(18,950)		3,052,663
Residential mortgage      backed securities – GSE		32,795,415		1,002,198		(458,845)		33,338,768
Obligations of State and
Political subdivisions		22,231,752		174,056		(2,660,209)		19,745,599
Trust preferred debt securities – single issuer		2,468,135		-		(429,935)		2,038,200
Corporate Debt Securities		16,267,927		280,241		(27,393)		16,520,775
Restricted stock		1,013,100		-		-		1,013,100
Mutual fund		25,000		-		-		25,000
	$	104,216,431	$	1,725,779	$	(4,384,999)	$	101,557,211

September 30, 2013:	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	$	1,537,229	$	-		$	1,537,229	$	14,416	$	-		$	1,551,645
Residential collateralized         Mortgage obligations –         GSE		15,701,290		-			15,701,290		578,336		-			16,279,626
Residential collateralized        Mortgage obligations –        non-GSE		11,234,867		-			11,234,867		329,988		(1,637	)		11,563,218
Residential mortgage        backed  securities – GSE		67,487,280		-			67,487,280		869,664		(268,803	)		68,088,141
Obligations of State and
political subdivisions		50,960,864		-			50,960,864		1,405,225		(1,327,248	)		51,038,841
Trust preferred debt        securities – pooled		656,662		(500,944	)		155,718		-		(8,311	)		147,407
Corporate debt securities		3,495,674		-			3,495,674		21,729		-			3,517,403
	$	151,073,866	$	(500,944	)	$	150,572,922	$	3,219,358	$	(1,605,999	)	$	152,186,281

9

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
December 31, 2012:	Cost		Gains		Losses			Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	29,384,595	$	137,847	$	(26,907	)	$	29,495,535
Residential collateralized  mortgage obligations – GSE		6,349,310		283,355		-			6,632,665
Residential collateralized   mortgage obligations –     non-GSE		3,811,933		119,323		(7,074	)		3,924,182
Residential mortgage  backed securities – GSE		24,912,948		1,576,387		-			26,489,335
Obligations of State and   Political subdivisions		20,793,222		375,416		(486,337	)		20,682,301
Trust preferred debt securities – single issuer		2,466,009		-		(467,643	)		1,998,366
Corporate Debt Securities		17,797,681		325,731		(23,131	)		18,100,281
Restricted stock		2,493,300		-		-			2,493,300
Mutual fund		25,000		-		-			25,000
	$	108,033,998	$	2,818,059	$	(1,011,092)		$	109,840,965

December 31, 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-
Obligations of U.S.       Government sponsored       corporations (“GSE”)       and agencies	$	3,073,957	$	-		$	3,073,957	$	33,213	$	-		$	3,107,170
Residential collateralized         mortgage obligations         – GSE		19,660,625		-			19,660,625		1,021,556		-			20,682,181
Residential collateralized      mortgage obligations-      non – GSE		13,387,974		-			13,387,974		796,892		(289	)		14,184,577
Residential mortgage      backed securities –      GSE		19,950,190		-			19,950,190		849,040		(944	)		20,798,286
Obligations of State and     Political subdivisions		42,815,706		-			42,815,706		3,039,935		-			45,855,641
Trust preferred debt     securities – pooled		656,662		(500,944	)		155,718		-		(9,638	)		146,080
Corporate debt securities		16,983,730		-			16,983,730		84,443		(2,745	)		17,065,428
	$	116,528,844	$	(500,944	)	$	116,027,900	$	5,825,079	$	(13,616	)	$	121,839,363

10

Restricted stock at September 30, 2013 and December 31, 2012 consisted of $998,100 and $2,478,300, 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 September 30, 2013, 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	$	4,998,329	$	5,004,300
Residential mortgage backed securities - GSE		19,397		20,034
Obligations of State and Political subdivisions		110,000		110,343
Corporate Debt Securities		510,694		512,930
Restricted Stock		1,013,100		1,013,100
Mutual Fund		25,000		25,000
	$	6,676,520	$	6,685,707
Due after one year through five years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	6,517,816	$	6,520,515
Residential mortgage backed securities - GSE		4,431,874		4,370,765
Obligations of State and Political subdivisions		374,281		375,833
Corporate Debt Securities		14,671,579		14,942,705
	$	25,995,550	$	26,209,818
Due after five years through ten years
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	10,866,330	$	10,101,850
Residential collateralized mortgage obligations - GSE		134,797		144,639
Residential mortgage backed securities - GSE		11,172,951		11,152,731
Obligations of State and Political Subdivisions		3,167,509		3,227,127
Corporate Debt Securities		-		-
	$	25,341,587	$	24,626,347
Due after ten years
Residential collateralized mortgage obligations - GSE		3,896,296		4,051,802
Residential collateralized mortgage obligations - non GSE		3,001,534		3,052,663
Residential mortgage backed securities - GSE		17,171,193		17,795,238
Obligations of State and Political subdivisions		18,579,962		16,032,296
Trust Preferred Debt Securities - single issuer		2,468,135		2,038,200
Corporate Debt Securities		1,085,654		1,065,140
	$	46,202,774	$	44,035,339
Total	$	104,216,431	$	101,557,211

11

Held to maturity-
Due in one year or less
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	1,537,229	$	1,551,645
Obligations of State and Political subdivisions		1,261,544		1,273,221
Corporate Debt Securities		3,495,674		3,517,403
	$	6,294,447	$	6,342,269
Due after one year through five years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	-	$	-
Obligations of State and Political subdivisions		8,937,728		9,243,927
Corporate Debt Securities		-		-
	$	8,937,728	$	9,243,927
Due after five years through ten years
Residential collateralized mortgage obligations - GSE		85,440		86,388
Residential collateralized mortgage obligations – non-GSE		954,327		952,869
Residential mortgage backed securities – GSE		21,772,966		21,945,961
Obligations of State and Political subdivisions		20,751,372		21,459,490
	$	43,564,105	$	44,444,708
Due after ten years
Residential collateralized mortgage obligations - GSE	$	15,615,850	$	16,193,239
Residential collateralized mortgage obligations – non-GSE		10,280,540		10,610,348
Residential mortgage backed securities - GSE		45,714,314		46,142,180
Obligations of State and Political subdivisions		20,010,221		19,062,203
Trust Preferred Debt Securities - Pooled		656,662		147,407
	$	92,277,587	$	92,155,377
Total	$	151,073,866	$	152,186,281

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 September 30, 2013 and December 31, 2012 are as follows:

September 30, 2013		Less than 12 months					12 months or longer				Total
	Number of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of         U.S. Government sponsored         corporations and agencies	3	$	11,627,065	$	(789,667	)	$	-	$	-	$	11,627,065	$	(789,667	)
Residential collateralized mortgage        obligations – non-GSE	3		952,689		(1,637	)		1,094,497		(18,950)		2,047,186		(20,587	)
Residential mortgage backed securities     - GSE	28		30,747,798		(727,648	)		-		-		30,747,798		(727,648	)
Obligations of State and Political     Subdivisions	77		24,976,580		(3,987,457	)		-		-		24,976,580		(3,987,457	)
Trust preferred debt securities –         single issuer	4		-		-			2,038,200		(429,935)		2,038,200		(429,935	)
Trust preferred debt securities –          pooled	1		-		-			147,407		(509,255)		147,407		(509,255	)
Corporate Debt Securities	3		2,823,855		(27,393	)		-		-		2,823,855		(27,393	)
Total temporarily impaired securities	119	$	71,127,987	$	(5,533,802)		$	3,280,104	$	(958,140)	$	74,408,091	$	(6,491,942)

12

December 31, 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
U.S. Treasury securities and obligations       of  U.S. Government sponsored       corporations (GSE) and agencies	1	$	9,842,200	$	(26,907)	$	-	$	-	$	9,842,200	$	(26,907)
Residential collateralized mortgage      obligations – non-GSE	3		1,960,237		(4,516)		156,505		(2,847)		2,116,742		(7,363)
Residential mortgage backed securities      GSE	2		3,989,675		(944)		-		-		3,989,675		(944)
Obligations of State and Political      Subdivisions	37		12,794,007		(486,337)		-		-		12,794,007		(486,337)
Trust preferred debt securities –         Single issuer	4		-		-		1,998,366		(467,643)		1,998,366		(467,643)
Trust preferred debt securities –         Pooled	1		-		-		146,080		(510,582)		146,080		(510,582)
Corporate debt securities	5		3,176,328		(25,876)		-		-		3,176,328		(25,876)
Total temporarily impaired securities	53	$	31,762,447	$	(544,580)	$	2,300,951	$	(981,072)	$	34,063,398	$	(1,525,652)

13

U.S. Treasury securities and obligations of U.S. Government sponsored corporations and agencies:  The unrealized losses on investments in these securities were caused by interest rate increases.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.  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.

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.  None of the issuers have defaulted on interest payments.  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 the projected cash flows where that present value of cash flows was less than the amortized cost basis of the security.  The present value of cash flows 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.

14

On a quarterly basis, management evaluates this security to determine if there is any additional other-than-temporary impairment (“OTTI”).  As of September 30, 2013, our evaluation was as follows:

a.  We obtained the PreTSL XXV Depository Institutions Issuer List as of September 30, 2013 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:

(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 26 year stated maturity of this pooled security even though the individual institutions are currently performing according to terms.

e.  This September 30, 2013 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 September 30, 2013.

15

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 September 30, 2013:

Security	Class	Amortized Cost	Fair Value	Unrealized (Loss) and OTTI	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	$656,662	$147,407	$(509,255)	66.5%	10.9%	22.6%	14.0%	C/ NR	$108,000	21.0%

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 Company regularly reviews the composition of the investment securities portfolio, taking into account market risks, the current and expected interest rate environment, liquidity needs, and its overall interest rate risk profile and strategic goals.

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 nine months ended September 30, 2013		Three and nine months ended September 30, 2012
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

16

(5)   Allowance for Loan Losses and Credit Quality Disclosures

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 September 30, 2013:

	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	$	-	$	-	$	995,830	$	995,830	$	42,237,906	$	43,233,736	$	-	$	995,830
Commercial Business		130,831		-		439,887		570,718		65,153,689		65,724,407		-		439,887
Commercial Real Estate		875,624		-		6,052,984		6,928,608		89,548,110		96,476,718		-		6,052,982
Mortgage Warehouse Lines		-		-		-		-		134,534,202		134,534,202		-		-
Residential Real Estate		-		970,123		164,541		1,134,664		10,521,526		11,656,190		-		164,542
Consumer
Loans to Individuals		-		-		94,898		94,898		9,752,485		9,847,383		94,898		-
Other		-		-		-		-		170,940		170,940		-		-
Deferred Loan Fees		-		-		-		-		905,897		905,897		-		-
Total	$	1,006,455		970,123	$	7,748,140	$	9,724,718	$	352,824,755	$	362,549,473	$	94,898	$	7,653,241

The following table provides an aging of the loan portfolio by loan class at December 31, 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	$	-	$	-	$	1,581,031	$	1,581,031	$	54,110,362	$	55,691,393	$	-	$	1,581,031
Commercial Business		202,451		70,192		518,912		791,555		57,073,881		57,865,436		-		629,821
Commercial Real Estate		-		-		3,137,553		3,137,553		99,275,141		102,412,694		-		3,478,605
Mortgage Warehouse Lines		-		-		-		-		284,127,530		284,127,530		-		-
Residential Real Estate		320,729		34,975		-		355,704		10,541,603		10,897,307		-		134,193
Consumer
Loans to Individuals		49,243		-		139,852		189,095		9,454,290		9,643,385		84,948		-
Other		-		-		-		-		189,279		189,279		-		-
Deferred Loan Fees		-		-		-		-		987,086		987,086		-		-
Total	$	572,423	$	105,167	$	5,377,348	$	6,054,938	$	515,759,172	$	521,814,110	$	84,948	$	5,878,554

17

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.

· 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 is 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 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 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 against 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. These impaired loans are assigned a doubtful risk rating grade because the loan has not performed according to payment terms and there is reason to believe that repayment of the loan principal, in whole or in part, is unlikely. 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 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.

18

The Company also maintains an unallocated allowance.  The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates, by definition, lack precision.  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

· 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:

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 are abundant, and for 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.

19

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.

The following table provides a breakdown of the loan portfolio by credit quality indictor at September 30, 2013.

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	38,743,089	$	63,079,908	$	64,562,349	$	134,534,202	$	10,521,525
Special Mention		-		1,465,856		21,013,297		-		1,134,665
Substandard		4,490,647		920,157		10,901,072		-		-
Doubtful		-		258,486		-		-		-
Total	$	43,233,736	$	65,724,407	$	96,476,718	$	134,534,202	$	11,656,190
Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	9,847,383	$	170,940
Nonperforming		-		-
Total	$	9,847,383	$	170,940

20

The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2012.

Commercial Credit Exposure - By Internally Assigned Grade	Construction			Commercial Business			Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass		$	49,373,827		$	55,498,613	$	76,096,964	$	284,127,530	$	10,763,114
Special Mention			-			1,019,586		19,060,621		-		134,193
Substandard			5,777,494			1,064,799		7,255,109		-		-
Doubtful			540,072			282,438		-		-		-
Total		$	55,691,393		$	57,865,436	$	102,412,694	$	284,127,530	$	10,897,307
Consumer Credit Exposure -  By Payment Activity	Loans to Individuals			Other
Performing		$	9,454,288		$	189,279
Nonperforming			189,097			-
Total		$	9,643,385		$	189,279

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 September 30, 2013 and December 31, 2012:

Period-End Allowance for Loan Losses by Impairment Method – September 30, 2013
			Commercial		Commercial		Mortgage		Residential								Deferred		Total
	Construction		Business		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Fees
Allowance for credit losses:
Ending Balance	$	1,208,023	$	1,031,607	$	3,064,248	$	672,671	$	141,826	$	110,068	$	2,051		589,686	$	-	$	6,820,180
Ending Balance
Individually evaluated      for impairment		-		235,027		1,476,632		-		-		-		-		-		-		1,711,659
Collectively evaluated       for impairment		1,208,023		796,580		1,587,616		672,671		141,826		110,068		2,051		589,686		-		5,108,521
Loans receivables:
Ending Balance	$	43,233,736	$	65,724,407	$	96,476,718	$	134,534,202	$	11,656,190	$	9,847,383	$	170,940	$	-	$	905,897	$	362,549,473
Individually evaluated         for impairment		1,015,112		701,035		9,646,821		-		164,542		-		-		-		-		11,527,510
Collectively evaluated        for impairment		42,218,624		65,023,372		86,829,897		134,534,202		11,491,648		9,847,383		170,940		-		905,897		351,021,963

Period-End Allowance for Loan Losses by Impairment Method – December 31, 2012
			Commercial		Commercial		Mortgage		Residential								Deferred		Total
	Construction		Business		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Fees
Allowance for credit losses:
Ending Balance	$	1,990,292	$	972,789	$	2,262,221	$	1,420,638	$	112,103	$	102,583	$	2,271	$	288,315	$	0	$	7,151,212
Ending Balance
Individually evaluated      for impairment		569,579		253,598		447,193		-		21,693		-		-		-		-		1,292,063
Collectively evaluated       for impairment		1,420,713		719,191		1,815,028		1,420,638		90,410		102,583		2,271		288,315		-		5,859,149
Loans receivables:
Ending Balance	$	55,691,393	$	57,865,436	$	102,412,694	$	284,127,530	$	10,897,307	$	9,643,385	$	189,279		-	$	987,086	$	521,814,110
Individually evaluated         for impairment		2,842,031		906,526		3,952,546		-		134,193		54,904		-		-		-		7,890,200
Collectively evaluated        for impairment		52,849,362		56,958,910		98,460,148		284,127,530		10,763,114		9,588,481		189,279		-		987,086		513,923,910

21

The activity in the allowance for loan losses by loan class for the nine months ended September 30, 2013 was as follows:

	Construction			Commercial Business			Commercial Real Estate			Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2012	$	1,990,292		$	972,789		$	2,262,221		$	1,420,638		$	112,103		$	102,583		$	2,271		$	288,315		$	7,151,212
Provision charged to operations		(218,010	)		(18,319	)		245,769			(429,900	)		262			50,606			(212	)		369,804			-
Loans charged off		(561,993	)		(139,289	)		(384,688	)		-			-			(50,855	)		-			-			(1,136,825	)
Recoveries of loans charged off		-			2,000			6,895			-			-			-			-			-			8,895
Balance - March 31, 2013	$	1,210,289		$	817,181		$	2,130,197		$	990,738		$	112,365		$	102,334		$	2,059		$	658,119		$	6,023,282
Provision charged to operations		1,872			160,164			321,659			(62,039	)		(19,632	)		(2,444	)		45			(162,958	)		236,667
Loans charged off		-			-			-			-			-			-			-			-			-
Recoveries of loans charged off		417			8,574			-			-			-			-			-			-			8,991
Balance – June 30, 2013	$	1,212,578		$	985,919		$	2,451,856		$	928,699		$	92,733		$	99,890		$	2,104			495,161		$	6,268,940
Provision charged to operations		(4,555	)		34,446			612,392			(256,028	)		49,093			10,178			(53	)		94,525			539,998
Loans charged off		-			(2,068	)		-			-			-			-			-			-			(2,068)
Recoveries of loans charged off		-			13,310			-			-			-			-			-			-			13,310
Balance - September 30, 2013	$	1,208,023		$	1,031,607		$	3,064,248		$	672,671		$	141,826		$	110,068		$	2,051		$	589,686		$	6,820,180

The activity in the allowance for loan losses by loan class for the nine months ended September 30, 2012 was 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	)		-			-			(77,858	)		(6,001	)		-			-			(261,336	)
Recoveries of loans charged off		3,403			5,427			-			-			-			-			-			-			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	)		-			-			(130,694	)		-			-			-			(175,893	)
Recoveries of loans charged off		-			1,191			182			-			-			-			-			-			1,373
Balance - June 30, 2012	$	1,647,605		$	903,401		$	2,304,010		$	1,153,883		$	122,510		$	123,213		$	2,798		$	-		$	6,257,420
Provision charged to operations		208,440			33,129			86,278			102,771			(2,812	)		(9,942	)		(27	)		82,161			499,998
Loans charged off		-			-			(64,375	)		-			-			-			-			-			(64,375	)
Recoveries of loans charged off		-			-			-			-			-			-			-			-			-
Balance - September 30, 2012	$	1,856,045		$	936,530		$	2,325,913		$	1,256,654		$	119,698		$	113,271		$	2, 771		$	82,161		$	6,693,043

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.

22

Impaired Loans Receivables (By Class) – September 30, 2013
							Three months ended
							September 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	1,015,112	$	1,015,112	$	-	$	1,184,249	$	4,660
Commercial Business		225,899		382,356		-		157,334		1,516
Commercial Real Estate		-		-		-		4,004,515		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		1,241,011		1,397,468		-		5,346,098		6,176
Residential Real Estate		164,542		164,542		-		164,542		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal				-		-		-		-
With no related allowance:	$	1,405,553	$	1,562,010	$	-	$	5,510,640	$	6,176
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		475,136		475,136		235,027		566,473		3,915
Commercial Real Estate		9,646,821		9,646,821		1,476,632		6,184,255		61,306
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		10,121,957		10,121,957		1,711,659		6,750,728		65,221
Residential Real Estate		-		-		-		-		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		10,121,957		10,121,957		1,711,659		6,750,728		65,221
Total:
Commercial		11,362,968		11,519,425		1,711,659		12,096,826		71,397
Residential Real Estate		164,542		164,542		-		164,542		-
Consumer		-		-		-		0		-
Total	$	11,527,510	$	11,683,967	$	1,711,659	$	12,261,368	$	71,397

23

Impaired Loans Receivables (By Class) – September 30, 2012
							Three months ended
							September 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		561,961		604,643		-		585,257		-
Commercial Real Estate		-		-		-		869,901		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		561,961		604,643		-		1,455,158		-
Residential Real Estate		-		-		-		-		-
Consumer
Loans to Individuals		54,904		54,904		-		54,904		-
Other		-		-		-		-		-
Subtotal		54,904		54,904		-		54,904		-
With no related allowance:	$	616,865	$	659,547	$	-	$	1,510,062	$	-
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		492,285		637,112		182,148		466,487		3,809
Commercial Real Estate		4,368,210		4,368,210		447,193		3,725,809		7,858
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		4,860,495		5,005,322		629,341		4,192,296		11,667
Residential Real Estate		135,963		135,963		28,566		136,781		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		4,996,458		5,141,285		657,907		4,329,077		11,667
Total:
Commercial		5,422,456		5,609,965		629,341		5,647,454		11,667
Residential Real Estate		135,963		135,963		28,566		136,781		-
Consumer		54,904		54,904		-		54,904		-
Total	$	5,613,323	$	5,800,832	$	657,907	$	5,839,139	$	11,667

24

Impaired Loans Receivables (By Class)
December 31, 2012
	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	$	1,360,914	$	1,360,914	$	-	$	412,716	$	-
Commercial Business		387,950		430,632		-		474,839		9,490
Commercial Real Estate		-		-		-		321,743		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		1,748,864		1,791,546		-		1,209,298		9,490
Residential Real Estate		-		-		-		23,600		-
Consumer
Loans to Individuals		54,904		54,904		-		54,904		-
Other		-		-		-		-		-
Subtotal		54,904		54,904		-		54,904		-
Subtotal with no Related Allowance		1,803,768		1,846,450		-		1,287,802		-
With an allowance:
Commercial
Construction		1,481,117		1,481,117		569,579		123,426		-
Commercial Business		518,576		663,403		253,598		456,541		15,746
Commercial Real Estate		3,952,546		3,999,032		447,193		2,964,744		29,291
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		5,952,239		6,143,552		1,270,370		3,544,711		45,037
Residential Real Estate		134,193		134,193		21,693		287,395		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
Subtotal with an Allowance		6,086,432		6,277,745		1,292,063		3,832,106		45,037
Total:
Commercial		7,701,103		7,935,098		1,270,370		4,754,009		54,527
Residential Real Estate		134,193		134,193		21,693		310,995		-
Consumer		54,904		54,904		-		54,904		-
Total	$	7,890,200	$	8,124,195	$	1,292,063	$	5,119,908	$	54,527

25

In the normal course of business, the Bank may consider modifying loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment or as a re-amortization or extension of a loan term to better match the loan’s repayment stream with the borrower’s cash flow. A modified loan would be considered a troubled debt restructuring (“TDR”) if the Bank grants a concession to a borrower and has determined that the borrower is troubled (i.e., experiencing financial difficulties).

If the Bank restructures a loan to a troubled borrower, the loan terms (i.e. interest rate, payment, amortization period and maturity date) may be modified in various ways to enable the borrower to cover the modified debt service payments based on current financial statements and cash flow adequacy.  If a borrower’s hardship is thought to be temporary, then modified terms may only be offered for that time period.  Where possible, the Bank would attempt to obtain additional collateral and/or secondary repayment sources at the time of the restructure in order to put the Bank in the best possible position if the borrower is not able to meet the modified terms.  The Bank will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default.

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 (“TDR”).  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.  There was no TDR activity during the three months ended September 30, 2013.  At September 30, 2013, the Bank had 8 loans classified as TDRs with an aggregate outstanding balance of $4,248,442.

 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 TDR.  The lower payments are determined by an analysis of the borrower’s cash flow to meet the modified terms while anticipating an improved financial condition to enable a resumption of the original payment terms.

(6)  Share-Based Compensation

As of September 30, 2013, Company’s stock-based incentive plans (the “Stock Plans”) authorized the issuance of an aggregate of 440,701 shares of common stock (as adjusted for subsequent 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.  The grant date fair value is calculated using the Black-Scholes option valuation model.  As of September 30, 2013, there were 395,763 shares of common stock (as adjusted for the 5% stock dividend declared December 20, 2012 and paid January 31, 2013 to shareholders of record on January 14, 2013) available for future grants under the Stock Plans.

Share-based compensation expense related to options was $25,381 and $25,187 for the three months ended September 30, 2013 and 2012, respectively.  Share-based compensation expense related to options was $75,949 and $75,661 for the nine months ended September 30, 2013 and 2012, respectively.

26

Transactions under the Stock Plans during the nine months ended September 30, 2013 (as adjusted to reflect the 5% stock dividend declared December 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, 2013		221,894	$	8.91
Granted		25,305		8.06
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2013		247,199	$	8.81		5.6	$	574,159
Exercisable at September 30, 2013		184,215	$	9.42		4.7	$	352,473

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the nine months ended September 30, 2013 are as follows:

Fair value of options granted	$	2.69
Risk-free rate of return		0.81	%
Expected option life in years		7
Expected volatility		30.82	%
Expected dividends (1)		-

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

As of September 30, 2013, there was approximately $150,270 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 nine months ended September 30, 2013 (as adjusted to reflect the 5% stock dividend declared in December 2012):

				Average
	Number of			Grant Date
Non-vested shares	Shares			Fair Value
Non-vested at January 1, 2013		140,575		$	6.41
Granted		19,633			8.42
Vested		(49,178	)		8.97
Forfeited		-			-
Non-vested at September 30, 2013		111,030		$	5.63

27

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.

Share-based compensation expense related to stock grants was $87,132 and $87,289 for the three months ended September 30, 2013 and 2012, respectively, and $326,085 and $262,933 for the nine months ended September 30, 2013 and 2012, respectively.

As of September 30, 2013, there was approximately $673,803 of unrecognized compensation cost related to nonvested stock grants that will be recognized over the next three years.

(7)  Benefit Plans

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

The Company also provides retirement benefits to certain employees under a supplemental executive retirement plan.  The plan is unfunded and the Company accrues actuarially determined benefit costs over the estimated service period of the employees in the plan.  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 Bank’s plan for the three and nine months ended September 30, 2013 and 2012 were as follows:

	Three months ended September 30,					Nine months ended September 30,
	2013			2012		2013			2012
Service cost	$	30,539		$	61,823	$	244,796		$	185,469
Interest cost		22,229			50,073		178,179			150,219
Actuarial (gain) loss recognized		(29,893	)		5,300		(239,614	)		15,900
Prior service cost recognized		942			24,858		7,553			74,574
	$	23,817		$	142,054	$	190,914		$	426,162

(8)  Other Comprehensive Income and Accumulated Other Comprehensive Income

Comprehensive income is the total of (1) net income, and (2) all other changes in equity from non-shareholder sources, which are referred to as other comprehensive income.  The components of other comprehensive income, and the related tax effects, are as follows:

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
Three Months Ended September 30, 2013:
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	(53,738	)	$	18,270		$	(35,468	)
Reclassification adjustment for (gains) realized in income		-			-			-
Other comprehensive gain (loss) on available-for-sale securities		(53,738	)		18,270			(35,468	)
Unfunded pension liability:
Changes from plan actuarial gains and (losses)        included in other comprehensive income		63,265			(25,305	)		37,960
Amortization of net transition obligation, prior service cost and net        actuarial loss included in net periodic benefit cost		-			-			-
Other comprehensive gain (loss) on unfunded retirement obligations		63,265			(25,305	)		37,960
Total other comprehensive gain (loss)	$	9,527		$	(7,035	)	$	2,492

28

	Before-Tax Amount		Income Tax Effect			Net-of-Tax Amount
Three Months Ended September 30, 2012:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	652,571	$	(221,873	)	$	430,698
Reclassification adjustment for losses realized in income		-		-			-
Other comprehensive gain (loss) on available-for-sale securities		652,571		(221,873	)		430,698
Unfunded pension liability:
Changes from plan actuarial gains and (losses)        included in other comprehensive income		3,219		(1,294	)		1,925
Amortization of net transition obligation, prior service cost and net        actuarial loss included in net periodic benefit cost		-		-			-
Other comprehensive gain (loss) on unfunded retirement obligations		3,219		(1,294	)		1,925
Total other comprehensive gain (loss)	$	655,790	$	(223,167	)	$	432,623

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
Nine Months Ended September 30, 2013:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	(4,466,187	)	$	1,518,504		$	(2,947,683	)
Reclassification adjustment for losses realized in income		-			-			-
Other comprehensive gain (loss) on available-for-sale securities	$	(4,466,187	)	$	1,518,504		$	(2,947,683	)
Unfunded pension liability:
Changes from plan actuarial gains and (losses)        included in other comprehensive income		129,751			(51,907	)		77,844
Amortization of net transition obligation, prior service cost and net        actuarial loss included in net periodic benefit cost		-			-			-
Other comprehensive gain (loss) on unfunded retirement obligations		129,751			(51,907	)		77,844
Total other comprehensive income (loss)	$	(4,336,436	)	$	1,466,597		$	(2,869,839	)

	Before-Tax Amount		Income Tax Effect			Net-of-Tax Amount
Nine Months Ended September 30, 2012:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	710,040	$	(241,412	)	$	468,628
Reclassification adjustment for losses realized in income		-		-			-
Other comprehensive gain (loss) on available-for-sale securities		710,040		(241,412	)		468,628
Unfunded pension liability:
Changes from plan actuarial gains and (losses)        included in other comprehensive income		9,660		(3,883	)		5,777
Amortization of net transition obligation, prior service cost and net        actuarial loss included in net periodic benefit cost		-		-			-
Other comprehensive gain (loss) on unfunded retirement obligations		9,660		(3,883	)		5,777
Total other comprehensive income (loss)	$	719,700	$	(245,295	)	$	474,405

29

Changes in the components of accumulated other comprehensive income are as follows and are presented net of tax:

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Nine Months Ended September 30, 2013:
Balance, beginning of period	$	1,235,204		$	(330,623	)	$	(100,288	)	$	804,293
Other comprehensive income (loss) before      reclassifications		(2,947,683	)		-			77,844			(2,869,839	)
Amounts reclassified from accumulated other      comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,947,683	)		-			77,844			(2,869,839	)
Balance, end of period	$	(1,712,479	)	$	(330,673	)	$	(22,444	)	$	(2,065,546	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities		Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Nine Months Ended September 30, 2012:
Balance, beginning of period	$	1,530,078	$	(330,623	)	$	(107,993	)	$	1,091,462
Other comprehensive income (loss) before      reclassifications		468,628		-			5,777			474,405
Amounts reclassified from accumulated other      comprehensive income (loss)		-		-			-			-
Other comprehensive income (loss)		468,628		-			5,777			474,405
Balance, end of period	$	1,998,706	$	(330,623	)	$	(162,216	)	$	1,565,867

There were no items reclassified out of each component of other comprehensive income (loss) for the three and nine months ended September 30, 2013.

30

 (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.

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 2011-05, 2011-12 and 2013-02 (Presentation of Comprehensive Income)

The provisions of ASU 2011-05 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 U.S. 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.  The Company adopted this update on January 1, 2012 and the new Consolidated Statements of Comprehensive Income are included in these financial statements.

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 only 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 12, 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.

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”) to improve the reporting of reclassifications out of accumulated comprehensive income.  ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in financial statements.  However, ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  ASU 2013-02 is effective for reporting periods beginning after December 15, 2012.  The adoption of ASU 2013-02 did not have a significant impact on the Company’s consolidated financial statements.

31

ASU 2013-04 (Presentation of Joint and Several Liability Arrangements)

In February 2013, the FASB issued ASU No. 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”).  ASU 2013-04 provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements.  ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following:

a.  The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors; and

b.  Any additional amount the reporting entity expects to pay on behalf of its co-obligors.

ASU 2013-04 also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations.  For public companies ASU 2013-04 is effective for reporting periods beginning after December 15, 2013.  The adoption of ASU 2013-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU No. 2013-11 (Presentation of Unrecognized Tax Benefit)

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740):  Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”).  Currently, there is diversity in practice in the presentation of unrecognized tax benefits.  The aim of ASU 2013-11 is to provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists.  An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except for circumstances outlined in ASU 2013-11.  For public companies, ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013.  Early adoption is permitted.  The adoption of ASU 2013-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

32

(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.

33

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.  For Level 2 securities, 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 prepayments 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 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.

34

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
September 30, 2013:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	20,101,450	$	1,525,215	$	-	$	21,626,665
Residential collateralized mortgage obligations- GSE		-		4,196,441		-		4,196,441
Residential collateralized mortgage obligations – non GSE		-		3,052,663		-		3,052,663
Residential mortgage backed securities –GSE		-		33,338,768		-		33,338,768
Obligations of State and Political subdivisions		-		19,745,599		-		19,745,599
Trust preferred debt securities – single issuer		-		2,038,200		-		2,038,200
Corporate debt securities		-		16,520,775		-		16,520,775
Restricted stock		-		1,013,000		-		1,013,000
Mutual fund		-		25,000		-		25,000

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
December 31, 2012:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	27,923,670	$	1,571,865	$	-	$	29,495,535
Residential collateralized mortgage obligations- GSE		-		6,632,665		-		6,632,665
Residential collateralized mortgage obligations - non GSE		-		3,924,182		-		3,924,182
Residential mortgage backed securities – GSE		-		26,489,335		-		26,489,335
Obligations of State and Political subdivisions		-		20,682,301		-		20,682,301
Trust preferred debt securities – single issuer		-		1,998,366		-		1,998,366
Corporate debt securities		-		18,100,281		-		18,100,281
Restricted stock		-		2,493,300		-		2,493,300
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 September 30, 2013and December 31, 2012 were as follows:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
September 30, 2013:
Impaired loans		-		-	$	8,410,298	$	8,410,298
Other real estate owned		-		-		571,950		571,950
December 31, 2012:
Impaired loans		-		-	$	4,794,369	$	4,794,369
Other real estate owned		-		-		6,568,781		6,568,781

Impaired loans, measured at fair value and included in the above table, consisted of 13 loans having an aggregate balance of $10,121,957 and specific loan loss allowances of $1,711,659 at September 30, 2013 and 16 loans at December 31, 2012 having an aggregate recorded investment of $6,086,432 and specific loan loss allowances of $1,292,063.

35

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
September 30, 2013
Impaired loans	$8,410,298	Appraisal of	Appraisal
		collateral (1)	adjustments (2)	5-50%
Other Real Estate Owned	$571,950	Appraisal of	Appraisal
		collateral (1)	adjustments (2)	8-60%
December 31, 2012
Impaired loans	$4,794,369	Appraisal of	Appraisal
		collateral (1)	adjustments (2)	5-50%
Other Real Estate Owned	$6,568,781	Appraisal of	Appraisal
		collateral (1)	adjustments (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.

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 have 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 of deposit to a schedule of aggregated expected monthly maturities of time deposits.

36

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 September 30, 2013 and December 31, 2012 were as follows:

				September 30, 2013
	Carrying			Level 1			Level 2			Level 3		Fair
	Value			Inputs			Inputs			Inputs		Value
Cash and cash equivalents	$	123,815,138		$	123,815,138			-		$	-	$	123,815,138
Securities available for sale		101,557,211			20,101,450			81,455,761			-		101,557,211
Securities held to maturity		150,572,922			-			152,186,281			-		152,186,281
Loans held for sale		14,535,681			14,535,681			-			-		14,535,681
Loans		355,729,293			-			-			361,388,000		361,388,000
Accrued interest receivable		2,143,535			2,143,535			-			-		2,143,535
Deposits		(686,943,954	)		-			(688,159,000	)		-		(688,159,000	)
Borrowings		(10,000,000	)		-			(11,252,000	)		-		(11,252,000	)
Redeemable subordinated debentures		(18,557,000	)		-			(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(787,927	)		(787,927	)		-			-		(787,927	)

				December 31, 2012
	Carrying			Level 1		Level 2			Level 3		Fair
	Value			Inputs		Inputs			Inputs		Value
Cash and cash equivalents	$	14,044,921		$	14,044,921		-		$	-	$	14,044,921
Securities available for sale		109,840,965			27,923,670		81,917,295			-		109,840,965
Securities held to maturity		116,027,900			-		121,839,363			-		121,839,363
Loans held for sale		35,960,262			-		35,960,262			-		35,960,262
Loans		514,662,898			-		-			515,577,788		515,577,788
Accrued interest receivable		2,872,099			-		2,872,099			-		2,872,099
Deposits		(707,689,475	)		-		(709,678,000	)		-		(709,678,000	)
Borrowings		(42,400,000	)		-		(43,906,000	)		-		(43,906,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(1,057,779	)		-		(1,057,779	)		-		(1,057,779	)

 Loan commitments and standby letters of credit as of September 30, 2013 and December 31, 2012 were based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit was nominal.

37

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 September 30, 2013 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 nine month periods ended September 30, 2013 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, 2012, as filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2013.

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, LLC, 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, 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.

38

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 22, 2013, 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.

39

RESULTS OF OPERATIONS

Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 2012

Summary

The Company realized net income of $1,523,238 for the three months ended September 30, 2013, an increase of $168,319, or 12.4%, from the $1,354,919 reported for the three months ended September 30, 2012.  The increase was due primarily to an increase in non-interest income and a lower level of non-interest expenses which, in total, offset the decrease in net interest income and a higher loan loss provision.  Net income per diluted common share was $0.25 for the three months ended September 30, 2013, which was unchanged when compared to the three months ended September 30, 2012.   All prior year share information has been adjusted for the effect of a 5% stock dividend declared on December 20, 2012 and paid on January 31, 2013 to shareholders of record on January 14, 2013.

During the third quarter of 2012, the Company launched a shareholders’ common stock rights offering, which expired on October 5, 2012. The Company received gross proceeds of $5.0 million from holders of subscription rights who exercised their basic subscription rights and from holders who exercised the over-subscription privilege. The rights offering was fully subscribed.  Accordingly, the Company issued a total of 555,555 shares of common stock to the holders of subscription rights who validly exercised their subscription rights, including pursuant to the exercise of the over-subscription privilege.

Key performance ratios improved for the three months ended September 30, 2013 due to higher net income for that period compared to the three months ended September 30, 2012.  Return on average assets and return on average equity were 0.76% and 9.25%, respectively, for the three months ended September 30, 2013 compared to 0.69% and 9.24%, respectively, for the three months ended September 30, 2012.

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 September 30, 2013 was 3.52% as compared to the 4.09% net interest margin recorded for the three months ended September 30, 2012, a decrease of 57 basis points.  This decrease in the Company’s net interest margin for the three months ended September 30, 2013 compared with the corresponding 2012 period was primarily due to two factors: (1) the decline in the balance of outstanding borrowings under mortgage warehouse lines and (2) the allocation of excess liquidity to much lower yielding overnight fund balances.  The decline in borrowings under mortgage warehouse lines was due to the increase in long-term interest rates during the third quarter of 2013, which led to lower levels of mortgage refinancings, and the shift from borrowings for mortgage refinancings to borrowings for new mortgages to purchase real property, which typically require more time to document and close.  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 79.6% of the Company’s net revenues for the three-month period ended September 30, 2013 and 84.6% of net revenues for the three-month period ended September 30, 2012. 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.

The Company’s net interest income decreased by $939,380, or 13.0 %, to $6,305,022 for the three months ended September 30, 2013 from the $7,244,402 reported for the three months ended September 30, 2012.  The decrease in net interest income was primarily attributable to a lower level of higher yielding mortgage warehouse portfolio loans during the current period.  The average rate paid on interest-bearing liabilities for the three months ended September 30, 2013 was 0.70%, a reduction of 14 basis points compared to 0.84% paid for the three months ended September 30, 2012. The average yield on assets decreased to 4.07% for the three months ended September 30, 2013 from 4.77% for the three months ended September 30, 2012 due to a shift in average assets away from loans which typically have higher yields than securities.

Average interest earning assets increased by $17,843,175, or 2.5%, to $743,290,714 for the three-month period ended September 30, 2013 from $725,447,539 for the three-month period ended September 30, 2012.  The overall yield on interest earning assets, on a tax-equivalent basis, decreased 70 basis points to 4.07% for the three-month period ended September 30, 2013 when compared to 4.77% for the three-month period ended September 30, 2012.   

40

Average interest bearing liabilities decreased by $1,138,771 to $585,200,612 for the three-month period ended September 30, 2013 from $586,339,383 for the three-month period ended September 30, 2012.  Overall, the cost of total interest bearing liabilities decreased 14 basis points to 0.70% for the three months ended September 30, 2013 compared to 0.84% for the three months ended September 30, 2012.

The net interest margin, which is net interest income on a tax equivalent basis divided by average interest earning assets, was 3.52% for the three months ended September 30, 2013 compared to 4.09% for the three months ended September 30, 2012.  

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. 

At September 30, 2013, the loan portfolio balance was $362,549,473, which represented a decrease of $159,264,637, or 30.5%, compared to the December 31, 2012 balance of $521,814,110.  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 $539,998 for the three months ended September 30, 2013 compared to $499,998 for the three months ended September 30, 2012.  

Non-Interest Income

Total non-interest income for the three months ended September 30, 2013 was $1,616,548, an increase of $299,821, or 22.8%, over non-interest income of $1,316,727 for the three months ended September 30, 2012. This component represented 20.4% of the Company’s net revenues for the three months ended September 30, 2013 and 15.4% of net revenues for the three-month period ended September 30, 2012.

Service charges on deposit accounts represent a consistent source of non-interest income. Service charge revenues decreased modestly to $231,169 for the three months ended September 30, 2013 from $243,443 for the three months ended September 30, 2012.  This decrease was the result of a lower volume of uncollected funds and overdraft fees collected on deposit accounts during the three months ended September 30, 2013 compared to the three months ended September 30, 2012.

Gain on sales of loans held for sale increased to $641,966 for the three months ended September 30, 2013 compared to $509,138 for the three months ended September 30, 2012.  The Bank sells both residential mortgage loans and Small Business Administration loans in the secondary market.  The volume of mortgage loan sales increased for the three months ended September 30, 2013 compared to the three months ended September 30, 2012.

Non-interest income also includes income from bank-owned life insurance (“BOLI”), which amounted to $115,840 for the three months ended September 30, 2013 compared to $112,276 for the three months ended September 30, 2012. 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.

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rental, wire transfer service fees, cash counting fees and Automated Teller Machine fees for non-Bank customers. Increased customer demand for these services contributed $627,573 to the other income component of non-interest income for the three months ended September 30, 2013 compared to $451,870 for the three months ended September 30, 2012, an increase of $175,703 for the third quarter of 2013 as compared to the third quarter of 2012.

Non-Interest Expenses

Non-interest expenses decreased by $929,691, or 15.0%, to $5,253,483 for the three months ended September 30, 2013 from $6,183,174 for the three months ended September 30, 2012.  The current period decrease in other real estate owned expenses was the primary cause for this current period decrease in total non-interest expenses when compared with the prior period’s non-interest expenses.  The following table presents the major components of non-interest expenses for the three months ended September 30, 2013 and 2012.

41

Non-Interest Expenses
	Three months ended September 30,
	2013		2012
Salaries and employee benefits	$	3,060,143	$	3,061,065
Occupancy expenses		629,922		523,126
Data processing services		273,272		257,991
Marketing		79,656		46,969
Regulatory, professional and other fees		303,114		196,870
FDIC insurance expense		111,563		139,693
Other real estate owned expenses		176,796		1,246,221
Amortization of intangible assets		66,992		66,993
All other expenses		552,025		644,246
	$	5,253,483	$	6,183,174

Salaries and employee benefits, which represent the largest portion of non-interest expenses, decreased marginally to $3,060,143 for the three months ended September 30, 2013 compared to $3,061,065 for the three months ended September 30, 2012.

Occupancy expenses increased by $106,796 to $629,922 for the three months ended September 30, 2013 compared to $523,126 for the three months ended September 30, 2012.  The increase in expense was primarily attributable to higher maintenance costs incurred to maintain the Bank’s branch operations and the timing of these repairs.

The cost of data processing services increased to $273,272 for the three months ended September 30, 2013 from $257,991 for the three months ended September 30, 2012 as additional expenses were incurred in connection with a 2013 initiative to upgrade software capabilities in branch offices in order to fully implement the Bank’s expanding mobile banking systems.

Regulatory, professional and other fees increased by $106,244 to $303,114 for the three months ended September 30, 2013 compared to $196,870 for the three months ended September 30, 2012.  During the three months ended September 30, 2013, the Company incurred professional fees in connection with consultants engaged to assess the Company’s compliance with regulatory requirements and risk management programs and legal fees in connection with the proposed merger of Rumson-Fair Haven Bank & Trust Company with and into the Bank.

Other real estate owned expenses decreased by $1,069,425 to $176,796 for the three months ended September 30, 2013 compared to $1,246,221 for the three months ended September 30, 2012 as the Company incurred a lower level of  property taxes, maintenance and other expenses on fewer repossessed properties during the third quarter of 2013 compared to the third quarter of 2012.  At September 30, 2013, the Bank held four properties with an aggregate value of $2,808,554 as other real estate owned compared to nine properties with an aggregate value of $10,225,740 at September 30, 2012.

FDIC insurance expense decreased to $111,563 for the three months ended September 30, 2013 compared to $139,693 for the three months ended September 30, 2012 as a result of the changes required by the Dodd-Frank Act with respect to FDIC premium assessment rules.

All other expenses decreased to $552,025 for the three months ended September 30, 2013 from $644,246 for the three months ended September 30, 2012. Current period decreases occurred in correspondent bank fees, maintenance agreements and ATM operating expenses.  All other expenses are comprised of a variety of operating expenses and fees as well as expenses associated with lending activities.

42

An important financial services industry productivity measure is the efficiency ratio. The efficiency ratio is calculated by dividing total operating expenses by the sum of net interest income on a tax-equivalent basis and 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 64.1% for the three months ended September 30, 2013 compared to 70.6% for the three months ended September 30, 2012 primarily as a result of the $1,069,425 decrease in other real estate owned expenses.  

Income Taxes

Income tax expense increased by $81,813 to $604,851 for the three months ended September 30, 2013 from $523,038 for the three months ended September 30, 2012.  The increase was primarily due to a higher level of pretax income for the third quarter of 2013 as compared to the third quarter of 2012.  

Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012

Summary

The Company realized net income of $4,405,588 for the nine months ended September 30, 2013, an increase of 15.3% from the $3,819,759 reported for the nine months ended September 30, 2012.  The increase was due primarily to an increase in non-interest income, a lower level of the provision for loan losses and a decrease in noninterest expenses which, in total, offset a decrease in net interest income for the nine months ended September 30, 2013 compared to the same period in 2012.

Diluted net income per share was $0.72 for the nine months ended September 30, 2013 compared to diluted net income per share of $0.70 for the nine months ended September 30, 2012.  All prior year share information has been adjusted for the effect of a 5% stock dividend declared on December 20, 2012 and paid on January 31, 2013 to shareholders of record on January 14, 2013.

During the third quarter of 2012, the Company launched a shareholders’ common stock rights offering, which expired on October 5, 2012.  The Company received gross proceeds of $5.0 million from holders of subscription rights who exercised their basic subscription rights and from holders who exercised the over-subscription privilege. The rights’ offering was fully subscribed.  Accordingly, the Company issued a total of 555,555 shares of common stock to the holders of subscription rights who validly exercised their subscription rights, including pursuant to the exercise of the over-subscription privilege.

Return on average assets and return on average equity were 0.73% and 8.96%, respectively, for the nine months ended September 30, 2013 compared to 0.67% and 9.01%, respectively, for the nine months ended September 30, 2012.  Return on average assets improved for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012 due to the higher level of net income for the 2013 period and the slight reduction in return on average equity for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 was primarily due to the issuance of new shares in the Company’s rights offering completed in October 2012.

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 nine months ended September 30, 2013 was 3.48% as compared to the 3.98% net interest margin recorded for the nine months ended September 30, 2012, a decrease of 50 basis points.  This decrease in the Company’s net interest margin for the nine months ended September 30, 2013 compared with the corresponding 2012 period was primarily due to two factors: (1) the decline in the balance of outstanding borrowings under mortgage warehouse lines and (2) the allocation of excess liquidity to much lower yielding overnight fund balances.  The decline in borrowings under mortgage warehouse lines was due to the increase in long-term interest rates during the third quarter of 2013, which led to lower levels of mortgage refinancings, and the shift from borrowings for mortgage refinancings to borrowings for new mortgages to purchase real property, which typically require more time to document and close.  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 80.0% of the Company’s net revenues for the nine-month period ended September 30, 2013 and 84.8% of net revenues for the nine-month period ended September 30, 2012. 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.

43

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 nine month periods ended September 30, 2013 and 2012, respectively. The average rates are derived by dividing interest income and expense by the average balance of assets and liabilities, respectively.

Average Balance Sheets with Resultant Interest and Rates
(yields on a tax-equivalent basis)	Nine months ended September 30, 2013						Nine months ended September 30, 2012
	Average Balance		Interest		Average Yield		Average Balance		Interest		Average Yield
Assets:
Federal Funds Sold/Short-Term Investments	$	112,351,662	$	221,087		0.26%	$	28,950,888	$	55,315		0.26%
Investment Securities:
Taxable		156,884,880		2,818,801		2.40%		171,836,158		3,430,770		2.66%
Tax-exempt		67,610,995		2,418,022		4.77%		50,443,281		1,837,521		4.86%
Total		224,495,875		5,236,823		3.11%		222,279,439		5,268,291		3.16%
Loan Portfolio:
Construction		42,149,774		1,926,931		6.11%		57,303,861		2,861,353		6.67%
Residential real estate		11,057,154		430,207		5.20%		11,920,919		463,905		5.20%
Home Equity		9,208,816		373,778		5.43%		10,529,455		445,123		5.65%
Commercial and commercial real estate		143,067,333		7,838,953		7.33%		145,668,346		8,013,835		7.35%
Mortgage warehouse lines		166,142,165		5,808,889		4.67%		198,007,591		7,060,451		4.76%
Installment		254,238		12,284		6.46%		356,875		18,221		6.82%
All Other Loans		41,800,648		928,216		2.97%		32,771,044		837,561		3.41%
Total		413,680,128		17,319,258		5.60%		456,558,091		19,700,449		5.76%
Total Interest-Earning Assets		750,527,665		22,777,168		4.05%		707,788,418		25,024,055		4.72%
Allowance for Loan Losses		(6,777,671)						(6,150,075)
Cash and Due From Bank		18,481,914						10,091,843
Other Assets		48,636,271						52,478,160
Total Assets	$	810,868,179					$	764,208,346
Liabilities and Shareholders’ Equity:
Interest-Bearing Liabilities:
Money Market and NOW Accounts	$	225,215,899	$	579,798		0.34%	$	203,155,986	$	762,799		0.50%
Savings Accounts		202,754,977		676,979		0.45%		192,802,238		894,090		0.62%
Certificates of Deposit		141,258,225		1,411,530		1.34%		147,548,296		1,634,787		1.48%
Other Borrowed Funds		10,380,769		310,649		4.00%		19,101,642		340,784		2.38%
Trust Preferred Securities		18,557,000		263,982		1.90%		18,557,000		292,759		2.11%
Total Interest-Bearing Liabilities		598,166,870		3,242,938		0.72%		581,165,162		3,925,219		0.90%
Net Interest Spread						3.33%						3.82%
Demand Deposits		139,542,141						117,413,216
Other Liabilities		7,394,439						8,790,417
Total Liabilities		745,103,450						707,368,795
Shareholders’ Equity		65,764,729						56,839,551
Total Liabilities and Shareholders’ Equity	$	810,868,179					$	764,208,346
Net Interest Margin			$	19,534,230		3.48%			$	21,098,837		3.98%

The Company’s net interest income decreased by $1,752,876, or 8.5%, to $18,750,007 for the nine months ended September 30, 2013 from $20,502,883 reported for the nine months ended September 30, 2012. The decrease in net interest income was attributable to a decreased volume of loans in the loan portfolio combined with lower rates earned on interest-earning assets, which more than offset the lower rates paid on a higher volume of interest-bearing liabilities.

44

Average interest-earning assets increased by $42,739,247, or 6.0%, to $750,527,665 for the nine-month period ended September 30, 2013 from $707,788,418 for the nine-month period ended September 30, 2012.  The average investment securities portfolio increased by $2,216,436, or 1.0%, to $224,495,875 for the nine-month period ended September 30, 2013 compared to $222,279,439 for the nine-month  period ended September 30, 2012. The average loan portfolio decreased by $42,877,963, or 9.4%, to $413,680,128 for the nine-month period ended September 30, 2013 compared to $456,558,091 for the nine-month period ended September 30, 2012.  The overall risk profile of the loan portfolio was reduced by a change in its composition via a reduction in average construction loans (which are generally riskier than other loans) of $15,154,087, or 26.4%, to $42,149,774 for the nine-month period ended September 30, 2013 compared to $57,303,861 for the nine- month period ended September 30, 2012. In addition, the third quarter of 2013 saw an increase in long-term interest rates that accelerated the decrease in the balance of outstanding mortgage warehouse lines.  The average balance of mortgage warehouse lines decreased by $31,865,426, or 16.1%, to $166,142,165 for the nine months ended September 30, 2013 compared to an average balance of $198,007,591 for the nine months ended September 30, 2012.  Overall, the yield on interest earning assets, on a tax-equivalent basis, decreased 67 basis points to 4.05% for the nine-month period ended September 30, 2013 compared to 4.72% for the nine-month period ended September 30, 2012.

Average interest-bearing liabilities increased by $17,001,708, or 2.9%, to $598,166,870 for the nine-month period ended September 30, 2013 from $581,165,162 for the nine-month period ended September 30, 2012.  Overall, the cost of total interest-bearing liabilities decreased 18 basis points to 0.72% for the nine months ended September 30, 2013 compared to 0.90% for the nine months ended September 30, 2012.

The net interest margin, which is net interest income on a tax equivalent basis divided by average interest earning assets, was 3.48% for the nine months ended September 30, 2013 compared to 3.98% the nine months ended September 30, 2012.

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. 

At September 30, 2013, the loan portfolio balance was $362,549,473, which represented a decrease of $159,264,637, or 30.5%, from the December 31, 2012 balance of $521,814,110.

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 $776,664 for the nine months ended September 30, 2013 compared to $1,649,994 for the nine months ended September 30, 2012.  

Non-Interest Income

Total non-interest income for the nine months ended September 30, 2013 was $4,672,970, an increase of $1,003,112, or 27.3%, over non-interest income of $3,669,858 for the nine months ended September 30, 2012.  This component represented 20.0% of the Company’s net revenues for the nine-month period ended September 30, 2013 and 15.2% of net revenues for the nine-month period ended September 30, 2012.

Service charges on deposit accounts represent a significant source of non-interest income. Service charges on deposit accounts decreased by $26,832, or 3.8%, to $675,839 for the nine months ended September 30, 2013 from $702,671 for the nine months ended September 30, 2012.  The lower service charges were primarily the result of a decrease in the number of deposit accounts subject to service charges during the nine months ended September 30, 2013 compared to the prior-year period.

Gain on sales of loans increased by $380,319, or 25.8%, to $1,852,821 for the nine months ended September 30, 2013 compared to $1,472,502 for the nine months ended September 30, 2012.  The Bank sells both residential mortgage loans and SBA loans in the secondary market.  The volume of mortgage loan sales increased for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012.

45

Non-interest income also includes income from bank-owned life insurance (“BOLI”), which amounted to $348,206 for the nine months ended September 30, 2013 compared to $337,374 for the nine months ended September 30, 2012. 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.

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rental, wire transfer service fees, cash counting fees and Automated Teller Machine fees for non-Bank customers.  Greater customer demand for these services contributed to the other income component of non-interest income increasing to $1,796,104 for the nine months ended September 30, 2013 compared to $1,157,311 for the nine months ended September 30, 2012.

Non-Interest Expenses

Non-interest expenses decreased by $670,914, or 3.9%, to $16,498,751 for the nine months ended September 30, 2013 from $17,169,665 for the nine months ended September 30, 2012.  The current period decrease in other real estate owned expenses was the most significant factor contributing to the decrease in total non-interest expenses when compared with the corresponding prior year period’s non-interest expenses.  The following table presents the major components of non-interest expenses for the nine months ended September 30, 2013 and 2012.

Non-Interest Expenses	Nine months ended September 30,
	2013		2012
Salaries and employee benefits	$	9,458,247	$	9,156,318
Occupancy expenses		1,930,227		1,860,446
Data processing services		868,960		774,110
Marketing		219,326		145,793
Regulatory, professional and other fees		770,015		611,606
FDIC insurance expense		146,249		426,960
Other real estate owned expenses		770,858		2,128,771
Amortization of intangible assets		200,975		200,975
Other expenses		2,133,894		1,864,686
	$	16,498,751	$	17,169,665

Salaries and employee benefits, which represent the largest portion of non-interest expenses, increased by $301,929, or 3.3%, to $9,458,247 for the nine months ended September 30, 2013 compared to $9,156,318 for the nine months ended September 30, 2012. The increase in salaries and employee benefits for the nine months ended September 30, 2013 was the result of regular merit increases and increased health care costs.

Occupancy expenses increased by $69,781, or 3.8%, to $1,930,227 for the nine months ended September 30, 2013 compared to $1,860,446 for the nine months ended September 30, 2012.  The increase in occupancy expenses for the current period was primarily attributable to increased maintenance costs related to the Bank’s branch properties.

The cost of data processing services increased to $868,960 for the nine months ended September 30, 2013 from $774,110 for the nine months ended September 30, 2012 as additional expenses were incurred in connection with a 2013 initiative to upgrade the software capabilities in branch offices in order to fully implement the Bank’s mobile banking system.

46

Regulatory, professional and other fees increased by $158,409, or 25.9%, to $770,015 for the nine months ended September 30, 2013 compared to $611,606 for the nine months ended September 30, 2012.  During the first nine months of 2013, the Company incurred professional fees in connection with consultants engaged to assess the Company’s compliance with regulatory requirements and risk management programs.  In addition, the increase in regulatory, professional and other fees for the nine months ended September 30, 2013 was partially due to the Company’s incurrence of legal fees in connection with the proposed merger of Rumson-Fair Haven Bank & Trust Company with and into the Bank.

Other real estate owned expenses decreased by $1,357,913 to $770,858 for the nine months ended September 30, 2013 compared to $2,128,771 for the nine months ended September 30, 2012 as the Company incurred a lower level of property tax, maintenance and other costs on fewer repossessed properties held as other real estate owned during the first nine months of 2013 compared to the first nine months of 2012.  At September 30, 2013, the Bank held four properties with an aggregate value of $2,808,554 as other real estate owned compared to nine properties with an aggregate value of $10,225,740 at September 30, 2012.

FDIC insurance expense decreased to $146,249 for the nine months ended September 30, 2013 compared to $426,960 for the nine months ended September 30, 2012 as a result of the changes required by the Dodd-Frank Act with respect to FDIC premium assessment rules.

All other expenses increased by $269,208 to $2,133,894 for the nine months ended September 30, 2013 from $1,864,686 for the nine months ended September 30, 2012 as a result of current year increases in payroll processing fees, ATM operation expenses and insurance premiums.

An important financial services industry productivity measure is the efficiency ratio. The efficiency ratio is calculated by dividing total operating expenses by the sum of net interest income on a tax-equivalent basis and 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 68.2% for the nine months ended September 30, 2013 compared to 69.3% for the nine months ended September 30, 2012 primarily as a result of the $1,357,913 decrease in other real estate owned expenses.  

Income Taxes

The Company had income tax expense of $1,741,974 for the nine months ended September 30, 2013 compared to income tax expense of $1,533,323 for the nine months ended September 30, 2012.  The increase in the income tax expense for the 2013 period was primarily due to the higher level of taxable interest income for the first nine months of 2013 compared to the first nine months of 2012.

Financial Condition

September 30, 2013 Compared with December 31, 2012

Total consolidated assets at September 30, 2013 were $790,168,852, representing a decrease of $50,799,530, or 6.0%, from total consolidated assets of $840,968,382 at December 31, 2012.  

Cash and Cash Equivalents

Cash and cash equivalentsat September 30, 2013 totaled $123,815,138 compared to $14,044,921 at December 31, 2012. Cash and cash equivalents at September 30, 2013 consisted of cash and due from banks of $123,803,713 and Federal funds sold/short term investments of $11,425. The corresponding balances at December 31, 2012 were $14,033,501 and $11,420, respectively.  The increase in long-term market interest rates that occurred during the third quarter of 2013 reduced the demand for mortgage refinancings, which led to a decrease in borrowings under mortgage warehouse lines extended to licensed mortgage banking companies by the Bank.  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 September 30, 2013 amounted to $14,535,681 compared to $35,960,262 at December 31, 2012. As indicated in the Consolidated Statements of Cash Flows, the amount of loans originated for sale was $114,126,927 for the nine months ended September 30, 2013 compared to $128,302,763 for the nine months ended September 30, 2012.  The current period decrease was primarily due to the increase in long-term interest rates during the nine months ended September 30, 2013.

47

Investment Securities

Investment securities represented 31.9% of total assets at September 30, 2013 and 26.9% at December 31, 2012. Total investment securities increased $26,261,268, or 11.6%, to $252,130,133 at September 30, 2013 from $225,868,865 at December 31, 2012.  Purchases of investments totaled $79,508,130 during the nine months ended September 30, 2013, and proceeds from calls and repayments totaled $47,912,035 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 September 30, 2013, securities available for sale totaled $101,557,211, which is a decrease of $8,283,754, or 7.5%, from securities available for sale totaling $109,840,965 at December 31, 2012.

At September 30, 2013, the securities available for sale portfolio had net unrealized losses of $(2,659,220), compared to net unrealized gains of $1,806,967 at December 31, 2012.  These unrealized (losses)/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 September 30, 2013, securities held to maturity were $150,572,922, an increase of $34,545,022, or 29.8%, from $116,027,900 at December 31, 2012.  The fair value of the held to maturity portfolio at September 30, 2013 was $152,186,281.

Proceeds from maturities and prepayments of securities during the first nine months of 2013 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 September 30, 2013 and December 31, 2012. 

Loan Portfolio Composition	September 30, 2013			December 31, 2012
Component	Amount		% of total	Amount		% of total
Construction loans	$	43,233,737	12%	$	55,691,393	11%
Residential real estate loans		11,656,190	3%		10,897,307	2%
Commercial business		65,724,407	18%		57,865,436	11%
Commercial real estate		96,490,718	27%		102,412,694	20%
Mortgage warehouse lines		134,534,202	37%		284,127,530	54%
Loans to individuals		9,847,383	3%		9,643,385	2%
Deferred loan fees and costs		905,896	-%		987,086	-%
All other loans		170,940	-%		189,279	-%
	$	362,563,473	100%	$	521,814,110	100%

The loan portfolio decreased by $159,264,637, or 30.5%, to $362,563,473 at September 30, 2013 compared to $521,814,110 at December 31, 2012.  This decrease in the loan portfolio was primarily the result of two factors: (1) the increase in long-term interest rates during the third quarter of 2013, which led to lower levels of mortgage refinancings, and (2) the shift from borrowings for mortgage refinancings to borrowings for new mortgages to purchase real property, which typically require more time to document and close.

The Mortgage warehouse lines component of the loan portfolio decreased by $149,593,328, or 52.7%, to $134,534,702 compared to $284,127,530 at December 31, 2012.

48

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 Bank’s Construction loans portfolio decreased by $12,457,656 during the first nine months of 2013.  The Bank received $13,737,207 in prepayments for the Construction loan portfolio during the first nine months of 2013.  In the current highly competitive marketplace for commercial and construction loans, developing new lending relationships and limiting the amount of loan prepayments will be essential for maintaining this portion of the Bank’s loan portfolio.

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.

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 that have not been classified as non-accrual.  Included in non-accrual loans are loans whose terms have been restructured to provide a reduction or deferral of interest and/or principal because of deterioration in the financial position of the borrower and which have not performed in accordance with restructured terms.

The Bank’s policy with regard to non-accrual loans is to generally place loans 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 increased by $1,784,638 to $7,748,140 at September 30, 2013 from $5,963,502 at December 31, 2012.  The major segment of non-accrual loans consist of commercial real estate loans, which are in the process of collection.  The table below sets forth non-performing assets and risk elements in the Bank’s portfolio for the periods indicated.

As the table demonstrates, while non-performing loans to total loans increased to 2.14% at September 30, 2013 from 1.14% at December 31, 2012, 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	September 30,		December 31,
	2013		2012
Non-Performing loans:
Loans 90 days or more past due and still accruing	$	94,898	$	84,948
Non-accrual loans		7,653,242		5,878,554
Total non-performing loans		7,748,140		5,963,502
Other real estate owned		2,808,554		8,332,601
Total non-performing assets	$	10,556,694	$	14,296,103
Non-performing loans to total loans		2.14%		1.14%
Non-performing loans to total loans excluding mortgage warehouse lines		3.40%		2.51%
Non-performing assets to total assets		1.34%		1.70%
Non-performing assets to total assets excluding mortgage warehouse lines		1.61%		2.57%

49

Non-performing assets decreased by $3,739,409 to $10,556,694 at September 30, 2013 from $14,296,103 at December 31, 2012.  Other real estate owned decreased by $6,124,047 to $2,208,554 at September 30, 2013 from $8,332,601 at December 31, 2012.  Since December 31, 2012, the Bank sold and transferred properties totaling approximately $7,183,854 out of other real estate owned. In addition, during the nine months ended September 30, 2013, the Bank recorded a provision for loss on other real estate owned of $662,918.

At September 30, 2013, the Bank had eight loans totaling $4,248,442 that were classified as troubled debt restructurings.  Two of these loans totaling $374,173 are included in the above table as non-accrual loans.  The remaining six loans totaling $3,874,269 are considered performing loans.

Non-performing assets represented 1.34% of total assets at September 30, 2013 and 1.70% at December 31, 2012.

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.

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 against 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 against 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.

50

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.

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 against 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. These impaired loans are assigned a doubtful risk rating grade because the loan has not performed according to payment terms and there is reason to believe that repayment of the loan principal in whole or part is unlikely. 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 outstanding loans 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 also maintains an unallocated allowance.  The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates, by definition, lack precision.  Management must make estimates using assumptions and information that is often subjective and changing rapidly.

Loans are placed in a non-accrual 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 non-accrual status unless they are both well secured and in the process of collection.  Impaired loans are evaluated individually.

51

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

Allowance for Loan Losses
	Nine Months Ended		Year  Ended		Nine Months Ended
	September 30, 2013		December 31, 2012		September 30, 2012
Balance, beginning of period	$	7,151,212	$	5,534,450	$	5,534,451
Provision charged to operating expenses		776,664		2,149,992		1,649,994
Loans charged off :
Construction loans		(561,993)		(57,650)		(57,650)
Residential real estate loans		-		(130,694)		(208,552)
Commercial and commercial real estate		(486,034)		(275,888)		(235,402)
Loans to individuals		(90,865)		(83,859)		-
Lease financing		-		-		-
All other loans		-		-		-
		(1,138,892)		(548,091)		(501,604)
Recoveries
Construction loans		417		3,403		3,403
Residential real estate loans		-		-		-
Commercial and commercial real estate		17,947		11,458		6,799
Loans to individuals		12,832		-		-
Lease financing		-		-		-
All other loans		-		-		-
		31,196		14,861		10,202
Net (charge offs) / recoveries		(1,107,696)		(533,230)		(491,402)
Balance, end of period	$	6,820,180	$	7,151,212	$	6,693,043
Loans :
At period end	$	362,549,473	$	521,814,110	$	497,247,199
Average during the period		386,475,158		444,064,283		438,292,781
Net (charge offs)/recoveries to average loans outstanding          (annualized)		(0.29)%		(0.12)%		(0.11)%
Allowance for loan losses to :
Total loans at period end		1.88%		1.37%		1.35%
Total loans at period end excluding mortgage           warehouse lines		2.99%		3.01%		2.72%
Non-performing loans		88.02%		119.92%		139.47%

The Company recorded a provision for loan losses of $776,664 for the nine months ended September 30, 2013 compared to $1,649,994 for the nine months ended September 30, 2012.  In addition to the results of management’s comprehensive review of the adequacy of the allowance, the decision for the reduced level of the current provision was further supported by the risk profile of the loan portfolio being reduced by a $159,264,637, or 30.5%, decrease in the total loan portfolio at September 30, 2013 compared to the December 31, 2012 balance.  Net charge offs/recoveries amounted to a net charge-off of $1,107,696 for the nine months ended September 30, 2013.

52

At September 30, 2013, the allowance for loan losses was $6,820,180 compared to $7,151,212 at December 31, 2012, a decrease of $331,032.  The ratio of the allowance for loan losses to total loans was 1.88% and 1.37%, respectively, at September 30, 2013 and December 31, 2012.  The allowance for loan losses as a percentage of non-performing loans was 88.02% at September 30, 2013 compared to 119.92% at December 31, 2012. Management believes that 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 September 30, 2013 and December 31, 2012.

	September 30,  2013			December 31,  2012
Demand
Non-interest bearing	$	147,179,144	$	152,334,759
Interest bearing		207,300,503		211,475,765
Savings		191,785,124		202,261,035
Time		140,679,183		141,617,916
	$	686,943,954,	$	707,689,475

At September 30, 2013, total deposits were $686,943,954, a decrease of $20,745,521, or 2.9%, from $707,689,475 at December 31, 2012.

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 $10,000,000 at September 30, 2013, consisting solely of FHLB long-term borrowings. The balance of borrowings at December 31, 2012 consisted of long-term FHLB borrowings of $10,000,000 and overnight funds purchased of $32,400,000.

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 $2,098,588 to $67,152,120 at September 30, 2013 from $65,053,532 at December 31, 2012.  Tangible book value per common share increased by $0.37, or 3.7%, to $10.39 at September 30, 2013 from $10.02 at December 31, 2012.  The current period increase in tangible book value per common share was the result of net income of $4,405,588 for the nine months ended September 30, 2013.  The ratio of shareholders’ equity to total assets was 8.50% and 7.74%, respectively, at September 30, 2013 and December 31, 2012.  The increase in shareholders’ equity was primarily the result of net income of $4,405,588 for the nine months ended September 30, 2013, which was partially offset by the other comprehensive loss of $2,869,839 for the nine-month period.

53

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 2012 and 2011 and paid in 2013 and 2012, respectively.  

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

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 September 30, 2013 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 September 30, 2013 and December 31, 2012 were as follows:

	Actual			For Capital Adequacy Purposes			To Be Well Capitalized Under Prompt Corrective Action Provision
	Amount		Ratio	Amount		Ratio	Amount		Ratio
As of September 30, 2013
Company
Total Capital to Risk Weighted Assets	$	87,981,099	19.30%	$	36,455,840	>8%		N/A	N/A
Tier 1 Capital to Risk Weighted Assets		82,261,099	18.05%		18,227,920	>4%		N/A	N/A
Tier 1 Capital to Average Assets		82,261,099	10.36%		31,769,544	>4%		N/A	N/A
Bank
Total Capital to Risk Weighted Assets	$	85,640,189	18.79%	$	36,455,840	>8%	$	45,569,800	>10%
Tier 1 Capital to Risk Weighted Assets		79,930,189	17.54%		18,227,920	>4%		27,341,880	>6%
Tier 1 Capital to Average Assets		79,930,189	10.06%		31,769,440	>4%		39,711,800	>5%

As of December 31, 2012
Company
Total Capital to Risk Weighted Assets	$	81,213,909	12.98%	$	50,044,960	>8%		N/A	N/A
Tier 1 Capital to Risk Weighted Assets		74,062,697	11.84%		25,022,480	>4%		N/A	N/A
Tier 1 Capital to Average Assets		74,062,697	9.29%		31,881,576	>4%		N/A	N/A
Bank
Total Capital to Risk Weighted Assets	$	78,621,740	12.57%	$	50,044,960	>8%	$	62,556,200	>10%
Tier 1 Capital to Risk Weighted Assets		71,470,528	11.43%		25,022,480	>4%		37,533,720	>6%
Tier 1 Capital to Average Assets		71,470,528	9.05%		31,604,458	>4%		39,505,573	>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 September 30, 2013, 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.

In July 2013, the Federal Reserve Board and the FDIC approved revisions to their capital adequacy guidelines and prompt corrective action rules that implement the revised standards of the Basel Committee on Banking Supervision, commonly called Basel III, and address relevant provisions of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).  The Federal Reserve Board’s final rules and the FDIC’s interim final rules apply to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more, and top-tier savings and loan holding companies (“banking organizations”).  Among other things, the rules establish a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets) and increase the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets).  Banking organizations will also be required to have a total capital  ratio of 8% (unchanged from current rules) and a Tier 1 leverage ratio of 4% (unchanged from current rules).  The rules also limit a banking organization’s ability to pay dividends, engage in share repurchases or pay discretionary bonuses if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements.  The rules become effective for the Company and the Bank on January 1, 2015.  The capital conservation buffer requirement will be phased in beginning in January 1, 2016 at 0.625% of common equity Tier 1 capital to risk-weighted assets and would increase by that amount each year until fully implemented in January 2019 at 2.5% of common equity Tier 1 capital to risk-weighted assets.  Management is currently evaluating the provisions of these rules and their expected impact on the Company and the Bank.

54

Liquidity

At September 30, 2013, 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.

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 $395,084,426, of its total assets at September 30, 2013.  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 September 30, 2013, the balance of cash and cash equivalents was $123,815,138.

Net cash provided by operating activities totaled $31,153,912 for the nine months ended September 30, 2013 compared to net cash provided by operations of $5,307,557 for the nine months ended September 30, 2012.  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 $131,274,935 for the nine months ended September 30, 2013 compared to net cash used in investing activities of $6,864,102 for the nine months ended September 30, 2012.  The increase for the 2013 period resulted from a reduction of $155,845,716 in the loan portfolio primarily through repayments.

Net cash used in financing activities totaled $52,658,630 for the nine months ended September 30, 2013 compared to net cash provided by financing activities of $361,464 for the nine months ended September 30, 2012.  

The securities portfolios are also a source of liquidity, providing cash flows from maturities and periodic repayments of principal.  For the nine months ended September 30, 2013, prepayments and maturities of investment securities totaled $47,912,035.  Another source of liquidity is the loan portfolio, which provides a flow of payments and maturities.

55

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.

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 September 30, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

56

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, if any, made by or on behalf of the Company during the three months ended September 30, 2013.

 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
July 1, 2013	July 31, 2013	-	-	-	187,559
August 1, 2013	August 31, 2013	-	-	-	187,559
September 1, 2013	September 30, 2013	-	-	-	187,559
	Total	-	-	-	187,559

(1) The Company’s common stock repurchase program covers a maximum of 225,824 shares of common stock of the Company, representing 5% of the outstanding common stock of the Company on July 21, 2005, as adjusted for subsequent common stock dividends.

57

Item 6. Exhibits.

Exhibit No.		Description
2.1		Agreement and Plan of Merger, dated August 14, 2013, by and between the Company, 1st Constitution Bank and Rumson-Fair Haven Bank & Trust Company (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on August 15, 2013)
2.2	*	First Amendment to Agreement and Plan of Merger, dated September 19, 2013, by and among the Company, 1st Constitution Bank and Rumson-Fair Haven Bank & Trust Company
3(i)(A)		Certificate of Incorporation of the Company (conformed copy) (incorporated by reference to Exhibit 3(i)(A) to the Company’s Form 10-K filed with the SEC on March 27, 2009)
3(i)(B)		Certificate of Amendment to the Certificate of Incorporation increasing the number of shares designated as Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on December 23, 2008)
3(i)(C)		Certificate of Amendment to the Certificate of Incorporation establishing the terms of the Fixed Rate Cumulative Perpetual Preferred Stock, Series B (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed with the SEC on December 23, 2008)
3(ii)(A)		By-laws of the Company (conformed copy) (incorporated by reference to Exhibit 3(ii)(A) to the Company’s Form 8-K filed with the SEC on October 22, 2007)
4.1		Specimen Share of Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-KSB (SEC File No. 000-32891) filed with the SEC on March 22, 2002)
4.2		Rights Agreement, dated as of March 18, 2004, between 1st Constitution Bancorp and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 4.5 to the Company’s Form 8-A12G (SEC File No. 000-32891) filed with the SEC on March 18, 2004)
4.3		Warrant, dated December 23, 2008, to purchase shares of 1st Constitution Bancorp common stock (incorporated by reference to Exhibit 3.3 to the Company’s Form 8-K filed with the SEC on December 23, 2008)
4.4		Subscription Agent Agreement, dated as of September 5, 2012, between 1st Constitution Bancorp and Registrar and Transfer Company (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 6, 2012)
4.5		Warrant, dated November 23, 2011, to purchase shares of 1st Constitution Bancorp common stock (incorporated by reference to Exhibit 4.5 to the Company’s Form 10-K filed with the SEC on March 22, 2013)
4.6		Warrant, dated November 23, 2011, to purchase shares of 1st Constitution Bancorp common stock (incorporated by reference to Exhibit 4.6 to the Company’s Form 10-K filed with the SEC on March 22, 2013)
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 Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document

_____________________

*   Filed herewith.

58

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: November 12, 2013	By:	/s/ Robert F. Mangano
		Robert F. Mangano
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: November 12, 2013	By:	/s/ Joseph M. Reardon
		Joseph M. Reardon
		Senior Vice President and Treasurer
		(Principal Financial and Accounting Officer)

59

EXHIBIT INDEX

Exhibit No.		Description
2.1		Agreement and Plan of Merger, dated August 14, 2013, by and between the Company, 1st Constitution Bank and Rumson-Fair Haven Bank & Trust Company (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on August 15, 2013)
2.2	*	First Amendment to Agreement and Plan of Merger, dated September 19, 2013, by and among the Company, 1st Constitution Bank and Rumson-Fair Haven Bank & Trust Company
3(i)(A)		Certificate of Incorporation of the Company (conformed copy) (incorporated by reference to Exhibit 3(i)(A) to the Company’s Form 10-K filed with the SEC on March 27, 2009)
3(i)(B)		Certificate of Amendment to the Certificate of Incorporation increasing the number of shares designated as Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the SEC on December 23, 2008)
3(i)(C)		Certificate of Amendment to the Certificate of Incorporation establishing the terms of the Fixed Rate Cumulative Perpetual Preferred Stock, Series B (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed with the SEC on December 23, 2008)
3(ii)(A)		By-laws of the Company (conformed copy) (incorporated by reference to Exhibit 3(ii)(A) to the Company’s Form 8-K filed with the SEC on October 22, 2007)
4.1		Specimen Share of Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-KSB (SEC File No. 000-32891) filed with the SEC on March 22, 2002)
4.2		Rights Agreement, dated as of March 18, 2004, between 1st Constitution Bancorp and Registrar and Transfer Company, as Rights Agent (incorporated by reference to Exhibit 4.5 to the Company’s Form 8-A12G (SEC File No. 000-32891) filed with the SEC on March 18, 2004)
4.3		Warrant, dated December 23, 2008, to purchase shares of 1st Constitution Bancorp common stock (incorporated by reference to Exhibit 3.3 to the Company’s Form 8-K filed with the SEC on December 23, 2008)
4.4		Subscription Agent Agreement, dated as of September 5, 2012, between 1st Constitution Bancorp and Registrar and Transfer Company (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the SEC on September 6, 2012)
4.5		Warrant, dated November 23, 2011, to purchase shares of 1st Constitution Bancorp common stock (incorporated by reference to Exhibit 4.5 to the Company’s Form 10-K filed with the SEC on March 22, 2013)
4.6		Warrant, dated November 23, 2011, to purchase shares of 1st Constitution Bancorp common stock (incorporated by reference to Exhibit 4.6 to the Company’s Form 10-K filed with the SEC on March 22, 2013)
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 Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document

_____________________

*   Filed herewith.

EX-2.2

Exhibit 2.2

FIRST AMENDMENT TO

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT (the “Amendment”) made this 19th day of September, 2013 by and among 1st Constitution Bancorp, a New Jersey corporation and registered bank holding company (“1st Constitution”), 1st Constitution Bank, a New Jersey state commercial bank and the wholly-owned banking subsidiary of 1st Constitution (the “Bank”), and Rumson-Fair Haven Bank and Trust Company, a New Jersey state commercial bank (“RFH”).

RECITALS:

A.           The parties entered into an Agreement and Plan of Merger dated as of August 14, 2013 whereby RFH agreed to merge with and into the Bank (the “Agreement”);

B             The parties have agreed to amend the Agreement in the manner set forth below.

C.            Capitalized terms not defined in this Amendment shall have the meanings ascribed to them in the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the Parties hereby agree as follows:

1.            Section 1.12 of the Agreement is hereby amended in its entirety as follows:

“1.12           Capital Stock.  As of June 30, 2013, the Bank had capital of $80,799,431 divided into 1,212,104 issued and outstanding shares of $5.00 par value common stock (no treasury shares) (“Bank Common Stock”), including $52,888,514 of surplus, and undivided profits of $21,850,397 (includes Other Comprehensive Loss of $2,068,038 as of June 30, 2013).  As of June 30, 2013, RFH had capital of $18,790,874.24, divided into 3,225,964 issued and outstanding shares of $2.00 par value common stock (no treasury shares), including $9,944,918 of surplus, and undivided profits of $2,394,028 (includes Other Comprehensive Income of $353,000 as of June 30, 2013).  At the Effective Time, the amount of capital of the Bank shall be $90,477,436, divided into 1,212,104 shares of $5.00 par value common stock, including surplus of approximately $62,566,514 and undivided profits of $21,850,397, including capital reserves, adjusted however, for earnings and dividends declared and paid by the Bank between June 30, 2013 and the Effective Time and purchase accounting adjustments.”

2.            The Agreement is hereby amended by adding the following Section 1.16:

“1.16  Offices.  The (i) principal office and branch offices of RFH, (ii) the principal office and branch office of the Bank, and (iii)  the principal office and branch offices of the Surviving Entity are as set forth on Exhibit C attached hereto.  The principal office of the Surviving Entity on and after Effective Date shall be the principal office of the Bank set forth on Exhibit C and the principal office of RFH and its branches shall become branches of the Surviving Entity on and after the Effective Date.”

3.            Section 5.1(b) of the Agreement is hereby amended in its entirety as follows:

“(b)           (i) repurchase, redeem or otherwise acquire (except for the acquisition of Trust Account Shares and DPC Shares) any shares of the capital stock of RFH or any Subsidiary of RFH, or any securities convertible into or exercisable for any shares of the capital stock of RFH or any Subsidiary of RFH, (ii) split, combine or reclassify any shares of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares, (iv) accelerate the exercisability or vesting of any Stock Options or RFH Stock Awards or (v) enter into any agreement with respect to any of the foregoing, except, (A) in the case of clauses (ii) and (iii), for the issuance of up to a total of 85,080  shares of RFH Common Stock upon the exercise of RFH Stock Options granted under RFH Stock Compensation Plans prior to the date hereof, any such exercise to be in accordance with the original terms of such options, and (Y) in the case of clause (iv), the acceleration of vesting of Stock Options covering up to 85,080 shares of RFH Common Stock and 11,250 RFH Stock Awards granted pursuant to RFH Stock Compensation Plans and outstanding on the date hereof;”

4.            The Agreement is hereby amended by adding Exhibit C which is attached to this Amendment.

5.            All other terms and conditions in the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, 1st Constitution, the Bank and RFH have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

ATTEST:		1st CONSTITUTION BANCORP
By:	/s/ JOSEPH M. REARDON	By:	/s/ ROBERT F. MANGANO
	Joseph M. Reardon		Robert F. Mangano
	Senior Vice President and Treasurer		President and Chief Executive Officer
ATTEST:		1st CONSTITUTION BANCORP
By:	/s/ JOSEPH M. REARDON	By:	/s/ ROBERT F. MANGANO
	Joseph M. Reardon		Robert F. Mangano
	Senior Vice President and Treasurer		President and Chief Executive Officer
ATTEST:		RUMSON-FAIR HAVEN BANK AND TRUST COMPANY
By:	/s/ GAYLE S. HOFFMAN	By:	/s/ JOSEPH CASTELLUCI
	Gayle S. Hoffman		Joseph Castelluci
	Senior Vice President and Counsel		President, Chief Executive Officer & General Counsel

STATE OF NEW JERSEY                             )

:  ss.

COUNTY OF MIDDLESEX                          )

On this 19th day of September, 2013, before me, a Notary Public for this state and county, personally came Robert F. Mangano, as President and Chief Executive Officer, and Joseph M. Reardon, as Senior Vice President and Treasurer of 1st Constitution Bancorp, and each in his capacity acknowledged this instrument to be the act and deed of 1st Constitution Bancorp and the seal affixed to it to be its seal.

WITNESS my official seal and signature this day and year.

/s/ ROXANNE CULPEPPER

(Seal of Notary)

STATE OF NEW JERSEY                             )

:  ss.

COUNTY OF MIDDLESEX                          )

On this 19th day of September, 2013, before me, a Notary Public for this state and county, personally came Robert F. Mangano, as President and Chief Executive Officer, and Joseph M. Reardon, as Senior Vice President and Treasurer of 1st Constitution Bank, and each in his capacity acknowledged this instrument to be the act and deed of 1st Constitution Bank and the seal affixed to it to be its seal.

WITNESS my official seal and signature this day and year.

/s/ ROXANNE CULPEPPER

 (Seal of Notary)

STATE OF NEW JERSEY                             )

:  ss.

COUNTY OF MONMOUTH                        )

On this 19th day of September, 2013, before me, a Notary Public for this state and county, personally came Joseph Castelluci, as President, Chief Executive Officer and General Counsel, and Gayle S. Hoffman, as Senior Vice President and Chief Financial Officer of Rumson-Fair Haven Bank and Trust Company, and each in his capacity acknowledged this instrument to be the act and deed of Rumson-Fair Haven Bank and Trust Company and the seal affixed to it to be its seal.

WITNESS my official seal and signature this day and year.

/s/ PAMELA WESCOTT-ARKENAU

(Seal of Notary)

Exhibit C

The Principal Office and Branch Offices of Rumson-Fair Haven Bank and Trust Company

Fair Haven Office (Principal Office)

636 River Road

Fair Haven, NJ 07704

Asbury Park Office

511 Cookman Avenue

Asbury Park, NJ 07712

Oceanport Office

251 East Main Street

Oceanport, NJ 07757

Rumson Office

20 Bingham Avenue

Rumson, NJ 07760

Shrewsbury Office

500 Broad Street

Shrewsbury, NJ 07702

The Principal Office and Branch Offices of 1st Constitution Bank

Main Office (Principal Office)

2650 Route 130

Cranbury, New Jersey 08512

Fort Lee Office

180 Main Street

Fort Lee, New Jersey  07024

Hamilton Office

3659 Nottingham Way

Hamilton, New Jersey  08690

Hightstown Office

140 Mercer Street

Hightstown, New Jersey  08520

Hillsborough Office

32 New Amwell Road

Hillsborough, New Jersey  08844

Hopewell Office

86 East Broad Street

Hopewell, New Jersey  08525

Jamesburg Office

1 Harrison Street

Jamesburg, New Jersey  08831

Lawrenceville Office

150 Lawrenceville-Pennington Road

Lawrenceville, New Jersey  08648

Perth Amboy Office

145 Fayette Street

Perth Amboy, New Jersey  08861

Plainsboro Office

Plainsboro Plaza Shopping Center

11 Shalks Crossing Road

Plainsboro, New Jersey  08536

Princeton Office

The Windrows at Princeton Forrestal

2000 Windrow Drive

Princeton, New Jersey  08540

Rocky Hill Office

995 Route 518

Skillman, New Jersey  08558

Village Office

74 North Main Street

Cranbury, New Jersey  08512

West Windsor Office

44 Washington Road

Princeton Jct, New Jersey  08550

The Principal Office and Branch Offices of the Surviving Entity

Main Office (Principal Office)

2650 Route 130

Cranbury, New Jersey 08512

Asbury Park Office

511 Cookman Avenue

Asbury Park, NJ 07712

Fair Haven Office

636 River Road

Fair Haven, NJ 07704

Fort Lee Office

180 Main Street

Fort Lee, New Jersey  07024

Hamilton Office

3659 Nottingham Way

Hamilton, New Jersey  08690

Hightstown Office

140 Mercer Street

Hightstown, New Jersey  08520

Hillsborough Office

32 New Amwell Road

Hillsborough, New Jersey  08844

Hopewell Office

86 East Broad Street

Hopewell, New Jersey  08525

Jamesburg Office

1 Harrison Street

Jamesburg, New Jersey  08831

Lawrenceville Office

150 Lawrenceville-Pennington Road

Lawrenceville, New Jersey  08648

Oceanport Office

251 East Main Street

Oceanport, NJ 07757

Perth Amboy Office

145 Fayette Street

Perth Amboy, New Jersey  08861

Plainsboro Office

Plainsboro Plaza Shopping Center

11 Shalks Crossing Road

Plainsboro, New Jersey  08536

Princeton Office

The Windrows at Princeton Forrestal

2000 Windrow Drive

Princeton, New Jersey  08540

Rocky Hill Office

995 Route 518

Skillman, New Jersey  08558

Rumson Office

20 Bingham Avenue

Rumson, NJ 07760

Shrewsbury Office

500 Broad Street

Shrewsbury, NJ 07702

Village Office

74 North Main Street

Cranbury, New Jersey  08512

West Windsor Office

44 Washington Road

Princeton Jct, New Jersey  08550

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: November 12, 2013

/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:  November 12, 2013

/s/ Joseph M. Reardon
Name:	Joseph M. Reardon
Title:	Senior Vice President and  Treasurer (Principal Financial Officer)

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 September 30, 2013 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:	November 12, 2013

/s/ Joseph M. Reardon
Name:	Joseph M. Reardon
Title:	Senior Vice President and  Treasurer (Principal Financial Officer)
Date:	November 12, 2013

XML

Note 10 - Fair Value Disclosures

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

(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.  For Level 2 securities, 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 prepayments 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 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
September 30, 2013:
Securities available for sale:
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	20,101,450	$	1,525,215	$	-	$	21,626,665
Residential collateralized mortgage obligations- GSE		-		4,196,441		-		4,196,441
Residential collateralized mortgage obligations – non GSE		-		3,052,663		-		3,052,663
Residential mortgage backed securities –GSE		-		33,338,768		-		33,338,768
Obligations of State and Political subdivisions		-		19,745,599		-		19,745,599
Trust preferred debt securities – single issuer		-		2,038,200		-		2,038,200
Corporate debt securities		-		16,520,775		-		16,520,775
Restricted stock		-		1,013,000		-		1,013,000
Mutual fund		-		25,000		-		25,000

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
December 31, 2012:
Securities available for sale:
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	27,923,670	$	1,571,865	$	-	$	29,495,535
Residential collateralized mortgage obligations- GSE		-		6,632,665		-		6,632,665
Residential collateralized mortgage obligations - non GSE		-		3,924,182		-		3,924,182
Residential mortgage backed securities – GSE		-		26,489,335		-		26,489,335
Obligations of State and Political subdivisions		-		20,682,301		-		20,682,301
Trust preferred debt securities – single issuer		-		1,998,366		-		1,998,366
Corporate debt securities		-		18,100,281		-		18,100,281
Restricted stock		-		2,493,300		-		2,493,300
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 September 30, 2013and December 31, 2012 were as follows:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
September 30, 2013:
Impaired loans		-		-	$	8,410,298	$	8,410,298
Other real estate owned		-		-		571,950		571,950
December 31, 2012:
Impaired loans		-		-	$	4,794,369	$	4,794,369
Other real estate owned		-		-		6,568,781		6,568,781

Impaired loans, measured at fair value and included in the above table, consisted of thirteen loans having an aggregate balance of $10,121,957 and specific loan loss allowances of $1,711,659 at September 30, 2013 and 16 loans at December 31, 2012 having an aggregate recorded investment of $6,086,432 and specific loan loss allowances of $1,292,063.

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
September 30, 2013
Impaired loans	$	8,410,298	Appraisal of collateral (1)	Appraisal adjustments (2)	5	-	50	%
Other Real Estate Owned	$	571,950	Appraisal of collateral (1)	Appraisal adjustments (2)	8	-	60	%
December 31, 2012
Impaired loans	$	4,794,369	Appraisal of collateral (1)	Appraisal adjustments (2)	5	-	50	%
Other Real Estate Owned	$	6,568,781	Appraisal of collateral (1)	Appraisal adjustments (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.

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 have 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 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 September 30, 2013 and December 31, 2012 were as follows:

				September 30, 2013
	Carrying Value			Level 1 Inputs			Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	123,815,138		$	123,815,138			-		$	-	$	123,815,138
Securities available for sale		101,557,211			20,101,450			81,455,761			-		101,557,211
Securities held to maturity		150,572,922			-			152,186,281			-		152,186,281
Loans held for sale		14,535,681			14,535,681			-			-		14,535,681
Loans		355,729,293			-			-			361,388,000		361,388,000
Accrued interest receivable		2,143,535			2,143,535			-			-		2,143,535
Deposits		(686,943,954	)		-			(688,159,000	)		-		(688,159,000	)
Borrowings		(10,000,000	)		-			(11,252,000	)		-		(11,252,000	)
Redeemable subordinated debentures		(18,557,000	)		-			(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(787,927	)		(787,927	)		-			-		(787,927	)

				December 31, 2012
	Carrying Value			Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	14,044,921		$	14,044,921		-		$	-	$	14,044,921
Securities available for sale		109,840,965			27,923,670		81,917,295			-		109,840,965
Securities held to maturity		116,027,900			-		121,839,363			-		121,839,363
Loans held for sale		35,960,262			-		35,960,262			-		35,960,262
Loans		514,662,898			-		-			515,577,788		515,577,788
Accrued interest receivable		2,872,099			-		2,872,099			-		2,872,099
Deposits		(707,689,475	)		-		(709,678,000	)		-		(709,678,000	)
Borrowings		(42,400,000	)		-		(43,906,000	)		-		(43,906,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(1,057,779	)		-		(1,057,779	)		-		(1,057,779	)

 Loan commitments and standby letters of credit as of September 30, 2013 and December 31, 2012 were based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit was nominal.

XML

Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures (USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2013		Dec. 31, 2012
Impaired Loans [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures [Line Items]
Impaired loans (in Dollars)	$ 8,410,298		$ 4,794,369
Valuation Techniques	Appraisal of collateral (1)	[1]	Appraisal of collateral (1)	[1]
Unobservable Input	Appraisal adjustments (2)	[2]	Appraisal adjustments (2)	[2]
Impaired Loans [Member] | Minimum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures [Line Items]
Range of Adjustments	5.00%		5.00%
Impaired Loans [Member] | Maximum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures [Line Items]
Range of Adjustments	50.00%		50.00%
Other Real Estate Owned [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures [Line Items]
Valuation Techniques	Appraisal of collateral (1)	[1]	Appraisal of collateral (1)	[1]
Unobservable Input	Appraisal adjustments (2)	[2]	Appraisal adjustments (2)	[2]
Other real estate owned (in Dollars)	$ 571,950		$ 6,568,781
Other Real Estate Owned [Member] | Minimum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures [Line Items]
Range of Adjustments	8.00%		8.00%
Other Real Estate Owned [Member] | Maximum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value, Quantitative Disclosures [Line Items]
Range of Adjustments	60.00%		60.00%

[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.

XML

Consolidated Statements of Income (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
INTEREST INCOME
Loans, including fees	$ 5,701,804	$ 6,966,886	$ 17,319,258	$ 19,700,449
Taxable	980,004	1,103,011	2,818,800	3,430,770
Tax-exempt	575,301	409,774	1,633,799	1,241,568
Federal funds sold and short-term investments	81,745	6,975	221,087	55,315
Total interest income	7,338,854	8,486,646	21,992,944	24,428,102
INTEREST EXPENSE
Deposits	842,372	1,026,154	2,668,306	3,291,676
Borrowings	103,122	119,223	310,649	340,784
Redeemable subordinated debentures	88,338	96,867	263,982	292,759
Total interest expense	1,033,832	1,242,244	3,242,937	3,925,219
Net interest income	6,305,022	7,244,402	18,750,007	20,502,883
PROVISION FOR LOAN LOSSES	539,998	499,998	776,664	1,649,994
Net interest income after provision for loan losses	5,765,024	6,744,404	17,973,343	18,852,889
NON-INTEREST INCOME
Service charges on deposit accounts	231,169	243,443	675,839	702,671
Gain on sales of loans	641,966	509,138	1,852,821	1,472,502
Income on bank-owned life insurance	115,840	112,276	348,206	337,374
Other income	627,573	451,870	1,796,104	1,157,311
Total non-interest income	1,616,548	1,316,727	4,672,970	3,669,858
NON-INTEREST EXPENSE
Salaries and employee benefits	3,060,143	3,061,065	9,458,247	9,156,318
Occupancy expense	629,922	523,126	1,930,227	1,860,446
Data processing expenses	273,272	257,990	868,960	774,110
FDIC insurance expenses	111,562	139,694	146,249	426,960
Other operating expenses	1,178,584	2,201,299	4,095,068	4,951,831
Total non-interest expenses	5,253,483	6,183,174	16,498,751	17,169,665
Income before income taxes	2,128,089	1,877,957	6,147,562	5,353,082
INCOME TAXES	604,851	523,038	1,741,974	1,533,323
Net income	$ 1,523,238	$ 1,354,919	$ 4,405,588	$ 3,819,759
NET INCOME PER SHARE
Basic (in Dollars per share)	$ 0.25	$ 0.25	$ 0.74	$ 0.71
Diluted (in Dollars per share)	$ 0.25	$ 0.25	$ 0.72	$ 0.70

XML

Note 3 - Net Income Per Common Share

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

(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 20, 2012 and paid on January 31, 2013 to shareholders of record on January 14, 2013.

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 September 30, 2013
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	1,523,238		5,991,480	$	0.25
Effect of dilutive securities:
Stock options and unvested stock awards				155,182
Diluted EPS:
Net income plus assumed conversion	$	1,523,238		6,146,662	$	0.25

	Three Months Ended September 30, 2012
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	1,354,919		5,378,854	$	0.25
Effect of dilutive securities:
Stock options and unvested stock awards				130,019
Diluted EPS:
Net income plus assumed conversion	$	1,354,919		5,508,873	$	0.25

	Nine Months Ended September 30, 2013
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per share:
Net income	$	4,405,588		5,960,294	$	0.74
Effect of dilutive securities:
Stock options and unvested stock awards				128,539
Diluted EPS:
Net income plus assumed conversion	$	4,405,588		6,088,833	$	0.72

	Nine Months Ended September 30, 2012
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	3,819,759		5,360,395	$	0.71
Effect of dilutive securities:
Stock options and unvested stock awards				96,107
Diluted EPS:
Net income plus assumed conversion	$	3,819,759		5,456,502	$	0.70

XML

Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

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

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
Three Months Ended September 30, 2013:
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	(53,738	)	$	18,270		$	(35,468	)
Reclassification adjustment for (gains) realized in income		-			-			-
Other comprehensive gain (loss) on available-for-sale securities		(53,738	)		18,270			(35,468	)
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		63,265			(25,305	)		37,960
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-			-			-
Other comprehensive gain (loss) on unfunded retirement obligations		63,265			(25,305	)		37,960
Total other comprehensive gain (loss)	$	9,527		$	(7,035	)	$	2,492

	Before-Tax Amount		Income Tax Effect			Net-of-Tax Amount
Three Months Ended September 30, 2012:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	652,571	$	(221,873	)	$	430,698
Reclassification adjustment for losses realized in income		-		-			-
Other comprehensive gain (loss) on available-for-sale securities		652,571		(221,873	)		430,698
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		3,219		(1,294	)		1,925
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-		-			-
Other comprehensive gain (loss) on unfunded retirement obligations		3,219		(1,294	)		1,925
Total other comprehensive gain (loss)	$	655,790	$	(223,167	)	$	432,623

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
Nine Months Ended September 30, 2013:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	(4,466,187	)	$	1,518,504		$	(2,947,683	)
Reclassification adjustment for losses realized in income		-			-			-
Other comprehensive gain (loss) on available-for-sale securities	$	(4,466,187	)	$	1,518,504		$	(2,947,683	)
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		129,751			(51,907	)		77,844
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-			-			-
Other comprehensive gain (loss) on unfunded retirement obligations		129,751			(51,907	)		77,844
Total other comprehensive income (loss)	$	(4,336,436	)	$	1,466,597		$	(2,869,839	)

	Before-Tax Amount		Income Tax Effect			Net-of-Tax Amount
Nine Months Ended September 30, 2012:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	710,040	$	(241,412	)	$	468,628
Reclassification adjustment for losses realized in income		-		-			-
Other comprehensive gain (loss) on available-for-sale securities		710,040		(241,412	)		468,628
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		9,660		(3,883	)		5,777
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-		-			-
Other comprehensive gain (loss) on unfunded retirement obligations		9,660		(3,883	)		5,777
Total other comprehensive income (loss)	$	719,700	$	(245,295	)	$	474,405

Components of Accumulated Other Comprehensive Loss [Table Text Block]

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Nine Months Ended September 30, 2013:
Balance, beginning of period	$	1,235,204		$	(330,623	)	$	(100,288	)	$	804,293
Other comprehensive income (loss) before reclassifications		(2,947,683	)		-			77,844			(2,869,839	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,947,683	)		-			77,844			(2,869,839	)
Balance, end of period	$	(1,712,479	)	$	(330,673	)	$	(22,444	)	$	(2,065,546	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities		Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Nine Months Ended September 30, 2012:
Balance, beginning of period	$	1,530,078	$	(330,623	)	$	(107,993	)	$	1,091,462
Other comprehensive income (loss) before reclassifications		468,628		-			5,777			474,405
Amounts reclassified from accumulated other comprehensive income (loss)		-		-			-			-
Other comprehensive income (loss)		468,628		-			5,777			474,405
Balance, end of period	$	1,998,706	$	(330,623	)	$	(162,216	)	$	1,565,867

XML

Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

The accompanying unaudited Consolidated Financial Statements include 1st 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, LLC, 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, 2012, filed with the SEC on March 22, 2013.

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.

Subsequent Events, Policy [Policy Text Block]

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2013 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

Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Components of Comprehensive Income (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Components of Comprehensive Income [Abstract]
Unrealized holding gains (losses) on available-for-sale securities, Before-Tax Amount	$ (53,738)	$ 652,571	$ (4,466,187)	$ 710,040
Unrealized holding gains (losses) on available-for-sale securities, Income Tax Effect	18,270	(221,873)	1,518,504	(241,412)
Unrealized holding gains (losses) on available-for-sale securities, Net-of-Tax Amount	(35,468)	430,698	(2,947,683)	468,628
Reclassification adjustment for (gains) losses realized in income, Before-Tax Amount	0	0	0	0
Reclassification adjustment for (gains) losses realized in income, Income Tax Effect	0	0	0	0
Reclassification adjustment for (gains) losses realized in income, Net-of-Tax Amount	0	0	0	0
Other comprehensive gain (loss) on available-for-sale securities, Before-Tax Amount	(53,738)	652,571	(4,466,187)	710,040
Other comprehensive gain (loss) on available-for-sale securities, Income Tax Effect	18,270	(221,873)	1,518,504	(241,412)
Other comprehensive gain (loss) on available-for-sale securities, Net-of-Tax Amount	(35,468)	430,698	(2,947,683)	468,628
Changes from plan actuarial gains and losses included in other comprehensive income, Before-Tax Amount	63,265	3,219	129,751	9,660
Changes from plan actuarial gains and losses included in other comprehensive income,Income Tax Effect	(25,305)	(1,294)	(51,907)	(3,883)
Changes from plan actuarial gains and losses included in other comprehensive income, Net-of-Tax Amount	37,960	1,925	77,844	5,777
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost, Before-Tax Amount	0	0	0	0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost, Income Tax Effect	0	0	0	0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost, Net-of-Tax Amount	0	0	0	0
Other comprehensive gain on unfunded retirement obligations, Before-Tax Amount	63,265	3,219	129,751	9,660
Other comprehensive gain on unfunded retirement obligations, Income Tax Effect	(25,305)	(1,294)	(51,907)	(3,883)
Other comprehensive gain on unfunded retirement obligations, Net-of-Tax Amount	37,960	1,925	77,844	5,777
Other comprehensive Income, Before-Tax Amount	9,527	655,790	(4,336,436)	719,700
Other comprehensive Income, Income Tax Effect	(7,035)	(223,167)	1,466,597	(245,295)
Other comprehensive Income, Net-of-Tax Amount	$ 2,492	$ 432,623	$ (2,869,839)	$ 474,405

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Financing Receivable Credit Quality Indicators Commercial (USD $)	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	$ 362,549,473	$ 521,814,110
Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	38,743,089	49,373,827
Construction [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	4,490,647	5,777,494
Construction [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	540,072
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	43,233,736	55,691,393
Commercial Business [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	63,079,908	55,498,613
Commercial Business [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	1,465,856	1,019,586
Commercial Business [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	920,157	1,064,799
Commercial Business [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	258,486	282,438
Commercial Business [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	65,724,407	57,865,436
Commercial Real Estate Other Receivable [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	64,562,349	76,096,964
Commercial Real Estate Other Receivable [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	21,013,297	19,060,621
Commercial Real Estate Other Receivable [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	10,901,072	7,255,109
Commercial Real Estate Other Receivable [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Commercial Real Estate Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	96,476,718	102,412,694
Mortgage Warehouse Lines [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	134,534,202	284,127,530
Mortgage Warehouse Lines [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Mortgage Warehouse Lines [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Mortgage Warehouse Lines [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Mortgage Warehouse Lines [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	134,534,202	284,127,530
Residential Real Estate [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	10,521,525	10,763,114
Residential Real Estate [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	1,134,665	134,193
Residential Real Estate [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Residential Real Estate [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	0	0
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Commercial Credit Exposure	$ 11,656,190	$ 10,897,307

XML

Note 3 - Net Income Per Common Share (Details)	1 Months Ended	9 Months Ended
	Jan. 31, 2013	Sep. 30, 2013
Earnings Per Share [Abstract]
Adjusted Share Information	5.00%	5.00%
Dividends Payable, Date Declared		Dec. 20, 2012
Dividends Payable, Date to be Paid		Jan. 31, 2013
Dividends Payable, Date of Record		Jan. 14, 2013

XML

Note 2 - Entry into a Material Definitive Agreement (Details) (RFHB [Member], USD $)	Aug. 14, 2013
Note 2 - Entry into a Material Definitive Agreement (Details) [Line Items]
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 7.50
Business Acquisition Share Conversion Rate	0.7772%
Business Combination, Contingent Consideration, Liability	$ 1,275,000
Termination Fee [Member]
Note 2 - Entry into a Material Definitive Agreement (Details) [Line Items]
Business Combination, Contingent Consideration, Liability	1,000,000
Out of Pocket Expenses [Member]
Note 2 - Entry into a Material Definitive Agreement (Details) [Line Items]
Business Combination, Contingent Consideration, Liability	$ 275,000

XML

Note 6 - Share Based Compensation (Details) - Restricted Stock Activity (USD $)	9 Months Ended
	Sep. 30, 2013
Restricted Stock Activity [Abstract]
Non-vested at January 1, 2013	140,575
Non-vested at January 1, 2013 (in Dollars per share)	$ 6.41
Granted	19,633
Granted (in Dollars per share)	$ 8.42
Vested	(49,178)
Vested (in Dollars per share)	$ 8.97
Forfeited	0
Forfeited (in Dollars per share)	$ 0
Non-vested at September 30, 2013	111,030
Non-vested at September 30, 2013 (in Dollars per share)	$ 5.63

XML

Note 4 - Investment Securities (Details) - Unrealized Losses on Investments (USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2013		Dec. 31, 2012
Note 4 - Investment Securities (Details) - Unrealized Losses on Investments [Line Items]
PreTSL XXV (in Dollars)	$ 151,073,866		$ 116,528,844
PreTSL XXV (in Dollars)	152,186,281		121,839,363
PreTSL XXV (in Dollars)	(1,605,999)		(13,616)
Pretsl Xxv [Member]
Note 4 - Investment Securities (Details) - Unrealized Losses on Investments [Line Items]
PreTSL XXV	B-1
PreTSL XXV (in Dollars)	656,662
PreTSL XXV (in Dollars)	147,407
PreTSL XXV (in Dollars)	(509,255)
PreTSL XXV	66.50%
PreTSL XXV	10.90%	[1]
PreTSL XXV	22.60%	[1]
PreTSL XXV	14.00%
PreTSL XXV	C/ NR
PreTSL XXV (in Dollars)	$ 108,000	[2]
PreTSL XXV	21.00%	[2]

[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.

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Credit Losses on Financing Receivables Summary (USD $)	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Allowance for credit losses:
Allowance for creidt losses, balance	$ 6,820,180	$ 6,268,940	$ 6,023,282	$ 7,151,212	$ 6,693,043	$ 6,257,420	$ 5,881,942	$ 5,534,450
Allowance for creidt losses, individually evaluated for impairment	1,711,659			1,292,063
Allowance for creidt losses, collectively evaluated for impairment	5,108,521			5,859,149
Loans receivables:
Loans receivables, balance	362,549,473			521,814,110
Loans receivables, individually evaluated for impairment	11,527,510			7,890,200
Loans receivables, collectively evaluated for impairment	351,021,963			513,923,910
Construction [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	1,208,023	1,212,578	1,210,289	1,990,292	1,856,045	1,647,605	1,242,949	1,054,695
Allowance for creidt losses, individually evaluated for impairment	0			569,579
Allowance for creidt losses, collectively evaluated for impairment	1,208,023			1,420,713
Loans receivables:
Loans receivables, balance	43,233,736			55,691,393
Loans receivables, individually evaluated for impairment	1,015,112			2,842,031
Loans receivables, collectively evaluated for impairment	42,218,624			52,849,362
Commercial [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	1,031,607			972,789
Allowance for creidt losses, individually evaluated for impairment	235,027			253,598
Allowance for creidt losses, collectively evaluated for impairment	796,580			719,191
Loans receivables:
Loans receivables, balance	65,724,407			57,865,436
Loans receivables, individually evaluated for impairment	701,035			906,526
Loans receivables, collectively evaluated for impairment	65,023,372			56,958,910
Commercial Real Estate Other Receivable [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	3,064,248	2,451,856	2,130,197	2,262,221	2,325,913	2,304,010	1,838,882	1,597,702
Allowance for creidt losses, individually evaluated for impairment	1,476,632			447,193
Allowance for creidt losses, collectively evaluated for impairment	1,587,616			1,815,028
Loans receivables:
Loans receivables, balance	96,476,718			102,412,694
Loans receivables, individually evaluated for impairment	9,646,821			3,952,546
Loans receivables, collectively evaluated for impairment	86,829,897			98,460,148
Mortgage Warehouse Lines [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	672,671	928,699	990,738	1,420,638	1,256,654	1,153,883	1,006,605	1,122,056
Allowance for creidt losses, individually evaluated for impairment	0			0
Allowance for creidt losses, collectively evaluated for impairment	672,671			1,420,638
Loans receivables:
Loans receivables, balance	134,534,202			284,127,530
Loans receivables, individually evaluated for impairment	0			0
Loans receivables, collectively evaluated for impairment	134,534,202			284,127,530
Residential Real Estate [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	141,826	92,733	112,365	112,103	119,698	122,510	239,573	91,076
Allowance for creidt losses, individually evaluated for impairment	0			21,693
Allowance for creidt losses, collectively evaluated for impairment	141,826			90,410
Loans receivables:
Loans receivables, balance	11,656,190			10,897,307
Loans receivables, individually evaluated for impairment	164,542			134,193
Loans receivables, collectively evaluated for impairment	11,491,648			10,763,114
Consumer [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	110,068	99,890	102,334	102,583	113,271	123,213	131,570	187,352
Allowance for creidt losses, individually evaluated for impairment	0			0
Allowance for creidt losses, collectively evaluated for impairment	110,068			102,583
Loans receivables:
Loans receivables, balance	9,847,383			9,643,385
Loans receivables, individually evaluated for impairment	0			54,904
Loans receivables, collectively evaluated for impairment	9,847,383			9,588,481
Other [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	2,051	2,104	2,059	2,271	2,771	2,798	3,179	2,377
Allowance for creidt losses, individually evaluated for impairment	0			0
Allowance for creidt losses, collectively evaluated for impairment	2,051			2,271
Loans receivables:
Loans receivables, balance	170,940			189,279
Loans receivables, individually evaluated for impairment	0			0
Loans receivables, collectively evaluated for impairment	170,940			189,279
Unallocated Financing Receivables [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	589,686	495,161	658,119	288,315	82,161	0	608,185	544,550
Allowance for creidt losses, individually evaluated for impairment	0			0
Allowance for creidt losses, collectively evaluated for impairment	589,686			288,315
Loans receivables:
Loans receivables, balance	0			0
Loans receivables, individually evaluated for impairment	0			0
Loans receivables, collectively evaluated for impairment	0			0
Loan Cost [Member]
Allowance for credit losses:
Allowance for creidt losses, balance	0			0
Allowance for creidt losses, individually evaluated for impairment	0			0
Allowance for creidt losses, collectively evaluated for impairment	0			0
Loans receivables:
Loans receivables, balance	905,897			987,086
Loans receivables, individually evaluated for impairment	0			0
Loans receivables, collectively evaluated for impairment	$ 905,897			$ 987,086

XML

Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Changes in the Components of AOCI (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Changes in the Components of AOCI [Line Items]
Balance, beginning of period			$ 804,293	$ 1,091,462
Other comprehensive income before reclassifications			(2,869,839)	474,405
Amounts reclassified from accumulated other comprehensive income			0	0
Other comprehensive incme	2,492	432,623	(2,869,839)	474,405
Balance, end of period	(2,065,546)	1,565,867	(2,065,546)	1,565,867
Unrealized Holding Gains (Losses) On Securities [Member]
Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Changes in the Components of AOCI [Line Items]
Balance, beginning of period			1,235,204	1,530,078
Other comprehensive income before reclassifications			(2,947,683)	468,628
Amounts reclassified from accumulated other comprehensive income			0	0
Other comprehensive incme			(2,947,683)	468,628
Balance, end of period	(1,712,479)	1,998,706	(1,712,479)	1,998,706
Unrealized Impairment Loss on Held to Maturity Security [Member]
Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Changes in the Components of AOCI [Line Items]
Balance, beginning of period			(330,623)	(330,623)
Other comprehensive income before reclassifications			0	0
Amounts reclassified from accumulated other comprehensive income			0	0
Other comprehensive incme			0	0
Balance, end of period	(330,673)	(330,623)	(330,673)	(330,623)
Unfunded Pension Liability [Member]
Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Changes in the Components of AOCI [Line Items]
Balance, beginning of period			(100,288)	(107,993)
Other comprehensive income before reclassifications			77,844	5,777
Amounts reclassified from accumulated other comprehensive income			0	0
Other comprehensive incme			77,844	5,777
Balance, end of period	$ (22,444)	$ (162,216)	$ (22,444)	$ (162,216)

XML

Note 4 - Investment Securities (Details) - Held-to-maturity Securities (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 151,073,866	$ 116,528,844
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	(500,944)	(500,944)
Carrying Value	150,572,922	116,027,900
Gross Unrealized Gains	3,219,358	5,825,079
Gross Unrealized Losses	(1,605,999)	(13,616)
Fair Value	152,186,281	121,839,363
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	1,537,229	3,073,957
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	0	0
Carrying Value	1,537,229	3,073,957
Gross Unrealized Gains	14,416	33,213
Gross Unrealized Losses	0	0
Fair Value	1,551,645	3,107,170
Residential collateralized mortgage obligations- GSE [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	15,701,290	19,660,625
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	0	0
Carrying Value	15,701,290	19,660,625
Gross Unrealized Gains	578,336	1,021,556
Gross Unrealized Losses	0	0
Fair Value	16,279,626	20,682,181
Residential collateralized mortgage obligations- non GSE [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	11,234,867	13,387,974
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	0	0
Carrying Value	11,234,867	13,387,974
Gross Unrealized Gains	329,988	796,892
Gross Unrealized Losses	(1,637)	(289)
Fair Value	11,563,218	14,184,577
Residential mortgage backed Securities- GSE [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	67,487,280	19,950,190
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	0	0
Carrying Value	67,487,280	19,950,190
Gross Unrealized Gains	869,664	849,040
Gross Unrealized Losses	(268,803)	(944)
Fair Value	68,088,141	20,798,286
Obligations of State and Political subdivisions [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	50,960,864	42,815,706
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	0	0
Carrying Value	50,960,864	42,815,706
Gross Unrealized Gains	1,405,225	3,039,935
Gross Unrealized Losses	(1,327,248)	0
Fair Value	51,038,841	45,855,641
Trust Preferred Debt Securities Pooled [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	656,662	656,662
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	(500,944)	(500,944)
Carrying Value	155,718	155,718
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(8,311)	(9,638)
Fair Value	147,407	146,080
Corporate Debt Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	3,495,674	16,983,730
Other than Temporary Impairment Recognized in Accumlated Other Comprehensive Income	0	0
Carrying Value	3,495,674	16,983,730
Gross Unrealized Gains	21,729	84,443
Gross Unrealized Losses	0	(2,745)
Fair Value	$ 3,517,403	$ 17,065,428

XML

Note 6 - Share Based Compensation (Details) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended		15 Months Ended
	Jan. 31, 2013	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)		440,701		440,701		440,701
Option Expiration		10 years		10 years		10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)		395,763		395,763		395,763
Adjusted Share Information	5.00%			5.00%
Allocated Share-based Compensation Expense		$ 25,381	$ 25,187	$ 75,949	$ 75,661
Unrecognized Compensation Cost Related To Nonvested Stock Option Based Compensation Arrangements				150,270
Recognition of Nonvested Stock Options		3 years		3 years		3 years
Employee Benefits and Share-based Compensation		87,132		326,085	262,933	87,289
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 673,803		$ 673,803		$ 673,803
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				3 years

XML

Note 10 - Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

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

		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
September 30, 2013:
Securities available for sale:
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	20,101,450	$	1,525,215	$	-	$	21,626,665
Residential collateralized mortgage obligations- GSE		-		4,196,441		-		4,196,441
Residential collateralized mortgage obligations – non GSE		-		3,052,663		-		3,052,663
Residential mortgage backed securities –GSE		-		33,338,768		-		33,338,768
Obligations of State and Political subdivisions		-		19,745,599		-		19,745,599
Trust preferred debt securities – single issuer		-		2,038,200		-		2,038,200
Corporate debt securities		-		16,520,775		-		16,520,775
Restricted stock		-		1,013,000		-		1,013,000
Mutual fund		-		25,000		-		25,000

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
December 31, 2012:
Securities available for sale:
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	27,923,670	$	1,571,865	$	-	$	29,495,535
Residential collateralized mortgage obligations- GSE		-		6,632,665		-		6,632,665
Residential collateralized mortgage obligations - non GSE		-		3,924,182		-		3,924,182
Residential mortgage backed securities – GSE		-		26,489,335		-		26,489,335
Obligations of State and Political subdivisions		-		20,682,301		-		20,682,301
Trust preferred debt securities – single issuer		-		1,998,366		-		1,998,366
Corporate debt securities		-		18,100,281		-		18,100,281
Restricted stock		-		2,493,300		-		2,493,300
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
September 30, 2013:
Impaired loans		-		-	$	8,410,298	$	8,410,298
Other real estate owned		-		-		571,950		571,950
December 31, 2012:
Impaired loans		-		-	$	4,794,369	$	4,794,369
Other real estate owned		-		-		6,568,781		6,568,781

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range of Adjustments
September 30, 2013
Impaired loans	$	8,410,298	Appraisal of collateral (1)	Appraisal adjustments (2)	5	-	50	%
Other Real Estate Owned	$	571,950	Appraisal of collateral (1)	Appraisal adjustments (2)	8	-	60	%
December 31, 2012
Impaired loans	$	4,794,369	Appraisal of collateral (1)	Appraisal adjustments (2)	5	-	50	%
Other Real Estate Owned	$	6,568,781	Appraisal of collateral (1)	Appraisal adjustments (2)	8	-	60	%

Fair Value, by Balance Sheet Grouping [Table Text Block]

				September 30, 2013
	Carrying Value			Level 1 Inputs			Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	123,815,138		$	123,815,138			-		$	-	$	123,815,138
Securities available for sale		101,557,211			20,101,450			81,455,761			-		101,557,211
Securities held to maturity		150,572,922			-			152,186,281			-		152,186,281
Loans held for sale		14,535,681			14,535,681			-			-		14,535,681
Loans		355,729,293			-			-			361,388,000		361,388,000
Accrued interest receivable		2,143,535			2,143,535			-			-		2,143,535
Deposits		(686,943,954	)		-			(688,159,000	)		-		(688,159,000	)
Borrowings		(10,000,000	)		-			(11,252,000	)		-		(11,252,000	)
Redeemable subordinated debentures		(18,557,000	)		-			(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(787,927	)		(787,927	)		-			-		(787,927	)

				December 31, 2012
	Carrying Value			Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	14,044,921		$	14,044,921		-		$	-	$	14,044,921
Securities available for sale		109,840,965			27,923,670		81,917,295			-		109,840,965
Securities held to maturity		116,027,900			-		121,839,363			-		121,839,363
Loans held for sale		35,960,262			-		35,960,262			-		35,960,262
Loans		514,662,898			-		-			515,577,788		515,577,788
Accrued interest receivable		2,872,099			-		2,872,099			-		2,872,099
Deposits		(707,689,475	)		-		(709,678,000	)		-		(709,678,000	)
Borrowings		(42,400,000	)		-		(43,906,000	)		-		(43,906,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(1,057,779	)		-		(1,057,779	)		-		(1,057,779	)

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (USD $)	Common Stock [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
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	442,918		13,843		456,761
Share-based compensation	73,965				73,965
Treasury stock purchased			(80,344)		(80,344)
Net income		3,819,759			3,819,759
Other comprehensive income (loss)				474,405	474,405
Balance at Sep. 30, 2012	41,364,812	16,890,365	(76,723)	1,565,867	59,744,321
Balance at Dec. 31, 2012	48,716,032	15,594,293	(61,086)	804,293	65,053,532
Exercise of stock options and issuance of vested shares under employee benefit programs	603,342				603,342
Share-based compensation	75,948				75,948
Treasury stock purchased			(116,451)		(116,451)
Net income		4,405,588			4,405,588
Other comprehensive income (loss)				(2,869,839)	(2,869,839)
Balance at Sep. 30, 2013	$ 49,395,322	$ 19,999,881	$ (177,537)	$ (2,065,546)	$ 67,152,120

XML

Note 1 - Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

(1)  Summary of Significant Accounting Policies

The accompanying unaudited Consolidated Financial Statements include 1st 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, LLC, 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, 2012, filed with the SEC on March 22, 2013.

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 September 30, 2013 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

Note 4 - Investment Securities

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

(4)      Investment Securities

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

September 30, 2013:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	22,382,475	$	33,857	$	(789,667	)	$	21,626,665
Residential collateralized mortgage obligations – GSE		4,031,094		165,347		-			4,196,441
Residential collateralized mortgage obligations – non-GSE		3,001,533		70,080		(18,950	)		3,052,663
Residential mortgage backed securities – GSE		32,795,415		1,002,198		(458,845	)		33,338,768
Obligations of State and Political subdivisions		22,231,752		174,056		(2,660,209	)		19,745,599
Trust preferred debt securities – single issuer		2,468,135		-		(429,935	)		2,038,200
Corporate Debt Securities		16,267,927		280,241		(27,393	)		16,520,775
Restricted stock		1,013,100		-		-			1,013,100
Mutual fund		25,000		-		-			25,000
	$	104,216,431	$	1,725,779	$	(4,384,999	)	$	101,557,211

September 30, 2013:	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	$	1,537,229	$	-		$	1,537,229	$	14,416	$	-		$	1,551,645
Residential collateralized Mortgage obligations – GSE		15,701,290		-			15,701,290		578,336		-			16,279,626
Residential collateralized Mortgage obligations – non-GSE		11,234,867		-			11,234,867		329,988		(1,637	)		11,563,218
Residential mortgage backed securities – GSE		67,487,280		-			67,487,280		869,664		(268,803	)		68,088,141
Obligations of State and political subdivisions		50,960,864		-			50,960,864		1,405,225		(1,327,248	)		51,038,841
Trust preferred debt securities - pooled		656,662		(500,944	)		155,718		-		(8,311	)		147,407
Corporate debt securities		3,495,674		-			3,495,674		21,729		-			3,517,403
	$	151,073,866	$	(500,944	)	$	150,572,922	$	3,219,358	$	(1,605,999	)	$	152,186,281

December 31, 2012:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale-
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	29,384,595	$	137,847	$	(26,907	)	$	29,495,535
Residential collateralized mortgage obligations – GSE		6,349,310		283,355		-			6,632,665
Residential collateralized mortgage obligations – non-GSE		3,811,933		119,323		(7,074	)		3,924,182
Residential mortgage backed securities – GSE		24,912,948		1,576,387		-			26,489,335
Obligations of State and Political subdivisions		20,793,222		375,416		(486,337	)		20,682,301
Trust preferred debt securities – single issuer		2,466,009		-		(467,643	)		1,998,366
Corporate Debt Securities		17,797,681		325,731		(23,131	)		18,100,281
Restricted stock		2,493,300		-		-			2,493,300
Mutual fund		25,000		-		-			25,000
	$	108,033,998	$	2,818,059	$	(1,011,092	)	$	109,840,965

December 31, 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-
Obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	3,073,957	$	-		$	3,073,957	$	33,213	$	-		$	3,107,170
Residential collateralized mortgage obligations – GSE		19,660,625		-			19,660,625		1,021,556		-			20,682,181
Residential collateralized mortgage obligations - non – GSE		13,387,974		-			13,387,974		796,892		(289	)		14,184,577
Residential mortgage backed securities – GSE		19,950,190		-			19,950,190		849,040		(944	)		20,798,286
Obligations of State and Political subdivisions		42,815,706		-			42,815,706		3,039,935		-			45,855,641
Trust preferred debt securities – pooled		656,662		(500,944	)		155,718		-		(9,638	)		146,080
Corporate debt securities		16,983,730		-			16,983,730		84,443		(2,745	)		17,065,428
	$	116,528,844	$	(500,944	)	$	116,027,900	$	5,825,079	$	(13,616	)	$	121,839,363

Restricted stock at September 30, 2013 and December 31, 2012 consisted of $998,100 and $2,478,300, 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 September 30, 2013, 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	$	4,998,329	$	5,004,300
Residential mortgage backed securities - GSE		19,397		20,034
Obligations of State and Political subdivisions		110,000		110,343
Corporate Debt Securities		510,694		512,930
Restricted Stock		1,013,100		1,013,100
Mutual Fund		25,000		25,000
	$	6,676,520	$	6,685,707
Due after one year through five years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	6,517,816	$	6,520,515
Residential mortgage backed securities - GSE		4,431,874		4,370,765
Obligations of State and Political subdivisions		374,281		375,833
Corporate Debt Securities		14,671,579		14,942,705
	$	25,995,550	$	26,209,818
Due after five years through ten years
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	10,866,330	$	10,101,850
Residential collateralized mortgage obligations - GSE		134,797		144,639
Residential mortgage backed securities - GSE		11,172,951		11,152,731
Obligations of State and Political Subdivisions		3,167,509		3,227,127
Corporate Debt Securities		-		-
	$	25,341,587	$	24,626,347
Due after ten years
Residential collateralized mortgage obligations - GSE		3,896,296		4,051,802
Residential collateralized mortgage obligations - non GSE		3,001,534		3,052,663
Residential mortgage backed securities - GSE		17,171,193		17,795,238
Obligations of State and Political subdivisions		18,579,962		16,032,296
Trust Preferred Debt Securities - single issuer		2,468,135		2,038,200
Corporate Debt Securities		1,085,654		1,065,140
	$	46,202,774	$	44,035,339
Total	$	104,216,431	$	101,557,211
Held to maturity-
Due in one year or less
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	1,537,229	$	1,551,645
Obligations of State and Political subdivisions		1,261,544		1,273,221
Corporate Debt Securities		3,495,674		3,517,403
	$	6,294,447	$	6,342,269
Due after one year through five years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	-	$	-
Obligations of State and Political subdivisions		8,937,728		9,243,927
Corporate Debt Securities		-		-
	$	8,937,728	$	9,243,927
Due after five years through ten years
Residential collateralized mortgage obligations - GSE		85,440		86,388
Residential collateralized mortgage obligations – non-GSE		954,327		952,869
Residential mortgage backed securities – GSE		21,772,966		21,945,961
Obligations of State and Political subdivisions		20,751,372		21,459,490
	$	43,564,105	$	44,444,708
Due after ten years
Residential collateralized mortgage obligations - GSE	$	15,615,850	$	16,193,239
Residential collateralized mortgage obligations – non-GSE		10,280,540		10,610,348
Residential mortgage backed securities - GSE		45,714,314		46,142,180
Obligations of State and Political subdivisions		20,010,221		19,062,203
Trust Preferred Debt Securities - Pooled		656,662		147,407
	$	92,277,587	$	92,155,377
Total	$	151,073,866	$	152,186,281

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 September 30, 2013 and December 31, 2012 are as follows:

September 30, 2013			Less than 12 months					12 months or longer					Total
	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of  U.S. Government sponsored corporations and agencies		3	$	11,627,065	$	(789,667	)	$	-	$	-		$	11,627,065	$	(789,667	)
Residential collateralized mortgage obligations – non-GSE		3		952,689		(1,637	)		1,094,497		(18,950	)		2,047,186		(20,587	)
Residential mortgage backed securities - GSE		28		30,747,798		(727,648	)		-		-			30,747,798		(727,648	)
Obligations of State and Political Subdivisions		77		24,976,580		(3,987,457	)		-		-			24,976,580		(3,987,457	)
Trust preferred debt securities – single issuer		4		-		-			2,038,200		(429,935	)		2,038,200		(429,935	)
Trust preferred debt securities – pooled		1		-		-			147,407		(509,255	)		147,407		(509,255	)
Corporate Debt Securities		3		2,823,855		(27,393	)		-		-			2,823,855		(27,393	)
Total temporarily impaired securities		119	$	71,127,987	$	(5,533,802	)	$	3,280,104	$	(958,140	)	$	74,408,091	$	(6,491,942	)

December 31, 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
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (GSE) and agencies		1	$	9,842,200	$	(26,907	)	$	-	$	-		$	9,842,200	$	(26,907	)
Residential collateralized mortgage obligations – non-GSE		3		1,960,237		(4,516	)		156,505		(2,847	)		2,116,742		(7,363	)
Residential mortgage backed securities GSE		2		3,989,675		(944	)		-		-			3,989,675		(944	)
Obligations of State and Political Subdivisions		37		12,794,007		(486,337	)		-		-			12,794,007		(486,337	)
Trust preferred debt securities – Single issuer		4		-		-			1,998,366		(467,643	)		1,998,366		(467,643	)
Trust preferred debt securities – Pooled		1		-		-			146,080		(510,582	)		146,080		(510,582	)
Corporate debt securities		5		3,176,328		(25,876	)		-		-			3,176,328		(25,876	)
Total temporarily impaired securities		53	$	31,762,447	$	(544,580	)	$	2,300,951	$	(981,072	)	$	34,063,398	$	(1,525,652	)

U.S. Treasury securities and obligations of U.S. Government sponsored corporations and agencies:  The unrealized losses on investments in these securities were caused by interest rate increases.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.  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.

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.  None of the issuers have defaulted on interest payments. 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 the projected cash flows where that present value of cash flows was less than the amortized cost basis of the security.  The present value of cash flows 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 (“OTTI”).  As of September 30, 2013, our evaluation was as follows:

a.  We obtained the PreTSL XXV Depository Institutions Issuer List as of September 30, 2013 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: (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 26 year stated maturity of this pooled security even though the individual institutions are currently performing according to terms.

e.  This September 30, 2013 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 September 30, 2013.

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 September 30, 2013:

										Excess Subordination (2)
Security	Class	Amortized Cost	Fair Value	Unrealized (Loss) and OTTI	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	Amount	% of Current Performing Collateral
PreTSL XXV	B-1	$656,662	$147,407	$(509,255)	66.5%	10.9%	22.6%	14.0%	C/ NR	$108,000	21.0%

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 Company regularly reviews the composition of the investment securities portfolio, taking into account market risks, the current and expected interest rate environment, liquidity needs, and its overall interest rate risk profile and strategic goals.

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 nine months ended September 30, 2013		Three and nine months ended September 30, 2012
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

XML

Note 2 - Entry into a Material Definitive Agreement

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

(2)  Entry into a Material Definitive Agreement

On August 14, 2013, the Company and the Bank entered into an Agreement and Plan of Merger, which was subsequently amended on September 19, 2013 by the First Amendment to Agreement and Plan of Merger (the Agreement and Plan of Merger and the First Amendment to Agreement and Plan of Merger are hereinafter referred to as the “Merger Agreement”), with Rumson-Fair Haven Bank & Trust Company (“RFHB”), providing for the merger of RFHB with and into the Bank, with the Bank as the surviving entity (the “Merger”).

Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of common stock of RFHB will be converted into the right to receive, at the election of the holder of such common stock of RFHB, (i) cash consideration of $7.50 or (ii) 0.7772 of a share of common stock of the Company, or a combination of both, subject to the payment of cash in lieu of fractional shares and customary proration and allocation procedures, if necessary, to assure that 60% of the outstanding shares of common stock of RFHB are exchanged for cash and 40% of the outstanding shares of common stock of RFHB are exchanged for shares of common stock of the Company. In addition, each outstanding option to acquire shares of common stock of RFHB will be terminated and converted to the right to receive cash and equal to the product of (i) the aggregate number of shares of common stock of RFHB underlying such outstanding option multiplied by (ii) the excess, if any, of $7.50 over the per share exercise price of such outstanding option. Stock awards will be converted into shares of common stock of the Company. Each outstanding share of common stock of the Company will remain outstanding and unaffected by the Merger.

Under New Jersey banking law, shareholders of RFHB can elect to dissent from the Merger. Any shareholder electing to dissent shall be entitled to a cash payment for such shares only to the extent permitted by and in accordance with New Jersey Banking law.

The Merger Agreement contains typical representations, warranties, and covenants of the Company, the Bank and RFHB, including, among others, covenants that require, during the period between the execution of the Merger Agreement and consummation of the Merger, (i) RFHB to use commercially reasonable efforts to conduct its business in the ordinary course and consistent with past banking practice and prudent banking practice; and (ii) RFHB to not, subject to certain exceptions generally related to the Board’s evaluation and exercise of its fiduciary duties, (a) solicit proposals relating to alternative business combination transactions or (b) enter into discussions or negotiations or provide confidential information in connection with any proposals for alternative business combination transactions.

The Merger Agreement provides certain termination rights for the Company, the Bank and RFHB, and further provides that upon termination of the Merger Agreement under certain circumstances, RFHB will be obligated to pay the Company a termination fee of $1,000,000 and out of pocket expenses incurred by the Company and the Bank in connection with the Merger of up to $275,000; provided, however, that the sum of the termination fee and such out-of-pocket expenses shall not exceed $1,275,000.

Completion of the Merger is subject to customary closing conditions, including (i) receipt of the requisite approval of the shareholders of RFHB, (ii) receipt of regulatory approvals, (iii) the absence of any law or order prohibiting the closing and (iv) and the effectiveness of the registration statement to be filed by the Company with respect to the common stock to be issued in the Merger. In addition, each party’s obligation to consummate the merger is subject to certain other conditions, including the accuracy of the representations and warranties of the other party and compliance of the other party with its covenants in all material respects.

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Credit Losses on Financing Receivables Activity (USD $)	3 Months Ended						9 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2013	Sep. 30, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	$ 6,268,940	$ 6,023,282	$ 7,151,212	$ 6,257,420	$ 5,881,942	$ 5,534,450	$ 7,151,212	$ 5,534,450
Provision for loan losses	539,998	236,667	0	499,998	549,998	599,998	776,664	1,649,994
Loans charged off	(2,068)	0	(1,136,825)	(64,375)	(175,893)	(261,336)
Recoveries of loans charged off	13,310	8,991	8,895	0	1,373	8,830
Balance	6,820,180	6,268,940	6,023,282	6,693,043	6,257,420	5,881,942	6,820,180	6,693,043
Construction [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	1,212,578	1,210,289	1,990,292	1,647,605	1,242,949	1,054,695	1,990,292	1,054,695
Provision for loan losses	(4,555)	1,872	(218,010)	208,440	429,656	217,501
Loans charged off	0	0	(561,993)	0	(25,000)	(32,650)
Recoveries of loans charged off	0	417	0	0	0	3,403
Balance	1,208,023	1,212,578	1,210,289	1,856,045	1,647,605	1,242,949	1,208,023	1,856,045
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	985,919	817,181	972,789	903,401	810,999	934,642	972,789	934,642
Provision for loan losses	34,446	160,164	(18,319)	33,129	111,410	15,757
Loans charged off	(2,068)	0	(139,289)	0	(20,199)	(144,827)
Recoveries of loans charged off	13,310	8,574	2,000	0	1,191	5,427
Balance	1,031,607	985,919	817,181	936,530	903,401	810,999	1,031,607	936,530
Commercial Real Estate Other Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	2,451,856	2,130,197	2,262,221	2,304,010	1,838,882	1,597,702	2,262,221	1,597,702
Provision for loan losses	612,392	321,659	245,769	86,278	464,946	241,180
Loans charged off	0	0	(384,688)	(64,375)	0	0
Recoveries of loans charged off	0	0	6,895	0	182	0
Balance	3,064,248	2,451,856	2,130,197	2,325,913	2,304,010	1,838,882	3,064,248	2,325,913
Mortgage Warehouse Lines [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	928,699	990,738	1,420,638	1,153,883	1,006,605	1,122,056	1,420,638	1,122,056
Provision for loan losses	(256,028)	(62,039)	(429,900)	102,771	147,278	(115,451)
Loans charged off	0	0	0	0	0	0
Recoveries of loans charged off	0	0	0	0	0	0
Balance	672,671	928,699	990,738	1,256,654	1,153,883	1,006,605	672,671	1,256,654
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	92,733	112,365	112,103	122,510	239,573	91,076	112,103	91,076
Provision for loan losses	49,093	(19,632)	262	(2,812)	13,631	148,497
Loans charged off	0	0	0	0	(130,694)	(77,858)
Recoveries of loans charged off	0	0	0	0	0	0
Balance	141,826	92,733	112,365	119,698	122,510	239,573	141,826	119,698
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	99,890	102,334	102,583	123,213	131,570	187,352	102,583	187,352
Provision for loan losses	10,178	(2,444)	50,606	(9,942)	(8,357)	22,076
Loans charged off	0	0	(50,855)	0	0	(6,001)
Recoveries of loans charged off	0	0	0	0	0	0
Balance	110,068	99,890	102,334	113,271	123,213	131,570	110,068	113,271
Other [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	2,104	2,059	2,271	2,798	3,179	2,377	2,271	2,377
Provision for loan losses	(53)	45	(212)	(27)	(381)	6,803
Loans charged off	0	0	0	0	0	0
Recoveries of loans charged off	0	0	0	0	0	0
Balance	2,051	2,104	2,059	2,771	2,798	3,179	2,051	2,771
Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance	495,161	658,119	288,315	0	608,185	544,550	288,315	544,550
Provision for loan losses	94,525	(162,958)	369,804	82,161	(608,185)	63,635
Loans charged off	0	0	0	0	0	0
Recoveries of loans charged off	0	0	0	0	0	0
Balance	$ 589,686	$ 495,161	$ 658,119	$ 82,161	$ 0	$ 608,185	$ 589,686	$ 82,161

XML

Note 3 - Net Income Per Common Share (Details) - Earnings Per Share, Basic and Diluted (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share, Basic and Diluted [Abstract]
Net income (in Dollars)	$ 1,523,238	$ 1,354,919	$ 4,405,588	$ 3,819,759
Weighted-average shares, basic	5,991,480	5,378,854	5,960,294	5,360,395
Per-share amount, basic (in Dollars per share)	$ 0.25	$ 0.25	$ 0.74	$ 0.71
Stock options and unvested stock awards	155,182	130,019	128,539	96,107
Net income (in Dollars)	$ 1,523,238	$ 1,354,919	$ 4,405,588	$ 3,819,759
Weighted-average shares, diluted	6,146,662	5,508,873	6,088,833	5,456,502
Per-share amount, diluted (in Dollars per share)	$ 0.25	$ 0.25	$ 0.72	$ 0.70

XML

Note 4 - Investment Securities (Details) - Investments by Contractual Maturity Date (USD $)	Sep. 30, 2013	Dec. 31, 2012
Due in one year or less
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	$ 6,676,520
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	6,685,707
Due after one year through five years
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	25,995,550
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	26,209,818
Due after five years through ten years
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	25,341,587
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	24,626,347
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	46,202,774
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	44,035,339
Total	104,216,431	108,033,998
Total	101,557,211	109,840,965
Due in one year or less
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Net Carrying Amount	6,294,447
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Fair Value	6,342,269
Due after one year through five years
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Net Carrying Amount	8,937,728
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Fair Value	9,243,927
Due after five years through ten years
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Net Carrying Amount	43,564,105
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Fair Value	44,444,708
Due after ten years
Held-to-maturity securities, Debt Maturities, After Ten Years, Net Carrying Amount	92,277,587
Held-to-maturity securities, Debt Maturities, After Ten Years, Fair Value	92,155,377
Total	151,073,866	116,528,844
Total	152,186,281	121,839,363
Restricted Stock [Member]
Due in one year or less
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	1,013,100
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	1,013,100
Due after ten years
Total	1,013,100	2,493,300
Total	1,013,100	2,493,300
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member]
Due in one year or less
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	4,998,329
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	5,004,300
Due after one year through five years
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	6,517,816
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	6,520,515
Due after five years through ten years
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	10,866,330
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	10,101,850
Due after ten years
Total	22,382,475	29,384,595
Total	21,626,665	29,495,535
Due in one year or less
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Net Carrying Amount	1,537,229
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Fair Value	1,551,645
Due after one year through five years
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Net Carrying Amount	0
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Fair Value	0
Due after ten years
Total	1,537,229	3,073,957
Total	1,551,645	3,107,170
Residential mortgage backed Securities- GSE [Member]
Due in one year or less
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	19,397
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	20,034
Due after one year through five years
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	4,431,874
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	4,370,765
Due after five years through ten years
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	11,172,951
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	11,152,731
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	17,171,193
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	17,795,238
Total	32,795,415	24,912,948
Total	33,338,768	26,489,335
Due after five years through ten years
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Net Carrying Amount	21,772,966
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Fair Value	21,945,961
Due after ten years
Held-to-maturity securities, Debt Maturities, After Ten Years, Net Carrying Amount	45,714,314
Held-to-maturity securities, Debt Maturities, After Ten Years, Fair Value	46,142,180
Total	67,487,280	19,950,190
Total	68,088,141	20,798,286
Obligations of State and Political subdivisions [Member]
Due in one year or less
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	110,000
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	110,343
Due after one year through five years
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	374,281
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	375,833
Due after five years through ten years
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	3,167,509
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	3,227,127
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	18,579,962
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	16,032,296
Total	22,231,752	20,793,222
Total	19,745,599	20,682,301
Due in one year or less
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Net Carrying Amount	1,261,544
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Fair Value	1,273,221
Due after one year through five years
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Net Carrying Amount	8,937,728
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Fair Value	9,243,927
Due after five years through ten years
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Net Carrying Amount	20,751,372
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Fair Value	21,459,490
Due after ten years
Held-to-maturity securities, Debt Maturities, After Ten Years, Net Carrying Amount	20,010,221
Held-to-maturity securities, Debt Maturities, After Ten Years, Fair Value	19,062,203
Total	50,960,864	42,815,706
Total	51,038,841	45,855,641
Corporate Debt Securities [Member]
Due in one year or less
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	510,694
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	512,930
Due after one year through five years
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	14,671,579
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	14,942,705
Due after five years through ten years
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	0
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	0
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	1,085,654
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	1,065,140
Total	16,267,927	17,797,681
Total	16,520,775	18,100,281
Due in one year or less
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Net Carrying Amount	3,495,674
Held-to-maturity securities, Debt Maturities, Next Twelve Months, Fair Value	3,517,403
Due after one year through five years
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Net Carrying Amount	0
Held-to-maturity securities, Debt Maturities, Year Two Through Five, Fair Value	0
Due after ten years
Total	3,495,674	16,983,730
Total	3,517,403	17,065,428
Mutual Fund [Member]
Due in one year or less
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
Residential collateralized mortgage obligations- GSE [Member]
Due after five years through ten years
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	134,797
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	144,639
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	3,896,296
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	4,051,802
Total	4,031,094	6,349,310
Total	4,196,441	6,632,665
Due after five years through ten years
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Net Carrying Amount	85,440
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Fair Value	86,388
Due after ten years
Held-to-maturity securities, Debt Maturities, After Ten Years, Net Carrying Amount	15,615,850
Held-to-maturity securities, Debt Maturities, After Ten Years, Fair Value	16,193,239
Total	15,701,290	19,660,625
Total	16,279,626	20,682,181
Residential collateralized mortgage obligations- non GSE [Member]
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	3,001,534
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	3,052,663
Total	3,001,533	3,811,933
Total	3,052,663	3,924,182
Due after five years through ten years
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Net Carrying Amount	954,327
Held-to-maturity securities, Debt Maturities, Year Six Through Ten, Fair Value	952,869
Due after ten years
Held-to-maturity securities, Debt Maturities, After Ten Years, Net Carrying Amount	10,280,540
Held-to-maturity securities, Debt Maturities, After Ten Years, Fair Value	10,610,348
Total	11,234,867	13,387,974
Total	11,563,218	14,184,577
Trust Preferred Debt Securities [Member]
Due after ten years
Available-for-sale Securities, Debt Maturities, After Ten Years, Amortized Cost Basis	2,468,135
Available-for-sale Securities, Debt Maturities, After Ten Years, Fair Value	2,038,200
Total	2,468,135	2,466,009
Total	2,038,200	1,998,366
Trust Preferred Debt Securities Pooled [Member]
Due after ten years
Held-to-maturity securities, Debt Maturities, After Ten Years, Net Carrying Amount	656,662
Held-to-maturity securities, Debt Maturities, After Ten Years, Fair Value	147,407
Total	656,662	656,662
Total	$ 147,407	$ 146,080

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Past Due Financing Recievables (USD $)	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	$ 1,006,455	$ 572,423
60-89 Days	970,123	105,167
Greater than 90 Days	7,748,140	5,377,348
Total Past Due	9,724,718	6,054,938
Current	352,824,755	515,759,172
Total Loans Receivable	362,549,473	521,814,110
Recorded Investment >90 Days Accruing	94,898	84,948
Nonaccrual Loans	7,653,241	5,878,554
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	0
60-89 Days	0	0
Greater than 90 Days	995,830	1,581,031
Total Past Due	995,830	1,581,031
Current	42,237,906	54,110,362
Total Loans Receivable	43,233,736	55,691,393
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	995,830	1,581,031
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	130,831	202,451
60-89 Days	0	70,192
Greater than 90 Days	439,887	518,912
Total Past Due	570,718	791,555
Current	65,153,689	57,073,881
Total Loans Receivable	65,724,407	57,865,436
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	439,887	629,821
Commercial Real Estate Other Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	875,624	0
60-89 Days	0	0
Greater than 90 Days	6,052,984	3,137,553
Total Past Due	6,928,608	3,137,553
Current	89,548,110	99,275,141
Total Loans Receivable	96,476,718	102,412,694
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	6,052,982	3,478,605
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	134,534,202	284,127,530
Total Loans Receivable	134,534,202	284,127,530
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	0	320,729
60-89 Days	970,123	34,975
Greater than 90 Days	164,541	0
Total Past Due	1,134,664	355,704
Current	10,521,526	10,541,603
Total Loans Receivable	11,656,190	10,897,307
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	164,542	134,193
Loans to Individuals [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days	0	49,243
60-89 Days	0	0
Greater than 90 Days	94,898	139,852
Total Past Due	94,898	189,095
Current	9,752,485	9,454,290
Total Loans Receivable	9,847,383	9,643,385
Recorded Investment >90 Days Accruing	94,898	84,948
Nonaccrual Loans	0	0
Consumer Other Financing Receivable [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	170,940	189,279
Total Loans Receivable	170,940	189,279
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	905,897	987,086
Total Loans Receivable	905,897	987,086
Recorded Investment >90 Days Accruing	0	0
Nonaccrual Loans	$ 0	$ 0

XML

Note 10 - Fair Value Disclosures (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Note 10 - Fair Value Disclosures (Details) [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 11,527,510	$ 7,890,200	$ 5,613,323
Impaired Financing Receivable, Related Allowance	1,711,659	1,292,063	657,907
Loans With Fair Value Measurement [Member]
Note 10 - Fair Value Disclosures (Details) [Line Items]
Impaired Financing Receivable, Recorded Investment	10,121,957	6,086,432
Impaired Financing Receivable, Related Allowance	$ 1,711,659	$ 1,292,063

XML

Note 6 - Share Based Compensation (Details) - Fair Value Inputs, Assets, Quantitative Information (USD $)	9 Months Ended
	Sep. 30, 2013
Fair Value Inputs, Assets, Quantitative Information [Abstract]
Fair value of options granted (in Dollars per share)	$ 2.69
Risk-free rate of return	0.81%
Expected option life in years	7 years
Expected volatility	30.82%
Expected dividends (1) (in Dollars)	$ 0	[1]

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

XML

Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Held to maturity, fair value (in Dollars)	$ 152,186,281	$ 121,839,363
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in Shares)	5,000,000	5,000,000
Preferred stock, shares issued (in Shares)	0	0
Common stock, par value (in Dollars per share)	$ 0	$ 0
Common stock, shares authorized (in Shares)	30,000,000	30,000,000
Common stock, shares issued (in Shares)	6,008,223	5,985,275
Common Stock, shares outstanding (in Shares)	5,988,867	5,977,924
Treasury stock shares (in Shares)	19,356	7,351

XML

Note 7 - Benefit Plans

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

(7)  Benefit Plans

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

The Company also provides retirement benefits to certain employees under a supplemental executive retirement plan.  The plan is unfunded and the Company accrues actuarially determined benefit costs over the estimated service period of the employees in the plan.  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 Bank’s plan for the three and nine months ended September 30, 2013 and 2012 were as follows:

	Three months ended September 30,					Nine months ended September 30,
	2013			2012		2013			2012
Service cost	$	30,539		$	61,823	$	244,796		$	185,469
Interest cost		22,229			50,073		178,179			150,219
Actuarial (gain) loss recognized		(29,893	)		5,300		(239,614	)		15,900
Prior service cost recognized		942			24,858		7,553			74,574
	$	23,817		$	142,054	$	190,914		$	426,162

XML

Consolidated Statements of Comprehensive Income (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
NET INCOME	$ 1,523,238	$ 1,354,919	$ 4,405,588	$ 3,819,759
Other comprehensive (loss) income, net of tax:
Unrealized holding gains (losses) on securities available for sale	(35,468)	430,698	(2,947,683)	468,628
Pension liability	37,960	1,925	77,844	5,777
Other comprehensive (loss) income	2,492	432,623	(2,869,839)	474,405
Comprehensive income	$ 1,525,730	$ 1,787,542	$ 1,535,749	$ 4,294,164

XML

Consolidated Balance Sheets (Unaudited) (USD $)	Sep. 30, 2013	Dec. 31, 2012
ASSETS
CASH AND DUE FROM BANKS	$ 123,803,713	$ 14,033,501
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS	11,425	11,420
Total cash and cash equivalents	123,815,138	14,044,921
INVESTMENT SECURITIES:
Available for sale, at fair value	101,557,211	109,840,965
Held to maturity (fair value of $152,186,281 and $121,839,363 at September 30, 2013, and December 31, 2012, respectively)	150,572,922	116,027,900
Total securities	252,130,133	225,868,865
LOANS HELD FOR SALE	14,535,681	35,960,262
LOANS	362,549,473	521,814,110
Less- Allowance for loan losses	(6,820,180)	(7,151,212)
Net loans	355,729,293	514,662,898
PREMISES AND EQUIPMENT, net	10,172,487	10,630,295
ACCRUED INTEREST RECEIVABLE	2,143,535	2,872,099
BANK-OWNED LIFE INSURANCE	15,374,712	15,026,506
OTHER REAL ESTATE OWNED	2,808,554	8,332,601
OTHER ASSETS	13,459,319	13,569,935
Total assets	790,168,852	840,968,382
LIABILITIES:
Non-interest bearing	147,179,144	152,334,759
Interest bearing	539,764,810	555,354,716
Total deposits	686,943,954	707,689,475
BORROWINGS	10,000,000	42,400,000
REDEEMABLE SUBORDINATED DEBENTURES	18,557,000	18,557,000
ACCRUED INTEREST PAYABLE	787,927	1,057,779
ACCRUED EXPENSES AND OTHER LIABILITIES	6,727,851	6,210,596
Total liabilities	723,016,732	775,914,850
COMMITMENTS 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; 6,008,223 and 5,985,275 shares issued and 5,988,867 and 5,977,924 shares outstanding as of September 30, 2013 and December 31, 2012 respectively	49,395,322	48,716,032
Retained earnings	19,999,881	15,594,293
Treasury Stock, at cost, 19,356 shares 7,351 shares at September 30, 2013 and December 31, 2012, respectively	(177,537)	(61,086)
Accumulated other comprehensive (loss) income	(2,065,546)	804,293
Total shareholders’ equity	67,152,120	65,053,532
Total liabilities and shareholders’ equity	$ 790,168,852	$ 840,968,382

XML

Note 10 - Fair Value Disclosures (Details) - Fair Value, Assets and Liabillities Measured on Recurring Basis (USD $)	Sep. 30, 2013	Dec. 31, 2012
Securities available for sale:
Securities Available for Sale	$ 101,557,211	$ 109,840,965
Restricted Stock [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Restricted Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	1,013,000	2,493,300
Restricted Stock [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Restricted Stock [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	1,013,000	2,493,300
Restricted Stock [Member]
Securities available for sale:
Securities Available for Sale	1,013,100	2,493,300
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	20,101,450	27,923,670
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	1,525,215	1,571,865
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	21,626,665	29,495,535
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member]
Securities available for sale:
Securities Available for Sale	21,626,665	29,495,535
Residential collateralized mortgage obligations- GSE [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Residential collateralized mortgage obligations- GSE [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	4,196,441	6,632,665
Residential collateralized mortgage obligations- GSE [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Residential collateralized mortgage obligations- GSE [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	4,196,441	6,632,665
Residential collateralized mortgage obligations- GSE [Member]
Securities available for sale:
Securities Available for Sale	4,196,441	6,632,665
Residential collateralized mortgage obligations- non GSE [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Residential collateralized mortgage obligations- non GSE [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	3,052,663	3,924,182
Residential collateralized mortgage obligations- non GSE [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Residential collateralized mortgage obligations- non GSE [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	3,052,663	3,924,182
Residential collateralized mortgage obligations- non GSE [Member]
Securities available for sale:
Securities Available for Sale	3,052,663	3,924,182
Residential mortgage backed Securities- GSE [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Residential mortgage backed Securities- GSE [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	33,338,768	26,489,335
Residential mortgage backed Securities- GSE [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Residential mortgage backed Securities- GSE [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	33,338,768	26,489,335
Residential mortgage backed Securities- GSE [Member]
Securities available for sale:
Securities Available for Sale	33,338,768	26,489,335
Obligations of State and Political subdivisions [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Obligations of State and Political subdivisions [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	19,745,599	20,682,301
Obligations of State and Political subdivisions [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Obligations of State and Political subdivisions [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	19,745,599	20,682,301
Obligations of State and Political subdivisions [Member]
Securities available for sale:
Securities Available for Sale	19,745,599	20,682,301
Trust Preferred Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Trust Preferred Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	2,038,200	1,998,366
Trust Preferred Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Trust Preferred Debt Securities [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	2,038,200	1,998,366
Trust Preferred Debt Securities [Member]
Securities available for sale:
Securities Available for Sale	2,038,200	1,998,366
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	16,520,775	18,100,281
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Corporate Debt Securities [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	16,520,775	18,100,281
Corporate Debt Securities [Member]
Securities available for sale:
Securities Available for Sale	16,520,775	18,100,281
Mutual fund [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Mutual fund [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	25,000	25,000
Mutual fund [Member] | Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Mutual fund [Member] | Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	25,000	25,000
Mutual fund [Member]
Securities available for sale:
Securities Available for Sale	25,000	25,000
Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Securities Available for Sale	20,101,450	27,923,670
Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Securities Available for Sale	81,455,761	81,917,295
Fair Value, Inputs, Level 3 [Member]
Securities available for sale:
Securities Available for Sale	0	0
Estimate of Fair Value Measurement [Member]
Securities available for sale:
Securities Available for Sale	$ 101,557,211	$ 109,840,965

XML

Note 4 - Investment Securities (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2009	Dec. 31, 2012
Investments, Debt and Equity Securities [Abstract]
Federal Home Loan Bank Stock	$ 998,100		$ 2,478,300
Atlantic Central Bankers Bank Stock	15,000
Other than Temporary Impairment Losses, Investments		864,727
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net		363,783
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Loss, before Tax, Including Portion Attributable to Noncontrolling Interest		$ 500,944
Expected Deferrals And Defaults, Basis Points Applied Annually	75
Expected Deferrals And Defaults, Percent Recovery	15.00%
Expected Deferrals And Defaults, Default Basis Points Rate	36

XML

Note 7 - Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

	Three months ended September 30,					Nine months ended September 30,
	2013			2012		2013			2012
Service cost	$	30,539		$	61,823	$	244,796		$	185,469
Interest cost		22,229			50,073		178,179			150,219
Actuarial (gain) loss recognized		(29,893	)		5,300		(239,614	)		15,900
Prior service cost recognized		942			24,858		7,553			74,574
	$	23,817		$	142,054	$	190,914		$	426,162

XML

Note 6 - Share Based Compensation (Details) - Share-based Compensation Activity (USD $)	9 Months Ended
	Sep. 30, 2013
Share-based Compensation Activity [Abstract]
Outstanding at January 1, 2013	221,894
Outstanding at January 1, 2013 (in Dollars per share)	$ 8.91
Granted	25,305
Granted (in Dollars per share)	$ 8.06
Exercised	0
Exercised (in Dollars per share)	$ 0
Forfeited	0
Forfeited (in Dollars per share)	$ 0
Expired	0
Expired (in Dollars per share)	$ 0
Outstanding at September 30, 2013	247,199
Outstanding at September 30, 2013 (in Dollars per share)	$ 8.81
Outstanding at September 30, 2013	5 years 219 days
Outstanding at September 30, 2013 (in Dollars)	$ 574,159
Exercisable at September 30, 2013	184,215
Exercisable at September 30, 2013 (in Dollars per share)	$ 9.42
Exercisable at September 30, 2013	4 years 255 days
Exercisable at September 30, 2013 (in Dollars)	$ 352,473

XML

Note 10 - Fair Value Disclosures (Details) - Carrying Values and Estimated Fair Values of Debt Instruments (USD $)	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 123,815,138	$ 14,044,921
Securities available for sale	101,557,211	109,840,965
Securities held to maturity	150,572,922	116,027,900
Securities held to maturity, Fair Value	152,186,281	121,839,363
Loans held for sale	14,535,681	35,960,262
Gross Loans	355,729,293	514,662,898
Accrued interest receivable	2,143,535	2,872,099
Deposits	(686,943,954)	(707,689,475)
Borrowings	(10,000,000)	(42,400,000)
Redeemable subordinated debentures	(18,557,000)	(18,557,000)
Accrued interest payable	(787,927)	(1,057,779)
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair Value	123,815,138	14,044,921
Securities available for sale	20,101,450	27,923,670
Securities held to maturity, Fair Value	0	0
Loans held for sale, Fair Value	14,535,681	0
Loans Receivable, Fair Value Disclosure	0	0
Accrued interest receivable, Fair Value	2,143,535	0
Deposits, Fair Value	0	0
Borrowings, Fair Value	0	0
Redeemable subordinated debentures, Fair Value	0	0
Accrued interest payable, Fair Value	(787,927)	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair Value	0	0
Securities available for sale	81,455,761	81,917,295
Securities held to maturity, Fair Value	152,186,281	121,839,363
Loans held for sale, Fair Value	0	35,960,262
Loans Receivable, Fair Value Disclosure	0	0
Accrued interest receivable, Fair Value	0	2,872,099
Deposits, Fair Value	(688,159,000)	(709,678,000)
Borrowings, Fair Value	(11,252,000)	(43,906,000)
Redeemable subordinated debentures, Fair Value	(18,557,000)	(18,557,000)
Accrued interest payable, Fair Value	0	(1,057,779)
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair Value	0	0
Securities available for sale	0	0
Securities held to maturity, Fair Value	0	0
Loans held for sale, Fair Value	0	0
Loans Receivable, Fair Value Disclosure	361,388,000	515,577,788
Accrued interest receivable, Fair Value	0	0
Deposits, Fair Value	0	0
Borrowings, Fair Value	0	0
Redeemable subordinated debentures, Fair Value	0	0
Accrued interest payable, Fair Value	0	0
Estimate of Fair Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, Fair Value	123,815,138	14,044,921
Securities available for sale	101,557,211	109,840,965
Securities held to maturity, Fair Value	152,186,281	121,839,363
Loans held for sale, Fair Value	14,535,681	35,960,262
Loans Receivable, Fair Value Disclosure	361,388,000	515,577,788
Accrued interest receivable, Fair Value	2,143,535	2,872,099
Deposits, Fair Value	(688,159,000)	(709,678,000)
Borrowings, Fair Value	(11,252,000)	(43,906,000)
Redeemable subordinated debentures, Fair Value	(18,557,000)	(18,557,000)
Accrued interest payable, Fair Value	$ (787,927)	$ (1,057,779)

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Financing Receivable Credit Quality Indicators Consumer (USD $)	Sep. 30, 2013	Dec. 31, 2012
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	$ 362,549,473	$ 521,814,110
Loans to Individuals [Member] | Performing Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	9,847,383	9,454,288
Loans to Individuals [Member] | Nonperforming Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	0	189,097
Loans to Individuals [Member]
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	9,847,383	9,643,385
Other [Member] | Performing Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	170,940	189,279
Other [Member] | Nonperforming Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	0	0
Other [Member]
Financing Receivable, Recorded Investment [Line Items]
Consumer Credit Exposure	$ 170,940	$ 189,279

XML

Note 4 - Investment Securities (Details) - Other Than Temporary Impairment, Credit Losses Recognized in Earnings (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Other Than Temporary Impairment, Credit Losses Recognized in Earnings [Abstract]
Balance at beginning of period	$ 364	$ 364	$ 364	$ 364
Balance at end of period	$ 364	$ 364	$ 364	$ 364

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) (USD $)	9 Months Ended
	Sep. 30, 2013
Receivables [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 they are both well secured and in the process of collection.
Financing Receivable, Modifications, Number of Contracts	8
Financing Receivable, Modifications, Recorded Investment (in Dollars)	$ 4,248,442

XML

Note 6 - Share Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(6)  Share-Based Compensation

As of September 30, 2013, Company’s stock-based incentive plans (the “Stock Plans”) authorized the issuance of an aggregate of 440,701 shares of common stock (as adjusted for subsequent 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.  The grant date fair value is calculated using the Black-Scholes option valuation model. As of September 30, 2013, there were 395,763 shares of common stock (as adjusted for the 5% stock dividend declared December 20, 2012 and paid January 31, 2013 to shareholders of record on January 14, 2013) available for future grants under the Stock Plans.

Share-based compensation expense related to options was $25,381 and $25,187 for the three months ended September 30, 2013 and 2012, respectively. Share-based compensation expense related to options was $75,949 and $75,661 for the nine months ended September 30, 2013 and 2012, respectively.

Transactions under the Stock Plans during the nine months ended September 30, 2013 (as adjusted to reflect the 5% stock dividend declared December 2012) are summarized as follows:

Stock Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		221,894	$	8.91
Granted		25,305		8.06
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2013		247,199	$	8.81		5.6	$	574,159
Exercisable at September 30, 2013		184,215	$	9.42		4.7	$	352,473

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the nine months ended September 30, 2013 are as follows:

Fair value of options granted	$	2.69
Risk-free rate of return		0.81	%
Expected option life in years		7
Expected volatility		30.82	%
Expected dividends (1)		-

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

As of September 30, 2013, there was approximately $150,270 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 nine months ended September 30, 2013 (as adjusted to reflect the 5% stock dividend declared in December 2012):

Non-vested shares	Number of Shares			Average Grant Date Fair Value
Non-vested at January 1, 2013		140,575		$	6.41
Granted		19,633			8.42
Vested		(49,178	)		8.97
Forfeited		-			-
Non-vested at September 30, 2013		111,030		$	5.63

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.

Share-based compensation expense related to stock grants was $87,132 and $87,289 for the three months ended September 30, 2013 and 2012, respectively, and $326,085 and $262,933 for the nine months ended September 30, 2013 and 2012, respectively.

As of September 30, 2013, there was approximately $673,803 of unrecognized compensation cost related to nonvested stock grants that will be recognized over the next three years.

XML

Note 4 - Investment Securities (Details) - Available-for-sale Securities (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 104,216,431	$ 108,033,998
Gross Unrealized Gains	1,725,779	2,818,059
Gross Unrealized Losses	(4,384,999)	(1,011,092)
Fair Value	101,557,211	109,840,965
Restricted Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,013,100	2,493,300
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	1,013,100	2,493,300
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	22,382,475	29,384,595
Gross Unrealized Gains	33,857	137,847
Gross Unrealized Losses	(789,667)	(26,907)
Fair Value	21,626,665	29,495,535
Residential collateralized mortgage obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	4,031,094	6,349,310
Gross Unrealized Gains	165,347	283,355
Gross Unrealized Losses	0	0
Fair Value	4,196,441	6,632,665
Residential collateralized mortgage obligations- non GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,001,533	3,811,933
Gross Unrealized Gains	70,080	119,323
Gross Unrealized Losses	(18,950)	(7,074)
Fair Value	3,052,663	3,924,182
Residential mortgage backed Securities- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	32,795,415	24,912,948
Gross Unrealized Gains	1,002,198	1,576,387
Gross Unrealized Losses	(458,845)	0
Fair Value	33,338,768	26,489,335
Obligations of State and Political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	22,231,752	20,793,222
Gross Unrealized Gains	174,056	375,416
Gross Unrealized Losses	(2,660,209)	(486,337)
Fair Value	19,745,599	20,682,301
Trust Preferred Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	2,468,135	2,466,009
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(429,935)	(467,643)
Fair Value	2,038,200	1,998,366
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	16,267,927	17,797,681
Gross Unrealized Gains	280,241	325,731
Gross Unrealized Losses	(27,393)	(23,131)
Fair Value	16,520,775	18,100,281
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

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Impaired Loans Receivables (USD $)	3 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 1,405,553	$ 616,865	$ 1,803,768
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	1,562,010	659,547	1,846,450
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	5,510,640	1,510,062	1,287,802
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	6,176	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	10,121,957	4,996,458	6,086,432
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	10,121,957	5,141,285	6,277,745
Impaired Financing Receivable, Related Allowance	1,711,659	657,907	1,292,063
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	6,750,728	4,329,077	3,832,106
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	65,221	11,667	45,037
Impaired Financing Receivable, Recorded Investment	11,527,510	5,613,323	7,890,200
Impaired Financing Receivable Unpaid Principal Balance	11,683,967	5,800,832	8,124,195
Impaired Financing Receivable Average Recorded Investment	12,261,368	5,839,139	5,119,908
Impaired Financing Receivable, Interest Income, Accrual Method	71,397	11,667	54,527
Construction [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,015,112	0	1,360,914
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	1,015,112	0	1,360,914
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	1,184,249	0	412,716
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	4,660	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	0	1,481,117
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	0	1,481,117
Impaired Financing Receivable, Related Allowance	0	0	569,579
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	0	123,426
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0
Commercial Business [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	225,899	561,961	387,950
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	382,356	604,643	430,632
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	157,334	585,257	474,839
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	1,516	0	9,490
Impaired Financing Receivable, with Related Allowance, Recorded Investment	475,136	492,285	518,576
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	475,136	637,112	663,403
Impaired Financing Receivable, Related Allowance	235,027	182,148	253,598
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	566,473	466,487	456,541
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	3,915	3,809	15,746
Commercial Real Estate Other Receivable [Member]
Financing Receivable, Impaired [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, Average Recorded Investment	4,004,515	869,901	321,743
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	9,646,821	4,368,210	3,952,546
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	9,646,821	4,368,210	3,999,032
Impaired Financing Receivable, Related Allowance	1,476,632	447,193	447,193
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	6,184,255	3,725,809	2,964,744
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	61,306	7,858	29,291
Mortgage Warehouse Lines [Member]
Financing Receivable, Impaired [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, Average Recorded Investment	0	0	0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	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
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,241,011	561,961	1,748,864
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	1,397,468	604,643	1,791,546
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	5,346,098	1,455,158	1,209,298
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	6,176	0	9,490
Impaired Financing Receivable, with Related Allowance, Recorded Investment	10,121,957	4,860,495	5,952,239
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	10,121,957	5,005,322	6,143,552
Impaired Financing Receivable, Related Allowance	1,711,659	629,341	1,270,370
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	6,750,728	4,192,296	3,544,711
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	65,221	11,667	45,037
Impaired Financing Receivable, Recorded Investment	11,362,968	5,422,456	7,701,103
Impaired Financing Receivable Unpaid Principal Balance	11,519,425	5,609,965	7,935,098
Impaired Financing Receivable Average Recorded Investment	12,096,826	5,647,454	4,754,009
Impaired Financing Receivable, Interest Income, Accrual Method	71,397	11,667	54,527
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	164,542	0	0
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	164,542	0	0
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	164,542	0	23,600
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	0	135,963	134,193
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	0	135,963	134,193
Impaired Financing Receivable, Related Allowance	0	28,566	21,693
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	0	136,781	287,395
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0
Impaired Financing Receivable, Recorded Investment	164,542	135,963	134,193
Impaired Financing Receivable Unpaid Principal Balance	164,542	135,963	134,193
Impaired Financing Receivable Average Recorded Investment	164,542	136,781	310,995
Impaired Financing Receivable, Interest Income, Accrual Method	0	0	0
Loans to Individuals [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	0	54,904	54,904
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0	54,904	54,904
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	0	54,904	54,904
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	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
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0
Other [Member]
Financing Receivable, Impaired [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, Average Recorded Investment	0	0	0
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	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
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0
Consumer Loan [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		54,904	54,904
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	0	54,904	54,904
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	0	54,904	54,904
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	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
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0
Impaired Financing Receivable, Recorded Investment	0	54,904	54,904
Impaired Financing Receivable Unpaid Principal Balance	0	54,904	54,904
Impaired Financing Receivable Average Recorded Investment	0	54,904	54,904
Impaired Financing Receivable, Interest Income, Accrual Method	$ 0	$ 0	$ 0

XML

Note 9 - Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

 (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.

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 2011-05, 2011-12 and 2013-02 (Presentation of Comprehensive Income)

The provisions of ASU 2011-05 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 U.S. 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. The Company adopted this update on January 1, 2012 and the new Consolidated Statements of Comprehensive Income are included in these financial statements.

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 only 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 12, 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.

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”) to improve the reporting of reclassifications out of accumulated comprehensive income. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. ASU 2013-02 is effective for reporting periods beginning after December 15, 2012. The adoption of ASU 2013-02 did not have a significant impact on the Company’s consolidated financial statements.

ASU 2013-04 (Presentation of Joint and Several Liability Arrangements)

In February 2013, the FASB issued ASU No. 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements. ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following:

a. The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors; and

b. Any additional amount the reporting entity expects to pay on behalf of its co-obligors.

ASU 2013-04 also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. For public companies ASU 2013-04 is effective for reporting periods beginning after December 15, 2013. The adoption of ASU 2013-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU No. 2013-11 (Presentation of Unrecognized Tax Benefit)

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). Currently, there is diversity in practice in the presentation of unrecognized tax benefits. The aim of ASU 2013-11 is to provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except for circumstances outlined in ASU 2013-11. For public companies, ASU 2013-11 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The adoption of ASU 2013-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

(5)   Allowance for Loan Losses and Credit Quality Disclosures

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 September 30, 2013:

	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	$	-	$	-	$	995,830	$	995,830	$	42,237,906	$	43,233,736	$	-	$	995,830
Commercial Business		130,831		-		439,887		570,718		65,153,689		65,724,407		-		439,887
Commercial Real Estate		875,624		-		6,052,984		6,928,608		89,548,110		96,476,718		-		6,052,982
Mortgage Warehouse Lines		-		-		-		-		134,534,202		134,534,202		-		-
Residential Real Estate		-		970,123		164,541		1,134,664		10,521,526		11,656,190		-		164,542
Consumer
Loans to Individuals		-		-		94,898		94,898		9,752,485		9,847,383		94,898		-
Other		-		-		-		-		170,940		170,940		-		-
Deferred Loan Fees		-		-		-		-		905,897		905,897		-		-
Total	$	1,006,455		970,123	$	7,748,140	$	9,724,718	$	352,824,755	$	362,549,473	$	94,898	$	7,653,241

The following table provides an aging of the loan portfolio by loan class at December 31, 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	$	-	$	-	$	1,581,031	$	1,581,031	$	54,110,362	$	55,691,393	$	-	$	1,581,031
Commercial Business		202,451		70,192		518,912		791,555		57,073,881		57,865,436		-		629,821
Commercial Real Estate		-		-		3,137,553		3,137,553		99,275,141		102,412,694		-		3,478,605
Mortgage Warehouse Lines		-		-		-		-		284,127,530		284,127,530		-		-
Residential Real Estate		320,729		34,975		-		355,704		10,541,603		10,897,307		-		134,193
Consumer
Loans to Individuals		49,243		-		139,852		189,095		9,454,290		9,643,385		84,948		-
Other		-		-		-		-		189,279		189,279		-		-
Deferred Loan Fees		-		-		-		-		987,086		987,086		-		-
Total	$	572,423	$	105,167	$	5,377,348	$	6,054,938	$	515,759,172	$	521,814,110	$	84,948	$	5,878,554

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.

● 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 is 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 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 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 against 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. These impaired loans are assigned a doubtful risk rating grade because the loan has not performed according to payment terms and there is reason to believe that repayment of the loan principal, in whole or in part, is unlikely. 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 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 also maintains an unallocated allowance.  The unallocated allowance is used to cover any factors or conditions which may cause a potential loan loss but are not specifically identifiable.  It is prudent to maintain an unallocated portion of the allowance because no matter how detailed an analysis of potential loan losses is performed, these estimates, by definition, lack precision.  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

● 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:

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 are abundant, and for 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.

The following table provides a breakdown of the loan portfolio by credit quality indictor at September 30, 2013.

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	38,743,089	$	63,079,908	$	64,562,349	$	134,534,202	$	10,521,525
Special Mention		-		1,465,856		21,013,297		-		1,134,665
Substandard		4,490,647		920,157		10,901,072		-		-
Doubtful		-		258,486		-		-		-
Total	$	43,233,736	$	65,724,407	$	96,476,718	$	134,534,202	$	11,656,190

Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	9,847,383	$	170,940
Nonperforming		-		-
Total	$	9,847,383	$	170,940

       The following table provides a breakdown of the loan portfolio by credit quality indicator at December 31, 2012.

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	49,373,827	$	55,498,613	$	76,096,964	$	284,127,530	$	10,763,114
Special Mention		-		1,019,586		19,060,621		-		134,193
Substandard		5,777,494		1,064,799		7,255,109		-		-
Doubtful		540,072		282,438		-		-		-
Total	$	55,691,393	$	57,865,436	$	102,412,694	$	284,127,530	$	10,897,307

Consumer Credit Exposure - By Payment Activity	Loans to Individuals		Other
Performing	$	9,454,288	$	189,279
Nonperforming		189,097		-
Total	$	9,643,385	$	189,279

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 September 30, 2013 and December 31, 2012:

Period-End Allowance for Loan Losses by Impairment Method – September 30, 2013
	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse		Residential Real Estate		Consumer		Other		Unallocated		Deferred Fees		Total
Allowance for credit losses:
Ending Balance	$	1,208,023	$	1,031,607	$	3,064,248	$	672,671	$	141,826	$	110,068	$	2,051		589,686	$	-	$	6,820,180
Ending Balance
Individually evaluated for impairment		-		235,027		1,476,632		-		-		-		-		-		-		1,711,659
Collectively evaluated for impairment		1,208,023		796,580		1,587,616		672,671		141,826		110,068		2,051		589,686		-		5,108,521
Loans receivables:
Ending Balance	$	43,233,736	$	65,724,407	$	96,476,718	$	134,534,202	$	11,656,190	$	9,847,383	$	170,940	$	-	$	905,897	$	362,549,473
Individually evaluated for impairment		1,015,112		701,035		9,646,821		-		164,542		-		-		-		-		11,527,510
Collectively evaluated for impairment		42,218,624		65,023,372		86,829,897		134,534,202		11,491,648		9,847,383		170,940		-		905,897		351,021,963

Period-End Allowance for Loan Losses by Impairment Method – December 31, 2012
	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse		Residential Real Estate		Consumer		Other		Unallocated		Deferred Fees			Total
Allowance for credit losses:
Ending Balance	$	1,990,292	$	972,789	$	2,262,221	$	1,420,638	$	112,103	$	102,583	$	2,271	$	288,315	$	0	$	7,151,212
Ending Balance
Individually evaluated for impairment		569,579		253,598		447,193		-		21,693		-		-		-		-		1,292,063
Collectively evaluated for impairment		1,420,713		719,191		1,815,028		1,420,638		90,410		102,583		2,271		288,315		-		5,859,149
Loans receivables:
Ending Balance	$	55,691,393	$	57,865,436	$	102,412,694	$	284,127,530	$	10,897,307	$	9,643,385	$	189,279		-	$	987,086	$	521,814,110
Individually evaluated for impairment		2,842,031		906,526		3,952,546		-		134,193		54,904		-		-		-		7,890,200
Collectively evaluated for impairment		52,849,362		56,958,910		98,460,148		284,127,530		10,763,114		9,588,481		189,279		-		987,086		513,923,910

The activity in the allowance for loan losses by loan class for the nine months ended September 30, 2013 was as follows:

	Construction			Commercial Business			Commercial Real Estate			Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2012	$	1,990,292		$	972,789		$	2,262,221		$	1,420,638		$	112,103		$	102,583		$	2,271		$	288,315		$	7,151,212
Provision charged to operations		(218,010	)		(18,319	)		245,769			(429,900	)		262			50,606			(212	)		369,804			-
Loans charged off		(561,993	)		(139,289	)		(384,688	)		-			-			(50,855	)		-			-			(1,136,825	)
Recoveries of loans charged off		-			2,000			6,895			-			-			-			-			-			8,895
Balance - March 31, 2013	$	1,210,289		$	817,181		$	2,130,197		$	990,738		$	112,365		$	102,334		$	2,059		$	658,119		$	6,023,282
Provision charged to operations		1,872			160,164			321,659			(62,039	)		(19,632	)		(2,444	)		45			(162,958	)		236,667
Loans charged off		-			-			-			-			-			-			-			-			-
Recoveries of loans charged off		417			8,574			-			-			-			-			-			-			8,991
Balance – June 30, 2013	$	1,212,578		$	985,919		$	2,451,856		$	928,699		$	92,733		$	99,890		$	2,104			495,161		$	6,268,940
Provision charged to operations		(4,555	)		34,446			612,392			(256,028	)		49,093			10,178			(53	)		94,525			539,998
Loans charged off		-			(2,068	)		-			-			-			-			-			-			(2,068	)
Recoveries of loans charged off		-			13,310			-			-			-			-			-			-			13,310
Balance - September 30, 2013	$	1,208,023		$	1,031,607		$	3,064,248		$	672,671		$	141,826		$	110,068		$	2,051		$	589,686		$	6,820,180

The activity in the allowance for loan losses by loan class for the nine months ended September 30, 2012 was 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	)		-			-			(77,858	)		(6,001	)		-			-			(261,336	)
Recoveries of loans charged off		3,403			5,427			-			-			-			-			-			-			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	)		-			-			(130,694	)		-			-			-			(175,893	)
Recoveries of loans charged off		-			1,191			182			-			-			-			-			-			1,373
Balance - June 30, 2012	$	1,647,605		$	903,401		$	2,304,010		$	1,153,883		$	122,510		$	123,213		$	2,798		$	-		$	6,257,420
Provision charged to operations		208,440			33,129			86,278			102,771			(2,812	)		(9,942	)		(27	)		82,161			499,998
Loans charged off		-			-			(64,375	)		-			-			-			-			-			(64,375	)
Recoveries of loans charged off		-			-			-			-			-			-			-			-			-
Balance - September 30, 2012	$	1,856,045		$	936,530		$	2,325,913		$	1,256,654		$	119,698		$	113,271		$	2, 771		$	82,161		$	6,693,043

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) – September 30, 2013

							Three months ended September 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	1,015,112	$	1,015,112	$	-	$	1,184,249	$	4,660
Commercial Business		225,899		382,356		-		157,334		1,516
Commercial Real Estate		-		-		-		4,004,515		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		1,241,011		1,397,468		-		5,346,098		6,176
Residential Real Estate		164,542		164,542		-		164,542		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal				-		-		-		-
With no related allowance:	$	1,405,553	$	1,562,010	$	-	$	5,510,640	$	6,176
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		475,136		475,136		235,027		566,473		3,915
Commercial Real Estate		9,646,821		9,646,821		1,476,632		6,184,255		61,306
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		10,121,957		10,121,957		1,711,659		6,750,728		65,221
Residential Real Estate		-		-		-		-		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		10,121,957		10,121,957		1,711,659		6,750,728		65,221
Total:
Commercial		11,362,968		11,519,425		1,711,659		12,096,826		71,397
Residential Real Estate		164,542		164,542		-		164,542		-
Consumer		-		-		-		0		-
Total	$	11,527,510	$	11,683,967	$	1,711,659	$	12,261,368	$	71,397

Impaired Loans Receivables (By Class) – September 30, 2012

							Three months ended September 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		561,961		604,643		-		585,257		-
Commercial Real Estate		-		-		-		869,901		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		561,961		604,643		-		1,455,158		-
Residential Real Estate		-		-		-		-		-
Consumer
Loans to Individuals		54,904		54,904		-		54,904		-
Other		-		-		-		-		-
Subtotal		54,904		54,904		-		54,904		-
With no related allowance:	$	616,865	$	659,547	$	-	$	1,510,062	$	-
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		492,285		637,112		182,148		466,487		3,809
Commercial Real Estate		4,368,210		4,368,210		447,193		3,725,809		7,858
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		4,860,495		5,005,322		629,341		4,192,296		11,667
Residential Real Estate		135,963		135,963		28,566		136,781		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		4,996,458		5,141,285		657,907		4,329,077		11,667
Total:
Commercial		5,422,456		5,609,965		629,341		5,647,454		11,667
Residential Real Estate		135,963		135,963		28,566		136,781		-
Consumer		54,904		54,904		-		54,904		-
Total	$	5,613,323	$	5,800,832	$	657,907	$	5,839,139	$	11,667

Impaired Loans Receivables (By Class)

December 31, 2012

	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	$	1,360,914	$	1,360,914	$	-	$	412,716	$	-
Commercial Business		387,950		430,632		-		474,839		9,490
Commercial Real Estate		-		-		-		321,743		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		1,748,864		1,791,546		-		1,209,298		9,490
Residential Real Estate		-		-		-		23,600		-
Consumer
Loans to Individuals		54,904		54,904		-		54,904		-
Other		-		-		-		-		-
Subtotal		54,904		54,904		-		54,904		-
Subtotal with no Related Allowance		1,803,768		1,846,450		-		1,287,802		-
With an allowance:
Commercial
Construction		1,481,117		1,481,117		569,579		123,426		-
Commercial Business		518,576		663,403		253,598		456,541		15,746
Commercial Real Estate		3,952,546		3,999,032		447,193		2,964,744		29,291
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		5,952,239		6,143,552		1,270,370		3,544,711		45,037
Residential Real Estate		134,193		134,193		21,693		287,395		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
Subtotal with an Allowance		6,086,432		6,277,745		1,292,063		3,832,106		45,037
Total:
Commercial		7,701,103		7,935,098		1,270,370		4,754,009		54,527
Residential Real Estate		134,193		134,193		21,693		310,995		-
Consumer		54,904		54,904		-		54,904		-
Total	$	7,890,200	$	8,124,195	$	1,292,063	$	5,119,908	$	54,527

In the normal course of business, the Bank may consider modifying loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment or as a re-amortization or extension of a loan term to better match the loan’s repayment stream with the borrower’s cash flow. A modified loan would be considered a troubled debt restructuring (“TDR”) if the Bank grants a concession to a borrower and has determined that the borrower is troubled (i.e., experiencing financial difficulties).

If the Bank restructures a loan to a troubled borrower, the loan terms (i.e. interest rate, payment, amortization period and maturity date) may be modified in various ways to enable the borrower to cover the modified debt service payments based on current financial statements and cash flow adequacy. If a borrower’s hardship is thought to be temporary, then modified terms may only be offered for that time period. Where possible, the Bank would attempt to obtain additional collateral and/or secondary repayment sources at the time of the restructure in order to put the Bank in the best possible position if the borrower is not able to meet the modified terms. The Bank will not offer modified terms if it believes that modifying the loan terms will only delay an inevitable permanent default.

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 (“TDR”).  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.  There was no TDR activity during the three months ended September 30, 2013. At September 30, 2013, the Bank had 8 loans classified as TDRs with an aggregate balance of $4,248,442.

 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 TDR.  The lower payments are determined by an analysis of the borrower’s cash flow to meet the modified terms while anticipating an improved financial condition to enable a resumption of the original payment terms.

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
OPERATING ACTIVITIES:
Net income	$ 4,405,588	$ 3,819,759
Adjustments to reconcile net income to net cash provided by operating activities-
Provision for loan losses	776,664	1,649,994
Provision for loss on other real estate owned	662,918	1,195,288
Depreciation and amortization	805,823	884,595
Net amortization of premiums and discounts on securities	868,639	1,109,664
Gains on sales of other real estate owned	(292,170)
Gains on sales of loans held for sale	(1,852,821)	(1,472,502)
Originations of loans held for sale	(114,126,927)	(128,302,763)
Proceeds from sales of loans held for sale	137,972,505	126,526,811
Income on Bank–owned life insurance	(348,206)	(337,374)
Share-based compensation expense	380,471	336,898
Decrease (increase) in accrued interest receivable	728,564	318,198
Decrease (increase) in other assets	925,461	(122,026)
Decrease in accrued interest payable	(269,852)	(263,258)
Increase (decrease) in accrued expenses and other liabilities	517,255	(35,727)
Net cash provided by operating activities	31,153,912	5,307,557
INVESTING ACTIVITIES:
Available for sale	(16,947,137)	(31,800,023)
Held to maturity	(62,560,993)	(6,602,385)
Available for sale	20,423,187	28,843,391
Held to maturity	27,488,848	24,829,152
Net decrease (increase) in loans	155,845,716	(22,860,591)
Capital expenditures	(147,040)	(815,581)
Additional investment in other real estate owned	(11,500)	(144,454)
Proceeds from sales of other real estate owned	7,183,854	1,686,389
Net cash provided by (used in) investing activities	131,274,935	(6,864,102)
FINANCING ACTIVITIES:
Exercise of stock options and issuance of vested shares	603,342	456,761
Purchase of Treasury Stock	(116,451)	(80,344)
Net (decrease) increase in demand, savings and time deposits	(20,745,521)	37,135,047
Net decrease in borrowings	(32,400,000)	(37,150,000)
Net cash (used in) provided by financing activities	(52,658,630)	361,464
Increase (decrease) in cash and cash equivalents	109,770,217	(1,195,081)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	14,044,921	15,195,259
CASH AND CASH EQUIVALENTS AT END OF PERIOD	123,815,138	14,000,178
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest	3,512,789	4,188,477
Income taxes	1,721,000	1,787,000
Non-cash investing activities
Real estate acquired in full satisfaction of loans in foreclosure	$ 2,311,225	$ 553,762

XML

Note 10 - Fair Value Disclosures (Details) - Fair Value Assets Measurements, Nonrecurring (USD $)	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Inputs, Level 1 [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Assets Measurements, Nonrecurring [Line Items]
Impaired loans	$ 0	$ 0
Other real estate owned	0	0
Fair Value, Inputs, Level 2 [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Assets Measurements, Nonrecurring [Line Items]
Impaired loans	0	0
Other real estate owned	0	0
Fair Value, Inputs, Level 3 [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Assets Measurements, Nonrecurring [Line Items]
Impaired loans	8,410,298	4,794,369
Other real estate owned	571,950	6,568,781
Estimate of Fair Value Measurement [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Assets Measurements, Nonrecurring [Line Items]
Impaired loans	8,410,298	4,794,369
Other real estate owned	$ 571,950	$ 6,568,781

XML

Note 7 - Benefit Plans (Details) - Net Periodic Benefit Costs (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Net Periodic Benefit Costs [Abstract]
Service cost	$ 30,539	$ 61,823	$ 244,796	$ 185,469
Interest cost	22,229	50,073	178,179	150,219
Actuarial (gain) loss recognized	(29,893)	5,300	(239,614)	15,900
Prior service cost recognized	942	24,858	7,553	74,574
	$ 23,817	$ 142,054	$ 190,914	$ 426,162

XML

Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value (USD $)	Sep. 30, 2013	Dec. 31, 2012
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	119	53
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 71,127,987	$ 31,762,447
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	(5,533,802)	(544,580)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	3,280,104	2,300,951
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	(958,140)	(981,072)
Investment Securities, Continuous Unrealized Loss Position, Fair Value	74,408,091	34,063,398
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(6,491,942)	(1,525,652)
U.S. Treasury securities and obligations of U.S. Government sponsored corporations ("GSE') and agencies [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	3	1
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	11,627,065	9,842,200
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	(789,667)	(26,907)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Fair Value	11,627,065	9,842,200
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(789,667)	(26,907)
Residential collateralized mortgage obligations- non GSE [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	3	3
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	952,689	1,960,237
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	(1,637)	(4,516)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,094,497	156,505
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	(18,950)	(2,847)
Investment Securities, Continuous Unrealized Loss Position, Fair Value	2,047,186	2,116,742
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(20,587)	(7,363)
Residential mortgage backed Securities- GSE [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	28	2
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	30,747,798	3,989,675
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	(727,648)	(944)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Fair Value	30,747,798	3,989,675
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(727,648)	(944)
Obligations of State and Political subdivisions [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	77	37
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	24,976,580	12,794,007
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	(3,987,457)	(486,337)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Fair Value	24,976,580	12,794,007
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(3,987,457)	(486,337)
Trust Preferred Debt Securities [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	4	4
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	2,038,200	1,998,366
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	(429,935)	(467,643)
Investment Securities, Continuous Unrealized Loss Position, Fair Value	2,038,200	1,998,366
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(429,935)	(467,643)
Trust Preferred Debt Securities Pooled [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	1	1
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	147,407	146,080
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	(509,255)	(510,582)
Investment Securities, Continuous Unrealized Loss Position, Fair Value	147,407	146,080
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	(509,255)	(510,582)
Corporate Debt Securities [Member]
Note 4 - Investment Securities (Details) - Investment Securities, Continuous Unrealized Loss Position, Fair Value [Line Items]
Number of Securities, Continuous Unrealized Loss Position,	3	5
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	2,823,855	3,176,328
Investment Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Aggregate Losses	(27,393)	(25,876)
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Investment Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses	0	0
Investment Securities, Continuous Unrealized Loss Position, Fair Value	2,823,855	3,176,328
Investment Securities, Continuous Unrealized Loss Position, Aggregate Losses	$ (27,393)	$ (25,876)

XML

Note 3 - Net Income Per Common Share (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

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

	Three Months Ended September 30, 2013
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	1,523,238		5,991,480	$	0.25
Effect of dilutive securities:
Stock options and unvested stock awards				155,182
Diluted EPS:
Net income plus assumed conversion	$	1,523,238		6,146,662	$	0.25

	Three Months Ended September 30, 2012
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	1,354,919		5,378,854	$	0.25
Effect of dilutive securities:
Stock options and unvested stock awards				130,019
Diluted EPS:
Net income plus assumed conversion	$	1,354,919		5,508,873	$	0.25

	Nine Months Ended September 30, 2013
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per share:
Net income	$	4,405,588		5,960,294	$	0.74
Effect of dilutive securities:
Stock options and unvested stock awards				128,539
Diluted EPS:
Net income plus assumed conversion	$	4,405,588		6,088,833	$	0.72

	Nine Months Ended September 30, 2012
	Net Income		Weighted- average shares		Per share Amount
Basic earnings per common share:
Net income	$	3,819,759		5,360,395	$	0.71
Effect of dilutive securities:
Stock options and unvested stock awards				96,107
Diluted EPS:
Net income plus assumed conversion	$	3,819,759		5,456,502	$	0.70

XML

Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2013

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

(8)  Other Comprehensive Income and Accumulated Other Comprehensive Income

Comprehensive income is the total of (1) net income, and (2) all other changes in equity from non-shareholder sources, which are referred to as other comprehensive income. The components of other comprehensive income, and the related tax effects, are as follows:

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
Three Months Ended September 30, 2013:
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	(53,738	)	$	18,270		$	(35,468	)
Reclassification adjustment for (gains) realized in income		-			-			-
Other comprehensive gain (loss) on available-for-sale securities		(53,738	)		18,270			(35,468	)
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		63,265			(25,305	)		37,960
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-			-			-
Other comprehensive gain (loss) on unfunded retirement obligations		63,265			(25,305	)		37,960
Total other comprehensive gain (loss)	$	9,527		$	(7,035	)	$	2,492

	Before-Tax Amount		Income Tax Effect			Net-of-Tax Amount
Three Months Ended September 30, 2012:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	652,571	$	(221,873	)	$	430,698
Reclassification adjustment for losses realized in income		-		-			-
Other comprehensive gain (loss) on available-for-sale securities		652,571		(221,873	)		430,698
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		3,219		(1,294	)		1,925
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-		-			-
Other comprehensive gain (loss) on unfunded retirement obligations		3,219		(1,294	)		1,925
Total other comprehensive gain (loss)	$	655,790	$	(223,167	)	$	432,623

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
Nine Months Ended September 30, 2013:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	(4,466,187	)	$	1,518,504		$	(2,947,683	)
Reclassification adjustment for losses realized in income		-			-			-
Other comprehensive gain (loss) on available-for-sale securities	$	(4,466,187	)	$	1,518,504		$	(2,947,683	)
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		129,751			(51,907	)		77,844
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-			-			-
Other comprehensive gain (loss) on unfunded retirement obligations		129,751			(51,907	)		77,844
Total other comprehensive income (loss)	$	(4,336,436	)	$	1,466,597		$	(2,869,839	)

	Before-Tax Amount		Income Tax Effect			Net-of-Tax Amount
Nine Months Ended September 30, 2012:
Unrealized holding gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) on available-for-sale securities	$	710,040	$	(241,412	)	$	468,628
Reclassification adjustment for losses realized in income		-		-			-
Other comprehensive gain (loss) on available-for-sale securities		710,040		(241,412	)		468,628
Unfunded pension liability:
Changes from plan actuarial gains and (losses) included in other comprehensive income		9,660		(3,883	)		5,777
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		-		-			-
Other comprehensive gain (loss) on unfunded retirement obligations		9,660		(3,883	)		5,777
Total other comprehensive income (loss)	$	719,700	$	(245,295	)	$	474,405

Changes in the components of accumulated other comprehensive income are as follows and are presented net of tax:

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Nine Months Ended September 30, 2013:
Balance, beginning of period	$	1,235,204		$	(330,623	)	$	(100,288	)	$	804,293
Other comprehensive income (loss) before reclassifications		(2,947,683	)		-			77,844			(2,869,839	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,947,683	)		-			77,844			(2,869,839	)
Balance, end of period	$	(1,712,479	)	$	(330,673	)	$	(22,444	)	$	(2,065,546	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities		Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Nine Months Ended September 30, 2012:
Balance, beginning of period	$	1,530,078	$	(330,623	)	$	(107,993	)	$	1,091,462
Other comprehensive income (loss) before reclassifications		468,628		-			5,777			474,405
Amounts reclassified from accumulated other comprehensive income (loss)		-		-			-			-
Other comprehensive income (loss)		468,628		-			5,777			474,405
Balance, end of period	$	1,998,706	$	(330,623	)	$	(162,216	)	$	1,565,867

There were no items reclassified out of each component of other comprehensive income (loss) for the three and nine months ended September 30, 2013.

XML

Note 6 - Share Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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

Stock Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013		221,894	$	8.91
Granted		25,305		8.06
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at September 30, 2013		247,199	$	8.81		5.6	$	574,159
Exercisable at September 30, 2013		184,215	$	9.42		4.7	$	352,473

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

Fair value of options granted	$	2.69
Risk-free rate of return		0.81	%
Expected option life in years		7
Expected volatility		30.82	%
Expected dividends (1)		-

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

Non-vested shares	Number of Shares			Average Grant Date Fair Value
Non-vested at January 1, 2013		140,575		$	6.41
Granted		19,633			8.42
Vested		(49,178	)		8.97
Forfeited		-			-
Non-vested at September 30, 2013		111,030		$	5.63

XML

Note 4 - Investment Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities [Table Text Block]

September 30, 2013:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	22,382,475	$	33,857	$	(789,667	)	$	21,626,665
Residential collateralized mortgage obligations – GSE		4,031,094		165,347		-			4,196,441
Residential collateralized mortgage obligations – non-GSE		3,001,533		70,080		(18,950	)		3,052,663
Residential mortgage backed securities – GSE		32,795,415		1,002,198		(458,845	)		33,338,768
Obligations of State and Political subdivisions		22,231,752		174,056		(2,660,209	)		19,745,599
Trust preferred debt securities – single issuer		2,468,135		-		(429,935	)		2,038,200
Corporate Debt Securities		16,267,927		280,241		(27,393	)		16,520,775
Restricted stock		1,013,100		-		-			1,013,100
Mutual fund		25,000		-		-			25,000
	$	104,216,431	$	1,725,779	$	(4,384,999	)	$	101,557,211

December 31, 2012:	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale-
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	29,384,595	$	137,847	$	(26,907	)	$	29,495,535
Residential collateralized mortgage obligations – GSE		6,349,310		283,355		-			6,632,665
Residential collateralized mortgage obligations – non-GSE		3,811,933		119,323		(7,074	)		3,924,182
Residential mortgage backed securities – GSE		24,912,948		1,576,387		-			26,489,335
Obligations of State and Political subdivisions		20,793,222		375,416		(486,337	)		20,682,301
Trust preferred debt securities – single issuer		2,466,009		-		(467,643	)		1,998,366
Corporate Debt Securities		17,797,681		325,731		(23,131	)		18,100,281
Restricted stock		2,493,300		-		-			2,493,300
Mutual fund		25,000		-		-			25,000
	$	108,033,998	$	2,818,059	$	(1,011,092	)	$	109,840,965

Held-to-maturity Securities [Table Text Block]

September 30, 2013:	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	$	1,537,229	$	-		$	1,537,229	$	14,416	$	-		$	1,551,645
Residential collateralized Mortgage obligations – GSE		15,701,290		-			15,701,290		578,336		-			16,279,626
Residential collateralized Mortgage obligations – non-GSE		11,234,867		-			11,234,867		329,988		(1,637	)		11,563,218
Residential mortgage backed securities – GSE		67,487,280		-			67,487,280		869,664		(268,803	)		68,088,141
Obligations of State and political subdivisions		50,960,864		-			50,960,864		1,405,225		(1,327,248	)		51,038,841
Trust preferred debt securities - pooled		656,662		(500,944	)		155,718		-		(8,311	)		147,407
Corporate debt securities		3,495,674		-			3,495,674		21,729		-			3,517,403
	$	151,073,866	$	(500,944	)	$	150,572,922	$	3,219,358	$	(1,605,999	)	$	152,186,281

December 31, 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-
Obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	3,073,957	$	-		$	3,073,957	$	33,213	$	-		$	3,107,170
Residential collateralized mortgage obligations – GSE		19,660,625		-			19,660,625		1,021,556		-			20,682,181
Residential collateralized mortgage obligations - non – GSE		13,387,974		-			13,387,974		796,892		(289	)		14,184,577
Residential mortgage backed securities – GSE		19,950,190		-			19,950,190		849,040		(944	)		20,798,286
Obligations of State and Political subdivisions		42,815,706		-			42,815,706		3,039,935		-			45,855,641
Trust preferred debt securities – pooled		656,662		(500,944	)		155,718		-		(9,638	)		146,080
Corporate debt securities		16,983,730		-			16,983,730		84,443		(2,745	)		17,065,428
	$	116,528,844	$	(500,944	)	$	116,027,900	$	5,825,079	$	(13,616	)	$	121,839,363

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	$	4,998,329	$	5,004,300
Residential mortgage backed securities - GSE		19,397		20,034
Obligations of State and Political subdivisions		110,000		110,343
Corporate Debt Securities		510,694		512,930
Restricted Stock		1,013,100		1,013,100
Mutual Fund		25,000		25,000
	$	6,676,520	$	6,685,707
Due after one year through five years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	6,517,816	$	6,520,515
Residential mortgage backed securities - GSE		4,431,874		4,370,765
Obligations of State and Political subdivisions		374,281		375,833
Corporate Debt Securities		14,671,579		14,942,705
	$	25,995,550	$	26,209,818
Due after five years through ten years
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	10,866,330	$	10,101,850
Residential collateralized mortgage obligations - GSE		134,797		144,639
Residential mortgage backed securities - GSE		11,172,951		11,152,731
Obligations of State and Political Subdivisions		3,167,509		3,227,127
Corporate Debt Securities		-		-
	$	25,341,587	$	24,626,347
Due after ten years
Residential collateralized mortgage obligations - GSE		3,896,296		4,051,802
Residential collateralized mortgage obligations - non GSE		3,001,534		3,052,663
Residential mortgage backed securities - GSE		17,171,193		17,795,238
Obligations of State and Political subdivisions		18,579,962		16,032,296
Trust Preferred Debt Securities - single issuer		2,468,135		2,038,200
Corporate Debt Securities		1,085,654		1,065,140
	$	46,202,774	$	44,035,339
Total	$	104,216,431	$	101,557,211
Held to maturity-
Due in one year or less
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	1,537,229	$	1,551,645
Obligations of State and Political subdivisions		1,261,544		1,273,221
Corporate Debt Securities		3,495,674		3,517,403
	$	6,294,447	$	6,342,269
Due after one year through five years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	-	$	-
Obligations of State and Political subdivisions		8,937,728		9,243,927
Corporate Debt Securities		-		-
	$	8,937,728	$	9,243,927
Due after five years through ten years
Residential collateralized mortgage obligations - GSE		85,440		86,388
Residential collateralized mortgage obligations – non-GSE		954,327		952,869
Residential mortgage backed securities – GSE		21,772,966		21,945,961
Obligations of State and Political subdivisions		20,751,372		21,459,490
	$	43,564,105	$	44,444,708
Due after ten years
Residential collateralized mortgage obligations - GSE	$	15,615,850	$	16,193,239
Residential collateralized mortgage obligations – non-GSE		10,280,540		10,610,348
Residential mortgage backed securities - GSE		45,714,314		46,142,180
Obligations of State and Political subdivisions		20,010,221		19,062,203
Trust Preferred Debt Securities - Pooled		656,662		147,407
	$	92,277,587	$	92,155,377
Total	$	151,073,866	$	152,186,281

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

September 30, 2013			Less than 12 months					12 months or longer					Total
	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities and obligations of  U.S. Government sponsored corporations and agencies		3	$	11,627,065	$	(789,667	)	$	-	$	-		$	11,627,065	$	(789,667	)
Residential collateralized mortgage obligations – non-GSE		3		952,689		(1,637	)		1,094,497		(18,950	)		2,047,186		(20,587	)
Residential mortgage backed securities - GSE		28		30,747,798		(727,648	)		-		-			30,747,798		(727,648	)
Obligations of State and Political Subdivisions		77		24,976,580		(3,987,457	)		-		-			24,976,580		(3,987,457	)
Trust preferred debt securities – single issuer		4		-		-			2,038,200		(429,935	)		2,038,200		(429,935	)
Trust preferred debt securities – pooled		1		-		-			147,407		(509,255	)		147,407		(509,255	)
Corporate Debt Securities		3		2,823,855		(27,393	)		-		-			2,823,855		(27,393	)
Total temporarily impaired securities		119	$	71,127,987	$	(5,533,802	)	$	3,280,104	$	(958,140	)	$	74,408,091	$	(6,491,942	)

December 31, 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
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (GSE) and agencies		1	$	9,842,200	$	(26,907	)	$	-	$	-		$	9,842,200	$	(26,907	)
Residential collateralized mortgage obligations – non-GSE		3		1,960,237		(4,516	)		156,505		(2,847	)		2,116,742		(7,363	)
Residential mortgage backed securities GSE		2		3,989,675		(944	)		-		-			3,989,675		(944	)
Obligations of State and Political Subdivisions		37		12,794,007		(486,337	)		-		-			12,794,007		(486,337	)
Trust preferred debt securities – Single issuer		4		-		-			1,998,366		(467,643	)		1,998,366		(467,643	)
Trust preferred debt securities – Pooled		1		-		-			146,080		(510,582	)		146,080		(510,582	)
Corporate debt securities		5		3,176,328		(25,876	)		-		-			3,176,328		(25,876	)
Total temporarily impaired securities		53	$	31,762,447	$	(544,580	)	$	2,300,951	$	(981,072	)	$	34,063,398	$	(1,525,652	)

Schedule of Unrealized Loss on Investments [Table Text Block]

										Excess Subordination (2)
Security	Class	Amortized Cost	Fair Value	Unrealized (Loss) and OTTI	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	Amount	% of Current Performing Collateral
PreTSL XXV	B-1	$656,662	$147,407	$(509,255)	66.5%	10.9%	22.6%	14.0%	C/ NR	$108,000	21.0%

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

(in thousands)	Three and nine months ended September 30, 2013		Three and nine months ended September 30, 2012
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 12, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	1ST CONSTITUTION BANCORP
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		5,988,867
Amendment Flag	false
Entity Central Index Key	0001141807
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Tables)

9 Months Ended

Sep. 30, 2013

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Tables) [Line Items]

Past Due Financing Receivables [Table Text Block]

	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	$	-	$	-	$	995,830	$	995,830	$	42,237,906	$	43,233,736	$	-	$	995,830
Commercial Business		130,831		-		439,887		570,718		65,153,689		65,724,407		-		439,887
Commercial Real Estate		875,624		-		6,052,984		6,928,608		89,548,110		96,476,718		-		6,052,982
Mortgage Warehouse Lines		-		-		-		-		134,534,202		134,534,202		-		-
Residential Real Estate		-		970,123		164,541		1,134,664		10,521,526		11,656,190		-		164,542
Consumer
Loans to Individuals		-		-		94,898		94,898		9,752,485		9,847,383		94,898		-
Other		-		-		-		-		170,940		170,940		-		-
Deferred Loan Fees		-		-		-		-		905,897		905,897		-		-
Total	$	1,006,455		970,123	$	7,748,140	$	9,724,718	$	352,824,755	$	362,549,473	$	94,898	$	7,653,241

	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	$	-	$	-	$	1,581,031	$	1,581,031	$	54,110,362	$	55,691,393	$	-	$	1,581,031
Commercial Business		202,451		70,192		518,912		791,555		57,073,881		57,865,436		-		629,821
Commercial Real Estate		-		-		3,137,553		3,137,553		99,275,141		102,412,694		-		3,478,605
Mortgage Warehouse Lines		-		-		-		-		284,127,530		284,127,530		-		-
Residential Real Estate		320,729		34,975		-		355,704		10,541,603		10,897,307		-		134,193
Consumer
Loans to Individuals		49,243		-		139,852		189,095		9,454,290		9,643,385		84,948		-
Other		-		-		-		-		189,279		189,279		-		-
Deferred Loan Fees		-		-		-		-		987,086		987,086		-		-
Total	$	572,423	$	105,167	$	5,377,348	$	6,054,938	$	515,759,172	$	521,814,110	$	84,948	$	5,878,554

Impaired Financing Receivables [Table Text Block]

							Three months ended September 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	1,015,112	$	1,015,112	$	-	$	1,184,249	$	4,660
Commercial Business		225,899		382,356		-		157,334		1,516
Commercial Real Estate		-		-		-		4,004,515		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		1,241,011		1,397,468		-		5,346,098		6,176
Residential Real Estate		164,542		164,542		-		164,542		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal				-		-		-		-
With no related allowance:	$	1,405,553	$	1,562,010	$	-	$	5,510,640	$	6,176
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		475,136		475,136		235,027		566,473		3,915
Commercial Real Estate		9,646,821		9,646,821		1,476,632		6,184,255		61,306
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		10,121,957		10,121,957		1,711,659		6,750,728		65,221
Residential Real Estate		-		-		-		-		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		10,121,957		10,121,957		1,711,659		6,750,728		65,221
Total:
Commercial		11,362,968		11,519,425		1,711,659		12,096,826		71,397
Residential Real Estate		164,542		164,542		-		164,542		-
Consumer		-		-		-		0		-
Total	$	11,527,510	$	11,683,967	$	1,711,659	$	12,261,368	$	71,397

							Three months ended September 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		561,961		604,643		-		585,257		-
Commercial Real Estate		-		-		-		869,901		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		561,961		604,643		-		1,455,158		-
Residential Real Estate		-		-		-		-		-
Consumer
Loans to Individuals		54,904		54,904		-		54,904		-
Other		-		-		-		-		-
Subtotal		54,904		54,904		-		54,904		-
With no related allowance:	$	616,865	$	659,547	$	-	$	1,510,062	$	-
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		492,285		637,112		182,148		466,487		3,809
Commercial Real Estate		4,368,210		4,368,210		447,193		3,725,809		7,858
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		4,860,495		5,005,322		629,341		4,192,296		11,667
Residential Real Estate		135,963		135,963		28,566		136,781		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		4,996,458		5,141,285		657,907		4,329,077		11,667
Total:
Commercial		5,422,456		5,609,965		629,341		5,647,454		11,667
Residential Real Estate		135,963		135,963		28,566		136,781		-
Consumer		54,904		54,904		-		54,904		-
Total	$	5,613,323	$	5,800,832	$	657,907	$	5,839,139	$	11,667

	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	$	1,360,914	$	1,360,914	$	-	$	412,716	$	-
Commercial Business		387,950		430,632		-		474,839		9,490
Commercial Real Estate		-		-		-		321,743		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		1,748,864		1,791,546		-		1,209,298		9,490
Residential Real Estate		-		-		-		23,600		-
Consumer
Loans to Individuals		54,904		54,904		-		54,904		-
Other		-		-		-		-		-
Subtotal		54,904		54,904		-		54,904		-
Subtotal with no Related Allowance		1,803,768		1,846,450		-		1,287,802		-
With an allowance:
Commercial
Construction		1,481,117		1,481,117		569,579		123,426		-
Commercial Business		518,576		663,403		253,598		456,541		15,746
Commercial Real Estate		3,952,546		3,999,032		447,193		2,964,744		29,291
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		5,952,239		6,143,552		1,270,370		3,544,711		45,037
Residential Real Estate		134,193		134,193		21,693		287,395		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
Subtotal with an Allowance		6,086,432		6,277,745		1,292,063		3,832,106		45,037
Total:
Commercial		7,701,103		7,935,098		1,270,370		4,754,009		54,527
Residential Real Estate		134,193		134,193		21,693		310,995		-
Consumer		54,904		54,904		-		54,904		-
Total	$	7,890,200	$	8,124,195	$	1,292,063	$	5,119,908	$	54,527

Commercial [Member]

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Tables) [Line Items]

Financing Receivable Credit Quality Indicators [Table Text Block]

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	38,743,089	$	63,079,908	$	64,562,349	$	134,534,202	$	10,521,525
Special Mention		-		1,465,856		21,013,297		-		1,134,665
Substandard		4,490,647		920,157		10,901,072		-		-
Doubtful		-		258,486		-		-		-
Total	$	43,233,736	$	65,724,407	$	96,476,718	$	134,534,202	$	11,656,190

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	49,373,827	$	55,498,613	$	76,096,964	$	284,127,530	$	10,763,114
Special Mention		-		1,019,586		19,060,621		-		134,193
Substandard		5,777,494		1,064,799		7,255,109		-		-
Doubtful		540,072		282,438		-		-		-
Total	$	55,691,393	$	57,865,436	$	102,412,694	$	284,127,530	$	10,897,307

Consumer [Member]

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Tables) [Line Items]

Financing Receivable Credit Quality Indicators [Table Text Block]

Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	9,847,383	$	170,940
Nonperforming		-		-
Total	$	9,847,383	$	170,940

Consumer Credit Exposure - By Payment Activity	Loans to Individuals		Other
Performing	$	9,454,288	$	189,279
Nonperforming		189,097		-
Total	$	9,643,385	$	189,279

Financing Receivable Summary [Member]

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Tables) [Line Items]

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

Period-End Allowance for Loan Losses by Impairment Method – September 30, 2013
	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse		Residential Real Estate		Consumer		Other		Unallocated		Deferred Fees		Total
Allowance for credit losses:
Ending Balance	$	1,208,023	$	1,031,607	$	3,064,248	$	672,671	$	141,826	$	110,068	$	2,051		589,686	$	-	$	6,820,180
Ending Balance
Individually evaluated for impairment		-		235,027		1,476,632		-		-		-		-		-		-		1,711,659
Collectively evaluated for impairment		1,208,023		796,580		1,587,616		672,671		141,826		110,068		2,051		589,686		-		5,108,521
Loans receivables:
Ending Balance	$	43,233,736	$	65,724,407	$	96,476,718	$	134,534,202	$	11,656,190	$	9,847,383	$	170,940	$	-	$	905,897	$	362,549,473
Individually evaluated for impairment		1,015,112		701,035		9,646,821		-		164,542		-		-		-		-		11,527,510
Collectively evaluated for impairment		42,218,624		65,023,372		86,829,897		134,534,202		11,491,648		9,847,383		170,940		-		905,897		351,021,963

Period-End Allowance for Loan Losses by Impairment Method – December 31, 2012
	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse		Residential Real Estate		Consumer		Other		Unallocated		Deferred Fees			Total
Allowance for credit losses:
Ending Balance	$	1,990,292	$	972,789	$	2,262,221	$	1,420,638	$	112,103	$	102,583	$	2,271	$	288,315	$	0	$	7,151,212
Ending Balance
Individually evaluated for impairment		569,579		253,598		447,193		-		21,693		-		-		-		-		1,292,063
Collectively evaluated for impairment		1,420,713		719,191		1,815,028		1,420,638		90,410		102,583		2,271		288,315		-		5,859,149
Loans receivables:
Ending Balance	$	55,691,393	$	57,865,436	$	102,412,694	$	284,127,530	$	10,897,307	$	9,643,385	$	189,279		-	$	987,086	$	521,814,110
Individually evaluated for impairment		2,842,031		906,526		3,952,546		-		134,193		54,904		-		-		-		7,890,200
Collectively evaluated for impairment		52,849,362		56,958,910		98,460,148		284,127,530		10,763,114		9,588,481		189,279		-		987,086		513,923,910

Financing Recievable Activity [Member]

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Tables) [Line Items]

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

	Construction			Commercial Business			Commercial Real Estate			Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2012	$	1,990,292		$	972,789		$	2,262,221		$	1,420,638		$	112,103		$	102,583		$	2,271		$	288,315		$	7,151,212
Provision charged to operations		(218,010	)		(18,319	)		245,769			(429,900	)		262			50,606			(212	)		369,804			-
Loans charged off		(561,993	)		(139,289	)		(384,688	)		-			-			(50,855	)		-			-			(1,136,825	)
Recoveries of loans charged off		-			2,000			6,895			-			-			-			-			-			8,895
Balance - March 31, 2013	$	1,210,289		$	817,181		$	2,130,197		$	990,738		$	112,365		$	102,334		$	2,059		$	658,119		$	6,023,282
Provision charged to operations		1,872			160,164			321,659			(62,039	)		(19,632	)		(2,444	)		45			(162,958	)		236,667
Loans charged off		-			-			-			-			-			-			-			-			-
Recoveries of loans charged off		417			8,574			-			-			-			-			-			-			8,991
Balance – June 30, 2013	$	1,212,578		$	985,919		$	2,451,856		$	928,699		$	92,733		$	99,890		$	2,104			495,161		$	6,268,940
Provision charged to operations		(4,555	)		34,446			612,392			(256,028	)		49,093			10,178			(53	)		94,525			539,998
Loans charged off		-			(2,068	)		-			-			-			-			-			-			(2,068	)
Recoveries of loans charged off		-			13,310			-			-			-			-			-			-			13,310
Balance - September 30, 2013	$	1,208,023		$	1,031,607		$	3,064,248		$	672,671		$	141,826		$	110,068		$	2,051		$	589,686		$	6,820,180

	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	)		-			-			(77,858	)		(6,001	)		-			-			(261,336	)
Recoveries of loans charged off		3,403			5,427			-			-			-			-			-			-			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	)		-			-			(130,694	)		-			-			-			(175,893	)
Recoveries of loans charged off		-			1,191			182			-			-			-			-			-			1,373
Balance - June 30, 2012	$	1,647,605		$	903,401		$	2,304,010		$	1,153,883		$	122,510		$	123,213		$	2,798		$	-		$	6,257,420
Provision charged to operations		208,440			33,129			86,278			102,771			(2,812	)		(9,942	)		(27	)		82,161			499,998
Loans charged off		-			-			(64,375	)		-			-			-			-			-			(64,375	)
Recoveries of loans charged off		-			-			-			-			-			-			-			-			-
Balance - September 30, 2012	$	1,856,045		$	936,530		$	2,325,913		$	1,256,654		$	119,698		$	113,271		$	2, 771		$	82,161		$	6,693,043