10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2014

or

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

For the transition period from _____ to _____

Commission file Number:     000-32891

1ST CONSTITUTION BANCORP

(Exact Name of Registrant as Specified in Its Charter)

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

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

(609) 655-4500

(Issuer’s Telephone Number, Including Area Code)

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

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

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

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

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

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

As of August 12, 2014, there were 7,116,055 shares of the registrant’s common stock, no par value, outstanding.

1ST CONSTITUTION BANCORP

FORM 10-Q

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets
	(unaudited) at June 30, 2014
	and December 31, 2013	1
	Consolidated Statements of Income
	(unaudited) for the Three Months and Six Months Ended
	June  30, 2014 and June  30, 2013	2
	Consolidated Statements of Comprehensive Income ( Loss)
	(unaudited) for the Three Months  and Six Months Ended
	June 30, 2014 and June 30, 2013	3
	Consolidated Statements of Changes in Shareholders’ Equity
	(unaudited) for the Six Months Ended
	June 30, 2014 and June 30, 2013	4
	Consolidated Statements of Cash Flows
	(unaudited) for the Six Months Ended
	June 30, 2014 and June 30, 2013	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67
Item 4.	Controls and Procedures	67
PART II.	OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 6.	Exhibits	70
SIGNATURES		71

PART I. FINANCIAL INFORMATION

Item 1.               Financial Statements.

1st Constitution Bancorp and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	June 30, 2014			December 31, 2013
ASSETS
CASH AND DUE FROM BANKS	$	23,149,148		$	69,267,345
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS		-			11,426
Total cash and cash equivalents		23,149,148			69,278,771
INVESTMENT SECURITIES:
Available for sale, at fair value		110,878,312			99,198,807
Hel             Held to maturity (fair value of $159,434,845 and $153,629,773 at Mar                 June 30, 2014 and December 31, 2013, respectively)		155,318,690			152,816,815
Total investment securities		266,197,002			252,015,622
LOANS HELD FOR SALE		9,877,863			10,923,689
LOANS		635,459,722			373,336,082
Less- Allowance for loan losses		(7,418,379	)		(7,038,571	)
Net loans		628,041,343			366,297,511
PREMISES AND EQUIPMENT, net		12,189,136			10,043,505
ACCRUED INTEREST RECEIVABLE		3,161,963			2,542,602
BANK-OWNED LIFE INSURANCE		20,932,291			16,183,574
OTHER REAL ESTATE OWNED		1,860,000			2,136,341
GOODWILL AND INTANGIBLE ASSETS		13,614,963			4,889,575
OTHER ASSETS		6,946,522			8,013,897
Total assets	$	985,970,231		$	742,325,087
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits
Non-interest bearing	$	166,866,851		$	121,891,752
Interest bearing		653,000,478			516,660,278
Total deposits		819,867,329			638,552,030
BORROWINGS		59,888,511			10,000,000
REDEEMABLE SUBORDINATED DEBENTURES		18,557,000			18,557,000
ACCRUED INTEREST PAYABLE		904,892			883,212
ACCRUED EXPENSES AND OTHER LIABILITIES		5,078,769			5,974,531
Total liabilities		904,296,501			673,966,773
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; 7,136,784 and 6,033,683 shares issued and 7,116,055 and  6,016,845 shares outstanding at June 30,2014 and December 31, 2013, respectively		60,937,366			49,403,450
Retained earnings		21,576,175			21,374,381
Treasury Stock, 20,729 shares and 16,838 shares at June 30, 2014     and December 31, 2013, respectively		(211,727	)		(171,883	)
Accumulated other comprehensive (loss)		(628,084	)		(2,247,634	)
Total shareholders’ equity		81,673,730			68,358,314
Total liabilities and shareholders’ equity	$	985,970,231		$	742,325,087

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

1

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
INTEREST INCOME:
Loans, including fees	$	7,870,260		$	5,645,259	$	14,108,699		$	11,617,454
Securities:
Taxable		1,059,160			901,711		2,180,744			1,838,796
Tax-exempt		588,750			545,620		1,169,731			1,058,498
Federal funds sold and short-term investments		45,417			89,662		100,708			139,342
Total interest income		9,563,587			7,182,252		17,559,882			14,654,090
INTEREST EXPENSE:
Deposits		972,362			869,598		1,871,093			1,825,934
Borrowings		127,839			104,254		243,417			207,527
Redeemable subordinated debentures		85,673			87,771		170,780			175,644
Total interest expense		1,185,874			1,061,623		2,285,290			2,209,105
Net interest income		8,377,713			6,120,629		15,274,592			12,444,985
PROVISION FOR LOAN LOSSES		4,099,998			236,666		4,599,996			236,666
Net interest income after provision for loan losses		4,277,715			5,883,963		10,674,596			12,208,319
NON-INTEREST INCOME:
Service charges on deposit accounts		267,235			221,604		486,351			444,670
Gain on sales of loans		267,155			479,146		1,006,736			1,210,855
Income on Bank-owned life insurance		148,987			119,758		278,138			232,366
Other income		576,655			627,351		1,125,789			1,168,531
Total non-interest income		1,260,032			1,447,859		2,897,014			3,056,422
NON-INTEREST EXPENSE:
Salaries and employee benefits		3,684,723			3,045,241		7,272,628			6,398,104
Occupancy expense		838,895			622,499		1,665,090			1,300,305
Data processing expense		311,760			294,306		627,809			595,688
Other real estate owned expenses		98,609			48,557		140,041			594,062
Merger related expenses		109,430			-		1,532,153			-
FDIC insurance expense		184,631			15,000		334,631			34,687
Other operating expenses		1,477,767			1,136,697		2,479,488			2,322,422
Total non-interest expenses		6,705,815			5,162,300		14,051,840			11,245,268
Income (loss) before income taxes		(1,168,068	)		2,169,522		(480,230	)		4,019,473
INCOME TAXES		(728,150	)		612,492		(682,024	)		1,137,125
Net income (loss)	$	(439,918	)	$	1,557,030	$	201,794		$	2,882,348
NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	(0.06	)	$	0.26	$	0.03		$	0.48
Diluted	$	(0.06	)	$	0.25	$	0.03		$	0.47

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

2

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Net Income (loss)	$	(439,918	)	$	1,557,030		$	201,794		$	2,882,348
Other comprehensive income (loss)  :
Unrealized gains (losses) on securities available for           sale		1,066,459			(3,833,028	)		2,281,660			(4,614,989	)
Tax effect		(387,844	)		1,353,848			(758,780	)		1,702,774
Net of tax amount		678,615			(2,479,180	)		1,522,880			(2,912,215	)
Realized loss on securities available for sale		2,516			-			2,516			-
Tax effect		(1,006	)		-			(1,006	)		-
Net of tax amount		1,510			-			1,510			-
Pension liability		95,335			63,266			158,601			66,486
Tax effect		(38,135	)		(25,307	)		(63,441	)		(26,602	)
Net of tax amount		57,200			37,959			95,160			39,884
Total other comprehensive income (loss)		737,325			(2,441,221	)		1,619,550			(2,872,331	)
Comprehensive income (loss)	$	297,407		$	(884,191	)	$	1,821,344		$	10,017

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

3

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the Six Months Ended June 30, 2014 and 2013

(Unaudited)

	Common Stock		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive (Loss) Income			Total Shareholders’ Equity
Balance, January 1, 2013	$	48,716,032	$	15,594,293	$	(61,086	)	$	804,293		$	65,053,532
Exercise of stock options and issuance of       shares under employee benefit program (23,233       shares)		219,783										219,783
Share-based compensation		50,568										50,568
Treasury stock purchased (6,440 shares)						(58,028	)					(58,028	)
Net income for the six month ended       June  30, 2013				2,882,348								2,882,348
Other comprehensive (loss)									(2,872,331	)		(2,872,331	)
Balance, June 30, 2013	$	48,986,383	$	18,476,641	$	(119,114	)	$	(2,068,038	)	$	65,275,872
Balance, January 1, 2014	$	49,403,450	$	21,374,381	$	(171,883	)	$	(2,247,634	)	$	68,358,314
Exercise of stock options and issuance  of       shares under employee  benefit program (35,600       shares)		302,850										302,850
Share-based compensation		70,366										70,366
Treasury stock purchased (3,891 shares)						(39,844	)					(39,844	)
Acquisition of Rumson-Fair Haven Bank and       Trust Company (1,019,223 shares)		11,160,700										11,160,700
Net income for the six months ended      June 30, 2014				201,794								201,794
Other comprehensive income									1,619,550			1,619,550
Balance June 30, 2014	$	60,937,366	$	21,576,175	$	(211,727	)	$	(628,084	)	$	81,673,730

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

4

1st Constitution Bancorp and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	2014				2013
OPERATING ACTIVITIES:
Net income	$	201,794		$	2,882,348
Adjustments to reconcile net income to net cash provided by operating activities-
Provision for loan losses		4,599,996			236,666
Provision for loss on other real estate owned		-			662,918
Depreciation and amortization		880,566			539,640
Net amortization of premiums and discounts on securities		546,824			613,720
Loss on sales of securities held for sale		2,516			-
Gains on sales of other real estate owned		(21,012	)		(291,452	)
Gains on sales of loans held for sale		(1,006,736	)		(1,210,855	)
Originations of loans held for sale		(39,760,548	)		(83,349,024	)
Proceeds from sales of loans held for sale		41,813,110			92,285,028
Income on Bank – owned life insurance		(278,138	)		(232,366	)
Share-based compensation expense		70,366			267,958
(Increase) decrease in accrued interest receivable		(22,749	)		317,907
Decrease in other assets		1,196,128			1,270,240
Decrease in accrued interest payable		(125,694	)		(114,674	)
(Decrease) increase in accrued expenses and other liabilities		(1,414,957	)		305,763
Net cash  provided by operating activities		6,681,466			14,183,817
INVESTING ACTIVITIES:
Purchases of securities -
Available for sale		-			(15,947,558	)
Held to maturity		(14,229,098	)		(10,839,022	)
Proceeds from maturities and prepayments of securities -
Available for sale		14,315,647			15,257,223
Held to maturity		11,534,177			16,295,574
Proceeds from sales of securities available for sale		5,957,188			-
Net (increase) decrease in loans		(122,887,249	)		110,901,189
Capital expenditures		(111,489	)		(113,402	)
Net cash received in the acquisition		21,375,071			-
Proceeds from sales of other real estate owned		230,949			2,653,518
Net cash (used in) provided by  investing activities		(83,814,804	)		118,207,522
FINANCING ACTIVITIES:
Issuance of vested shares		302,850			219,783
Purchase of Treasury Stock		(39,844	)		(58,028	)
Net decrease in demand, savings and time deposits		(8,169,253	)		(4,089,641	)
Net increase (decrease) in borrowings		38,909,962			(32,400,000	)
Net cash provided by (used in) financing activities		31,003,715			(36,327,886	)
(Decrease) increase in cash and cash equivalents		(46,129,623	)		96,063,453
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR		69,278,771			14,044,921
CASH AND CASH EQUIVALENTS
AT END OF YEAR	$	23,149,148		$	110,108,374
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION
Cash paid during the period for -
Interest	$	2,410,984			2,323,779
Income taxes		596,223			1,153,000
Non-cash investing activities
Real estate acquired in full satisfaction of loans in foreclosure	$	-			2,311,225
Acquisition of Rumson-Fair Haven Bank and Trust Company
Noncash assets acquired:
Investment securities available for sale	$	30,024,458
Loans		143,714,377
Accrued interest receivable		596,612
Premises and equipment, net		2,551,939
Goodwill		7,698,427
Core deposit intangible		1,188,836
Bank-owned life insurance		4,470,579
Other assets		885,576
		191,130,804
Liabilities assumed:
Deposits		189,490,005
Advances from FHLB		11,030,000
Other liabilities		825,170
		201,345,175
Common stock issued as consideration	$	11,160,700

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

5

1st Constitution Bancorp and Subsidiaries

Notes To Consolidated Financial Statements

June 30, 2014 (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, 2013, filed with the SEC on March 31, 2014.

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

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2014 for items that should potentially be recognized or disclosed in these financial statements.  The evaluation was conducted through the date these financial statements were issued.

(2)  Acquisition of Rumson-Fair Haven Bank and Trust Company

On February 7, 2014, the Company completed its acquisition of Rumson-Fair Haven Bank and Trust Company, a New Jersey state commercial bank (“Rumson”), which merged with and into the Bank, with the Bank as the surviving entity. The merger agreement among the Company, the Bank and Rumson (the “Merger Agreement”) provided that the shareholders of Rumson would receive, at their election, for each outstanding share of Rumson common stock that they own at the effective time of the merger, either 0.7772 shares of the Company common stock or $7.50 in cash or a combination thereof, subject to proration as described in the Merger Agreement, so that 60% of the aggregate merger consideration consisted of cash and 40% consisted of shares of the Company’s common stock. The Company issued an aggregate of 1,019,223 shares of its common stock and paid $14.8 million in cash in the transaction.

The merger was accounted for under the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at preliminary estimated fair values as of the acquisition date. Rumson’s results of operations have been included in the Company’s Consolidated Statements of Income since February 7, 2014.

The assets acquired and liabilities assumed in the merger were recorded at their estimated fair values based on management’s best estimates using information available at the date of the merger, including the use of a third party valuation specialist. The fair values are preliminary estimates and subject to adjustment for up to one year after the closing date of the merger. The following table summarizes the estimated fair value of the acquired assets and liabilities.

6

($ in thousands)	Amount
Consideration paid:
Company stock issued	$	11,161
Cash payment		14,770
Total consideration paid		25,931
Recognized amounts of identifiable assets and liabilities assumed at fair value:
Cash and cash equivalents		36,045
Short-term investments		100
Securities available for sale		30,024
Loans		143,714
Premises and equipment, net		2,552
Identifiable intangible assets		1,189
Bank-owned life insurance		4,471
Accrued interest receivable and other assets		1,483
Deposits		(189,490	)
Borrowings		(11,030	)
Other liabilities		(825	)
Total identifiable assets		18,233
Goodwill	$	7,698

Accounting Standards Codification (“ASC”) Topic 805-10 provides that if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete.  During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.  During the measurement period, the acquirer also shall recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date.  The measurement period may not exceed one year from the acquisition date.  As of June 30, 2014, independent appraisals of branch office real estate and leases had not been completed and the fair value of these assets and liabilities had not been determined.

Loans and leases acquired in the Rumson acquisition were recorded at fair value and subsequently accounted for in accordance with ASC Topic 310, and there was no carryover of Rumson’s allowance for loan losses. The fair values of loans acquired from Rumson were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted for estimated future credit losses and the rate of prepayments. Projected cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.

At the acquisition date, the Company recorded $141.1 million of loans without evidence of credit quality deterioration and $2.6 million of loans with evidence of credit quality deterioration. The following table summarizes the composition of the loans acquired and recorded at fair value.

7

	At February 7, 2014
($ in thousands)	Loans acquired with no credit quality deterioration		Loans acquired with credit quality deterioration		Total
Commercial
Construction	$	11,920	$	-	$	11,920
Commercial Real Estate		62,398		1,832		64,230
Commercial Business		18,086		368		18,454
Residential Real Estate		32,743		180		32,923
Consumer		15,953		234		16,187
Total	$	141,100	$	2,614	$	143,714

The following is a summary of the loans acquired with evidence of deteriorated credit quality in the Rumson acquisition as of the closing date.

($ in thousands)	Acquired Credit Impaired Loans
Contractually required principal and interest at acquisition	$	4,451
Contractual cash flows not expected to be collected (non-accretable difference)		1,543
Expected cash flows at acquisition		2,908
Interest component of expected cash flows (accretable difference)		294
Fair value of acquired loans	$	2,614

The core deposit intangible totaled $1.2 million and is being amortized over its estimated useful life of approximately 10 years using an accelerated method. The goodwill will be evaluated annually for impairment. The goodwill is not deductible for tax purposes.

8

The following table presents the projected amortization of the core deposits intangible for each period presented:

	($ in thousands)
2014	$216
2015	195
2016	173
2017	151
2018	130
Thereafter	324
	$1,189

The fair values of deposit liabilities with no stated maturities, such as checking, money market and savings accounts, were assumed to equal the carrying amounts since these deposits are payable on demand. The fair values of certificates of deposits and IRAs represent the present value of contractual cash flows discounted at market rates for similar certificates of deposit.

Direct costs related to the acquisition were expensed as incurred. During the six months ended June 30, 2014, the Company incurred $1.5 million of merger and acquisition integration-related expenses, which have been separately stated in the Company’s Consolidated Statements of Income.

Supplemental Pro Forma Financial Information

The following table presents financial information regarding the former Rumson operations included in our Consolidated Statements of Income from the date of the acquisition, February 7, 2014, through June 30, 2014 under the column “Actual from acquisition date to June 30, 2014.”  In addition, the table provides unaudited condensed pro forma financial information assuming that the Rumson acquisition had been completed as of January 1, 2013. In the table below, merger-related expenses of $1.8 million were excluded from pro forma non-interest expenses for the six months ended June 30, 2014.  Income taxes were also adjusted to exclude income tax benefits of $505,000 related to the merger expenses for the six months ended June 30, 2014.

The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited pro forma financial information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings that may have occurred as a result of the integration and consolidation of Rumson’s operations. The pro forma financial information reflects adjustments related to certain purchase accounting fair value adjustments; amortization of core deposit and other intangibles; and related income tax effects.

9

	Actual from acquisition date to June 30, 2014		Pro Forma for the  six months ended June 30, 2014			Pro Forma for the six months ended June 30, 2013
	(in thousands, except per share amounts)
Net interest income	$	2,809	$	16,074		$	16,258
Non-interest income		123		2,946			3,572
Non-interest expenses		1,120		13,242			14,020
Income taxes (benefit)		724		(61	)		1,625
Net income		1,088		1,239			3,778
Earnings per share – diluted			$	0.18		$	0.53

 (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, and common stock options, using the treasury stock method.  For periods when a net loss is incurred, there is no dilutive effect of share equivalents. Accordingly, these shares are not included in the calculation of diluted earnings per share.

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

	Three Months Ended June 30, 2014
	Net   (loss)			Weighted- average shares		Per share amount
Basic earnings per common share:
Net (loss)	$	(439,918	)		7,113,717	$	(0.06	)
Effect of dilutive securities:
Stock options and warrants					-
Diluted EPS:
Net (loss) plus assumed conversion	$	(439,918	)		7,113,717	$	(0.06	)

10

	Three Months Ended June 30, 2013
	Net  Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	1,557,030		5,992,743	$	0.26
Effect of Dilutive Securities:
Stock options and warrants				150,867
Diluted EPS:
Net income plus assumed conversions	$	1,557,030		6,143,610	$	0.25

	Six Months Ended June 30, 2014
	Net  Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	201,794		6,958,901	$	0.03
Effect of Dilutive Securities:
Stock options  and warrants				120,293
Diluted EPS:
Net income plus assumed conversions	$	201,794		7,079,194	$	0.03

	Six Months Ended June 30, 2013
	Net  Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	2,882,348		5,944,633	$	0.48
Effect of Dilutive Securities:
Stock options and warrants				148,498
Diluted EPS:
Net income plus assumed conversions	$	2,882,348		6,093,131	$	0.47

 For the three months and six months ended June 30, 2014 and 2013, 247,298 and 90,296 options, respectively, were anti-dilutive and were not included in the computation of diluted earnings per common shares.

11

(4)           Investment Securities

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

				Gross			Gross
	Amortized			Unrealized			Unrealized				Fair
June 30, 2014	Cost			Gains			Losses				Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies		$	11,430,419		$	-		$	(525,144	)		$	10,905,275
Residential collateralized mortgage obligations – GSE			4,016,935			104,804			(35,909	)			4,085,830
Residential collateralized mortgage obligations –      non-GSE			2,774,669			47,862			(6,211	)			2,816,320
Residential mortgage backed securities – GSE			29,268,826			966,555			(261,125	)			29,974,256
Obligations of State and Political subdivisions			22,047,926			225,727			(1,264,271	)			21,009,382
Trust preferred debt securities – single issuer			2,470,301			-			(321,701	)			2,148,600
Corporate debt securities			36,036,784			404,998			(44,033	)			36,397,749
Restricted stock			3,515,900			-			-				3,515,900
Mutual fund			25,000			-			-				25,000
		$	111,586,760		$	1,749,946		$	(2,458,394	)		$	110,878,312

June 30, 2014	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Loss			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	$	501,773	$	-		$	501,773	$	1,572	$	-		$	503,345
Residential collateralized          mortgage obligations – GSE		13,242,024		-			13,242,024		500,621		-			13,742,645
Residential collateralized mortgage          obligations – non-GSE		9,679,334		-			9,679,334		346,640					10,025,974
Residential mortgage backed          securities – GSE		61,339,357		-			61,339,357		1,404,295		(134,022	)		62,609,630
Obligations of State and
Political subdivisions		69,900,076		-			69,900,076		2,023,380		(404,000	)		71,519,456
Trust preferred debt securities-pooled		656,661		(500,944	)		155,717		376,593		-			532,310
Corporate debt securities		500,409		-			500,409		1,076		-			501,485
	$	155,819,634	$	(500,944	)	$	155,318,690	$	4,654,177	$	(538,022	)	$	159,434,845

12

				Gross			Gross
	Amortized			Unrealized			Unrealized				Fair
December 31, 2013	Cost			Gains			Losses				Value
Available for sale-
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies		$	22,386,761		$	33,213		$	(910,274	)		$	21,509,700
Residential collateralized mortgage obligations – GSE			3,547,404			134,388			-				3,681,792
Residential collateralized mortgage obligations –              non-GSE			2,782,843			52,227			(8,674	)			2,826,396
Residential mortgage backed securities – GSE			31,532,051			872,169			(438,273	)			31,965,947
Obligations of State and Political subdivisions			22,206,959			149,959			(2,710,874	)			19,646,044
Trust preferred debt securities-single issuer			2,468,839			-			(455,739	)			2,013,100
Corporate debt securities			16,228,474			318,590			(29,336	)			16,517,728
Restricted stock			1,013,100			-			-				1,013,100
Mutual fund			25,000			-			-				25,000
		$	102,191,431		$	1,560,546		$	(4,553,170	)		$	99,198,807

December 31, 2013	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Loss			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
Obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	1,524,860	$	-		$	1,524,860	$	10,310	$	-		$	1,535,170
Residential collateralized           mortgage obligations – GSE		14,803,739		-			14,803,739		379,815		-			15,183,554
Residential collateralized          mortgage obligations – non-GSE		10,682,363		-			10,682,363		119,777		(27,526	)		10,774,614
Residential mortgage backed       securities – GSE		65,240,620		-			65,240,620		611,062		(387,034	)		65,464,648
Obligations of State and Political subdivisions		59,400,916		-			59,400,916		1,399,938		(1,296,357	)		59,504,497
Trust preferred debt securities –        pooled		656,662		(500,944	)		155,718		-		(6,863	)		148,855
Corporate debt securities		1,008,599		-			1,008,599		9,836		-			1,018,435
	$	153,317,759	$	(500,944	)	$	152,816,815	$	2,530,738	$	(1,717,780	)	$	153,629,773

Restricted stock at June 30, 2014 and December 31, 2013 consisted of $3,450,900 and $948,100, respectively, of Federal Home Loan Bank of New York stock and $65,000 of Atlantic Central Bankers Bank stock.

The amortized cost and estimated fair value of investment securities at June 30, 2014, 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.”

13

	Amortized Cost		Fair Value
Available for sale-
Due in one year or less
U.S. Treasury securities and obligations of US                    Government sponsored corporations (“GSE”)                      and agencies	$	-	$	-
Residential mortgage backed securities – GSE		327,904		329,483
Obligations of State and Political subdivisions		264,650		265,665
Corporate Debt Securities		10,350,414		10,377,692
Restricted Stock		3,515,900		3,515,900
Mutual Fund		25,000		25,000
	$	14,483,868	$	14,513,740
Due after one year through five years
U.S. Treasury securities and obligations of U.S.                     Government sponsored corporations (“GSE”) and                      agencies	$	1,542,897	$	1,537,275
Residential collateralized mortgage obligations –                       non-GSE		-		-
Residential mortgage backed securities – GSE		6,945,975		6,882,941
Obligations of State and Political subdivisions		110,000		110,251
Corporate Debt Securities		23,581,409		23,946,637
	$	32,180,281	$	32,477,104
Due after five years through ten years
U.S. Treasury securities and obligations of US                     Government sponsored corporations (“GSE”) and                      agencies	$	9,887,522	$	9,368,000
Residential collateralized mortgage obligations – GSE		109,945		117,244
Residential mortgage backed Securities – GSE		7,557,870		7,653,670
Obligations of State and Political Subdivisions		4,861,389		4,921,297
Corporate Debt Securities		1,020,008		1,032,500
	$	23,436,734	$	23,092,711
Due after ten years
Residential collateralized mortgage obligations – GSE	$	3,906,991	$	3,968,587
Residential collateralized mortgage obligations – non-GSE		2,446,764		2,486,836
Residential mortgage backed securities – GSE		14,764,981		15,437,645
Obligations of State and Political subdivisions		16,811,887		15,712,169
Corporate Debt Securities		1,084,953		1,040,920
Trust Preferred Debt Securities		2,470,301		2,148,600
	$	41,485,877	$	40,794,757
Total	$	111,586,760	$	110,878,312
Held to maturity-
Due in one year or less
U.S. Treasury securities and obligations of US                     Government sponsored corporations (“GSE”) and                      agencies	$	501,773	$	503,345
Obligations of State and Political subdivisions		18,863,582		18,878,243
Corporate Debt Securities		500,409		501,485
		19,865,764		19,883,073
Due after one year through five years
U.S. Treasury securities and obligations of US                     Government sponsored corporations (“GSE”) and                      agencies	$	-	$	-

14

Obligations of State and Political subdivisions		11,961,666		12,397,039
Corporate Debt Securities		-		-
	$	11,961,666	$	12,397,039
Due after five years through ten years
Residential collateralized mortgage obligations – GSE	$	-	$	-
Residential collateralized mortgage obligations – non-GSE		841,639		844,647
Residential mortgage backed securities – GSE		20,221,542		20,553,756
Obligations of State and Political subdivisions		20,832,099		21,759,133
	$	41,895,280	$	43,157,536
Due after ten years
Residential collateralized mortgage obligations – GSE	$	13,242,024	$	13,742,645
Residential collateralized mortgage obligations – non-GSE		8,837,695		9,181,327
Residential mortgage backed securities – GSE		41,117,815		42,055,874
Obligations of State and Political subdivisions		18,242,729		18,485,041
Trust Preferred Debt Securities – Pooled		656,661		532,310
	$	82,096,924	$	83,997,197
Total	$	155,819,634	$	159,434,845

Gross unrealized losses on available for sale and held to maturity securities and the estimated fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013 were as follows:

June 30, 2014		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	2	$	-	$	-		$	10,905,275	$	(525,144	)	$	10,905,275	$	(525,144	)
Residential collateralized mortgage obligations – GSE	1		1,126,559		(35,909	)		-		-			1,126,559		(35,909	)
Residential collateralized mortgage        obligations – non-GSE	2		988,947		(382	)		105,842		(5,829	)		1,094,789		(6,211	)
Residential mortgage backed        securities – GSE	16		-		-			17,570,016		(395,147	)		17,570,016		(395,147	)
Obligations of State and Political       Subdivisions	79		1,097,189		(6,295	)		25,841,204		(1,661,976	)		26,938,393		(1,668,271	)
Trust preferred debt securities –         single issuer	4		-		-			2,148,600		(321,701	)		2,148,600		(321,701	)
Corporate Debt Securities	1		-		-			1,040,920		(44,033	)		1,040,920		(44,033	)
Total temporarily impaired securities	105	$	3,212,695	$	(42,586	)	$	57,611,857	$	(2,953,830	)	$	60,824,552	$	(2,996,416	)

15

December 31, 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 (GSE) and      agencies	3	$	11,507,350	$	(910,274	)	$	-	$	-		$	11,507,350	$	(910,274	)
Residential collateralized mortgage      Obligations – non-GSE	8		5,328,485		(28,231	)		1,094,754		(7,969	)		6,423,239		(36,200	)
Residential mortgage backed securities      GSE	38		40,504,327		(825,307	)		-		-			40,504,327		(825,307	)
Obligations of State and Political      Subdivisions	95		19,403,457		(2,285,759	)		8,936,441-		(1,721,472	)		28,339,898		(4,007,231	)
Trust preferred debt securities –         single issuer	4		-		-			2,013,100		(455,739	)		2,013,100		(455,739	)
Trust preferred debt securities –         Pooled	1		-		-			148,855		(507,807	)		148,855		(507,807	)
Corporate debt securities	1		-		-			1,056,110		(29,336	)		1,056,110		(29,336	)
Total temporarily impaired securities	150	$	76,743,619	$	(4,049,571	)	$	13,249,260	$	(2,722,323	)	$	89,992,879	$	(6,771,894	)

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 increases in market interest rates.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. 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; therefore, 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 increases in market interest rates. The contractual cash flows of these securities are guaranteed by the issuer, which are primarily 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. The decline in fair value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell these investments and it is not likely that the Company will be required to sell these investments before a market price recovery or maturity; therefore, these investments are not considered other-than-temporarily impaired.

Obligations of State and Political Subdivisions:  The unrealized losses or investments in these securities were caused by increases in market interest rates.  It is expected that the securities would not be settled at a price less than the amortized cost of the investment.  The decline in fair value is attributable to changes in interest rates and not credit quality, 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; therefore, these investments are not considered other-than-temporarily impaired.

Corporate debt securities:   The unrealized losses on investments in corporate debt securities were caused by increases to market interest rates.  None of the corporate issuers have defaulted on interest payments.   The decline in fair value is attributable to changes in interest rates and not a decline in credit quality, 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; therefore, these investments are not considered other-than-temporarily impaired.

16

Trust preferred debt securities – single issuer:  The investments in these securities with unrealized losses are comprised of four corporate trust preferred securities issued by two large financial institutions that mature in 2027. 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.  Both of the issuers continue to maintain investment grade credit ratings and neither has defaulted on interest payments.  The decline in fair value is attributable to the widening of interest rate spreads and the lack of an active trading market for these securities and, to a lesser degree, market concerns about the issuers’ credit quality. The Company does not intend to sell these investments and it is not likely that the Company will be required to sell these investments before a market price recovery or maturity; therefore, these investments are not considered other-than-temporarily impaired.

Trust preferred debt securities – 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 securities issued by financial institution holding companies.  During 2009, the Company recognized an other-than-temporary impairment of $864,727, of which $363,783 was determined to be a credit loss and charged to operations and $500,944 was recognized in the other comprehensive income (loss) component of shareholders’ equity.

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

On a quarterly basis, management evaluates this security to determine if any additional other-than-temporary impairment is required.  As of June 30, 2014, our evaluation was as follows:

a. We obtained the PRETSL XXV Depository Institutions Issuer List as of June 30, 2014 from the FTN Financial Corp. (“FTN”) website and reviewed the financial ratios and capital levels of each individual financial institution issuer.

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

(1) Above 100;

(2) 75 to 100; and

(3) Below 75.

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

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

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

(3) Below 75 – no deferral/default.

d. We then performed 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:

17

· 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 the doubling of 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 23-year stated maturity of this pooled security even though the individual institutions are currently performing according to terms.

e. This June 30, 2014 projection of future cash flows produced a present value that exceeded the carrying value of the pooled trust preferred security; therefore, management concluded that no other-than-temporary impairment issues were present at June 30, 2014.

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

The following table sets forth information with respect to this security at June 30, 2014:

								Expected Deferrals and		Excess Subordination        (2)
Security	Class	Book Value	Fair Value	Unrealized Gain (Loss)	Percent of  Underlying  Collateral Performing	Percent of Underlying Collateral In Deferral (1)	Percent of Underlying Collateral In Default  (1)	Defaults as a % of Remaining Performing Collateral	Moody's S&P / Ratings	Amount	%  of  Current Performing Collateral
PreTSL   XXV	B-1	$155,717	$532,310	$376,593	70.7%	6.7%	22.6%	13.7%	Ca/ NR	$146,000	27.0%

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 percentage means there is more excess subordination to absorb additional defaults / deferrals, and the better our security is protected from loss.

18

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 months ended June 30, 2014		Three months ended June 30, 2013
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

(in thousands)	Six months ended June 30, 2014		Six months ended June 30, 2013
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

(5)   Allowance for Loan Losses and Credit Quality Disclosure

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.

19

            The following table provides an aging of the loan portfolio by loan class at June 30, 2014:

	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	$	-	$	-	$	-	$	-	$	78,921,897	$	78,921,897	$	-	$	-
Commercial Business		365,090		-		422,820		787,910		106,294,283		107,082,193		53,518		369,302
Commercial Real Estate		1,315,303		211,979		6,604,013		8,131,295		183,823,741		191,955,036		440,425		6,163,588
Mortgage Warehouse Lines		-		-		-		-		181,911,743		181,911,743		-		-
Residential Real Estate		219,759		127,677		1,498,854		1,846,290		48,240,242		50,086,532		183,668		1,442,863
Consumer
Loans to Individuals		77,432		-		233,957		311,389		24,303,646		24,615,035		233,957		-
Other		-		-		-		-		205,573		205,573		-		-
Deferred Loan Costs		-		-		-		-		681,713		681,713		-		-
Total	$	1,977,584	$	339,656	$	8,759,644	$	11,076,884	$	624,382,838	$	635,459,722	$	911,568	$	7,975,753

As provided by ASC 310-30, the excess of cash flows expected at acquisition over the initial investment in the loan is recognized as interest income over the life of the loan. Accordingly, loans acquired with evidence of deteriorated credit quality of $911,568 at June 30, 2014 were not classified as non-performing loans.

The following table provides an aging of the loan portfolio by loan class at December 31, 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	$	-	$	-	$ _		$	-	$	51,002,172	$	51,002,172	$	-	$	-
Commercial Business		385,133		58,665		453,325		897,123		81,450,932		82,348,055		-		511,990
Commercial Real Estate		-		-		5,217,173		5,217,173		93,172,557		98,389,730		-		5,555,851
Mortgage Warehouse Lines		-		-		-		-		116,951,357		116,951,357		-		-
Residential Real Estate		315,615		967,099		33,494		1,316,208		12,447,970		13,764,178		-		162,012
Consumer
Loans to Individuals		-		-		-		-		9,766,114		9,766,114		-		92,103
Other		-		-		-		-		170,526		170,526		-		-
Deferred Loan Costs		-		-		-		-		943,950		943,950		-		-
Total	$	700,748	$	1,025,764	$	5,703,992	$	7,430,504	$	365,905,578	$	373,336,082		-	$	6,321,956

20

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 and is consistent with generally accepted accounting principles (GAAP) and regulatory interagency supervisory guidance.  The allowance for loan losses methodology consists of two major components.  The first component is an estimation of losses associated with individually identified impaired loans, which follows Accounting Standards Codification (ASC) Topic 310 (formerly SFAS 114).  The second major component is an estimation of losses under ASC Topic 450 (formerly SFAS 5), which provides guidance for estimating losses on groups of loans with similar risk characteristics.  The Company’s methodology results in an allowance for loan losses which includes a specific reserve for impaired loans, an allocated reserve, and an unallocated portion.

When analyzing groups of loans under ASC 450, the Bank follows the Interagency Policy Statement on the Allowance for Loan and Lease Losses.  The methodology considers the Company’s historical loss experience adjusted for changes in trends, conditions, and other relevant factors that affect repayment of the loans as of the evaluation date.  These adjustment factors, known as qualitative factors, include:

· Delinquencies and nonaccruals

· Portfolio quality

· Concentration of credit

· Trends in volume of loans

· Quality of collateral

· Policy and procedures

· Experience, ability, and depth of management

· Economic trends – national and local

· External factors – competition, legal and regulatory

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

The watch list includes loans that are assigned a rating of special mention, substandard, doubtful and loss. Loans rated 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 off against the allowance for loan losses.

The specific allowance for impaired loans is established for specific loans that have been identified by management as being impaired. These loans are considered to be impaired primarily because the loans have 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 impaired 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.

21

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, warehouse lines of credit 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 qualitative 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, mortgage warehouse lines of credit, and consumer.

Commercial

The Company’s primary lending emphasis is the origination of commercial and commercial real estate loans. 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.

Mortgage Warehouse Lines of Credit

The Company’s Mortgage Warehouse Group provides revolving lines of credit that are available to licensed mortgage banking companies (the “Warehouse Line of Credit”). The Warehouse Line of Credit is used by the mortgage banker to fund the origination of 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 and a transaction fee are collected by the Bank at the time of repayment. Additionally, customers of the Warehouse Lines of Credit are required to maintain deposit relationships with the Bank that, on average, represent 10% to 15% of the loan balances.

As a separate segment of the total portfolio, the warehouse loan portfolio is analyzed as a whole for allowance for loan losses purposes.  Warehouse lines of credit are subject to the same inherent risks as other commercial lending, but the overall degree of risk differs. While the Company’s loss experience with this type of lending has been non-existent since the product was introduced in 2008; there are other risks unique to this lending that still must be considered in assessing the adequacy of the allowance for loan losses. These unique risks may include, but are not limited to, (i) credit risks relating to the mortgage bankers that borrow from us, (ii) the risk of intentional misrepresentation or fraud by any of such mortgage bankers, (iii) changes in the market value of mortgage loans originated by the mortgage banker, the sale of which is the expected source of repayment of the borrowings under a warehouse line of credit, due to changes in interest rates during the time in warehouse, or (iv) unsalable or impaired mortgage loans so originated, which could lead to decreased collateral value and the failure of a purchaser of the mortgage loan to purchase the loan from the mortgage banker.

 These factors, along with the other qualitative factors such as economic trends, concentrations of credit, trends in the volume of loans, portfolio quality, delinquencies and nonaccruals, are also considered and may have positive or negative effects on the allocated allowance.  The aggregate amount resulting from the application of these qualitative factors determines the overall risk for the portfolio and results in an allocated allowance for warehouse lines of credit.

22

Consumer

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

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

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

· Consumer credit scores

· Internal credit risk grades

· Loan-to-value ratios

· Collateral

· Collection experience

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

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

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

3w. Watch - 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 from 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.

23

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.

6.  Doubtful - Loans with the same 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 be charged off to the Bank's loan loss reserve.  Any accrued interest should be backed out of income.

24

The following table provides a breakdown of the loan portfolio by credit quality indictor at June 30, 2014.

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	78,921,897	$	103,155,373	$	165,905,820	$	181,911,743	$	48,453,325
Special Mention		-		2,545,759		15,475,088		-		1,317,592
Substandard		-		942,648		10,574,128		-		315,615
Doubtful		-		438,413		-		-		-
Total	$	78,921,897	$	107,082,193	$	191,955,036	$	181,911,743	$	50,086,532
Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	24,615,035	$	205,573
Nonperforming		-		-
Total	$	24,615,035	$	205,573

The following table provides a breakdown of the loan portfolio by credit quality indictor at December 31, 2013.

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	47,539,033	$	79,832,704	$	68,620,450	$	116,951,357	$	12,635,067
Special Mention		-		1,406,143		19,396,574		-		1,129,111
Substandard		3,463,139		792,057		10,372,706		-		-
Doubtful		-		258,486		-		-		-
Loss		-		58,665		-		-
Total	$	51,002,172	$	82,348,055	$	98,389,730	$	116,951,357	$	13,764,178
Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	9,674,011	$	170,526
Nonperforming		92,103		-
Total	$	9,766,114	$	170,526

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 the loans are both well secured and in the process of collection.

25

The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2014 and December 31, 2013:

Period-End Allowance for Loan Losses by Impairment Method June 30, 2014
					Commercial		Mortgage		Residential								Loan		Total
	Construction		Commercial		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Costs
Allowance for loan losses:
Ending Balance	$	950,014	$	1,546,766	$	3,607,083	$	909,559	$	172,853	$	90,732	$	1,665	$	139,707	$	-	$	7,418,379
Ending Balance
Individually evaluated      for impairment		-		19,141		1,487,047		-		15,015		-		-		-		-		1,521,203
Collectively evaluated       for impairment	$	950,014	$	1,527,625	$	2,120,036	$	909,559	$	157,838	$	90,732	$	1,665	$	139,707	$	-	$	5,897,176
Loans receivables:
Ending Balance	$	78,921,897	$	107,082,193	$	191,955,036	$	181,911,743	$	50,086,532	$	24,615,035	$	205,573	$	-	$	681,713	$	635,459,722
Individually evaluated         for impairment		373,663		464,725		10,041,584		-		1,442,866		-		-		-		-		12,322,838
Loans acquired with        deteriorated credit        quality		-		384,932		1,678,720		-		183,668		233,958		-		-		-		2,481,278
Collectively evaluated        for impairment	$	78,548,234	$	106,232,536	$	180,234,732	$	181,911,743	$	48,459,998	$	24,381,077	$	205,573	$	-	$	681,713	$	620,655,606

Period-End Allowance for Loan Losses by Impairment Method December 31, 2013
					Commercial		Mortgage		Residential								Loan		Total
	Construction		Commercial		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Costs
Allowance for loan losses:
Ending Balance	$	1,205,267	$	1,271,733	$	3,021,766	$	584,757	$	164,673	$	108,849	$	2,183	$	679,343	$	-	$	7,038,571
Ending Balance
Individually evaluated      for impairment		-		293,692		1,490,169		-		-		-		-		-		-		1,783,861
Collectively evaluated       for impairment	$	1,205,267	$	978,041	$	1,531,597	$	584,757	$	164,673	$	108,849	$	2,183	$	679,343	$	-	$	5,254,710
Loans receivables:
Ending Balance	$	51,002,172	$	82,348,055	$	98,389,730	$	116,951,357	$	13,764,178	$	9,766,114	$	170,526	$	-	$	943,950	$	373,336,082
Individually evaluated         for impairment		19,930		776,101		9,130,605		-		162,012		92,103		-		-		-		10,180,751
Collectively evaluated        for impairment	$	50,982,242	$	81,571,954	$	89,259,125	$	116,951,357	$	13,602,166	$	9,674,011	$	170,526	$	-	$	943,950	$	363,155,331

The activity in the allowance for loan loss by loan class for the six months ended June 30, 2014 and 2013 was as follows:

	Construction			Commercial Business			Commercial Real Estate		Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2013	$	1,205,267		$	1,271,733		$	3,021,766	$	584,757		$	164,673		$	108,849		$	2,183		$	679,343		$	7,038,571
Provision charged to operations		60,163			454,031			113,961		(63,082	)		17,332			(16,462	)		(560	)		(65,385	)		499,998
Loans charged off		-			(510,952	)		-		-			-			-			-			-			(510,952	)
Recoveries of loans charged off		-			3,225			-		-			-			-			-			-			3,225
Balance – March 31, 2014	$	1,265,430		$	1,218,037		$	3,135,727	$	521,675		$	182,005		$	92,387		$	1,623		$	613,958		$	7,030,842
Provision charged to operations		(315,416	)		4,041,190			471,356		387,884			(9,152	)		(1,655	)		42			(474,251	)		4,099,998
Loans charged off		-			(3,713,789	)		-		-			-			-			-			-			(3,713,789	)
Recoveries of loans charged off		-			1,328			-		-			-			-			-			-			1,328
Balance – June 30, 2014	$	950,014		$	1,546,766		$	3,607,083	$	909,559		$	172,853		$	90,732		$	1,665		$	139,707		$	7,418,379

26

	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		$	102,234		$	2,059		$	658,119		$	6,023,282
Provision charged to operations		1,872			160,163			321,659			(62,039	)		(19,632	)		(2,444	)		45			(162,958	)		236,666
Loans charged off		-			-			-			-			-			-			-			-			-
Recoveries of loans charged off		417			8,575			-			-			-			-			-			-			8
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

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

Impaired Loans Receivables (By Class)

June 30, 2014

							Three months ended				Six months ended
							June 30, 2014				June 30, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	373,663	$	373,663	$	0	$	338,563	$	3,752	$	229,152	$	4,821
Commercial Business		723,060		1,300,245		0		719,845		8,967		819,018		12,232
Commercial Real Estate		2,625,135		2,812,050		0		2,104,136		10,738		1,052,068		17,480
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Subtotal		3,721,858		4,485,958		0		3,162,544		23,457	$	2,100,238	$	34,533
Residential Real Estate		1,310,919		1,317,592		0		1,310,990		5,043		1,002,650		6,767
Consumer
Loans to Individuals		233,958		243,438		0		238,397		0		261,941		1,155
Other		0		0		0		0		0		0		0
Subtotal		233,958		243,438		0		238,397		0		261,941		1,155
Subtotal with no related allowance		5,266,735		6,046,988		0		4,711,931		28,500	$	3,364,829		42,455
With an allowance:
Commercial
Construction		0		0		0		0		0		0		0
Commercial Business		126,597		283,054		19,141		171,520		0		321,402		0
Commercial Real Estate		9,095,169		9,095,169		1,487,047		9,101,300		64,949		9,112,256		113,822
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Subtotal		9,221,766		9,378,223		1,506,188		9,272,820		64,949		9,433,658		113,822
Residential Real Estate		315,615		315,615		15,015		315,615		0		210,410		0
Consumer
Loans to Individuals		0		0		0		0		0		0		0
Other		0		0		0		0		0		0		0
Subtotal		0		0		0		0		0		0		0
Subtotal with an allowance		9,537,381		9,693,838		1,521,203		9,588,435		64,949		9,644,068		113,822
Total:
Construction		373,663		373,663		0		338,563		3,752		229,152		4,821
Commercial Business		849,657		1,583,299		19,141		891,365		8,967		1,140,420		12,232
Connercial Real Estate		11,720,304		11,907,219		1,487,047		11,205,436		75,687		10,164,324		131,302
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Residential Real Estate		1,626,534		1,633,207		15,015		1,626,605		5,043		1,213,060		6,767
Consumer		233,958		243,438		0		238,397		0		261,941		1,155
Total	$	14,804,116	$	15,740,826	$	1,521,203	$	14,300,366	$	93,449	$	13,008,897	$	156,277

27

							Year ended
December 31 , 2013							12/31/2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	19,930	$	19,930	$	-	$	965,268	$	33,946
Commercial Business		243,840		400,297				258,139		5,094
Commercial Real Estate		-		-		-		1,032,115		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		263,770		420,227		-		2,255,522		39,040
Residential Real Estate		162,012		162,012		-		117,746		-
Consumer
Loans to Individuals		92,103		92,103		-		34,292		-
Other		-		-		-		-		-
Subtotal		92,103		92,103		-		34,292		-
With no related allowance	$	517,885	$	674,342	$	-	$	2,407,560	$	39,040
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	246,853	$	-
Commercial Business		532,261		532,261		293,692		562,346		9,728
Commercial Real Estate		9,130,605		9,130,605		1,490,169		5,546,690		247,277
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		9,662,866		9,662,866		1,783,861		6,355,889		257,005
Residential Real Estate		-		-		-		44,196		-
Consumer
Loans to Individuals		-		-		-		4,238		-
Other		-		-		-		-		-
Subtotal		-		-		-		4,238		-
With an allowance	$	9,662,866	$	9,662,866	$	1,783,861	$	6,404,323	$	257,005
Total:
Construction		19,930		19,930		-		1,212,121		33,946
Commercial Business		776,101		932,558		293,692		820,485		14,822
Commercial Real Estate		9,130,605		9,130,605		1,490,169		6,578,805		247,277
Mortgage Warehouse		-		-		-		-		-
Residential Real Estate		162,012		162,012		-		161,942		-
Consumer		92,103		92,103		-		38,530		-
Total	$	10,180,751	$	10,337,208	$	1,783,861	$	8,811,883	$	296,045

28

Impaired Loans Receivables (By Class)							Three months ended
June 30 , 2013							June 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	540,975	$	540,975	$	-	$	725,974	$	11,078
Commercial Business		177,980		232,022		-		168,683		1,450
Commercial Real Estate		-		-		-		123,945		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		718,955		772,997		-		1,018,602		12,528
Residential Real Estate		164,542		164,542		-		121,246		-
Consumer
Loans to Individuals		-		-		-		22,540		-
Other		-		-		-		-		-
Subtotal				-		-		22,540		-
With no related allowance:	$	883,497	$	937,539	$	-	$	1,162,388	$	12,528
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		614,396		759,223		173,155		617,054		834
Commercial Real Estate		4,477,287		4,477,287		793,926		4,372,626		64,468
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		5,091,683		5,236,510		967,081		4,989,680		65,302
Residential Real Estate		-		-		-		44,069		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		5,091,683		5,236,510		967,081		5,033,749		65,302
Total:
Commercial		5,810,638		6,009,507		967,081		6,008,282		77,830
Residential Real Estate		164,542		164,542		-		165,315		-
Consumer		-		-		-		22,540		-
Total	$	5,975,180	$	6,174,049	$	967,081	$	6,196,137	$	77,830

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).

29

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. In evaluating whether a restructuring constitutes a troubled debt restructuring, applicable guidance requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties.

There were no loans modified that were TDRs in the six month period ended June 30, 2014. Loans modified during the three month and six month ended June 30, 3013 were as follows:

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		-		-		-
Commercial Real Estate		2		3,224,980		3,154,157
Residential Real Estate		-		-		-

There were no loans modified that were TDR’s during the three and six month periods ended June 30, 2014 and June 30, 2013 that were in default.

	Number of Contracts		Recorded Investment
Troubled Debt Restructurings
That Subsequently Defaulted:
Commercial		-		-
Commercial Real Estate		-		-
Residential Real Estate		-		-

Changes in the accretable discount for acquired credit impaired loans for the six months ended June 30, 2014 were as follows:

Balance at beginning of period	$	-
Acquisition of impaired loans		293,976
Accretion of discount		(47,333	)
Balance at end of period	$	246,643

30

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30:

	February 7, 2014		June 30, 2014
	Acquired loans with Evidence of Credit Deterioration		Acquired loans with Evidence of Credit Deterioration
Outstanding balance	$	3,409,340	$	3,229,459
Carrying amount	$	2,613,826	$	2,481,278

There were no changes in the expected cash flows of these loans during the six month period ended June 30, 2014. No allowance for loan losses has been recorded for acquired loans with or without evidence of deterioration as of the acquisition date or as of June 30, 2014.

(6)  Share-Based Compensation

The Company’s share-based incentive plans (“Stock Plans”) authorize the issuance of an aggregate of 440,701 shares of the Company’s common stock (as adjusted for stock dividends) pursuant to awards that may be granted in the form of stock options to purchase common stock (“Options”) and awards of shares of common stock (“Stock Awards”).  The purpose of the Stock Plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, employees and other persons to promote the success of the Company.  Under the Stock Plans, options have a term of ten years after the date of grant, subject to earlier termination in certain circumstances.  Options are granted with an exercise price at the then fair market value of the Company’s common stock.  The grant date fair value is calculated using the Black – Scholes option valuation model.  As of June 30, 2014, there were 346,166 shares of common stock available for future grants under the Stock Plans, of which 300,040 shares are available for future grants under the 2013 Equity Incentive Plan and 46,126 shares are available for future grant under the 2006 Directors Stock Plan.

Stock-based compensation expense related to options was $70,366 and $50,568 for the six months ended June 30, 2014 and 2013, respectively.

Transactions under the Stock Plans during the six months ended June 30, 2014 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, 2014		235,598	$	8.81
Granted		11,700		11.02
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at June 30, 2014		247,298	$	8.91		5.4	$	485,125
Exercisable at June 30, 2014		199,881	$	9.17		4.7	$	294,904

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the six months ended June 30, 2014 are as follows:

	January 2014		April 2014
Fair value of options granted	$	4.75	$	4.32
Risk-free rate of return		1.65%		1.70%
Expected option life in years		7		7
Expected volatility		38.01%		38.01%
Expected dividends (1)		-		-

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

31

As of June 30, 2014, there was approximately $69,098 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 four years.

The following table summarizes nonvested restricted shares for the six months ended June 30, 2014:

				Average
	Number of			Grant-Date
Non-vested shares	Shares			Fair Value
Non-vested at January 1, 2014		136,490			$6.59
Granted		35,600			11.21
Vested		(29,065	)		6.73
Forfeited		-			-
Non-vested at June 30, 2014		143,025			$7.71

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

Stock based compensation expense related to stock grants was $253,322 and $217,390 for the six months ended June 30, 2014 and 2013.

As of June 30, 2014, there was approximately $956,859 of unrecognized compensation cost related to non-vested 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 401(k) plan permits all eligible employees to make contributions to the plan up to the IRS salary deferral limit. The Bank’s contributions to the 401(k) plan are expensed as incurred.

The Company also provides retirement benefits to certain employees under supplemental executive retirement plans.  The plans are unfunded and the Company accrues actuarial 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 as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur, through comprehensive income.

In connection with the benefit plans, the Bank has life insurance policies on the lives of its executives, directors and divisional officers. The Bank is the owner and beneficiary of the policies. The cash surrender values of the policies total approximately $20.9 million and $16.2 million at June 30, 2014 and December 31, 2013, respectively.

32

The components of net periodic expense for the Company’s supplemental executive retirement plans for the three month and six month periods ended June 30, 2014 and 2013 were as follows:

	Three months ended June 30,					Six months ended June 30,
	2014		2013			2014		2013
Service cost	$	43,334	$	30,539		$	57,167	$	214,257
Interest cost		32,852		22,229			43,339		155,951
Actuarial (gain) loss recognized		(1,574)		(29,893	)		(2,077)		(209,721	)
Prior service cost recognized		-		942			-		6,611
	$	74,612	$	23,817		$	98,429	$	167,098

 (8)  Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)

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

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
June 30, 2014:
Unrealized holding (losses) gains on available-for-sale securities:
Unrealized holding (losses) on available-for-sale securities	$	(708,448	)	$	300,312		$	(408,136	)
Unrealized impairment loss on held to maturity security:
Unrealized impairment (loss) on held to maturity security		(500,944	)		170,321			(330,623	)
Unfunded pension liability:
Plan actuarial gains and losses        included in other comprehensive income		185,837			(75,162	)		110,675
Accumulated other comprehensive income ( loss)	$	(1,023,555	)	$	395,471		$	(628,084	)

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
December 31, 2013:
Unrealized holding (losses) gains on available-for-sale securities:
Unrealized holding (losses) on available-for-sale securities	$	(2,992,624	)	$	1,060,098		$	(1,932,526	)
Unrealized impairment loss on held to maturity security:
Unrealized impairment (loss) on held to maturity security		(500,944	)		170,321			(330,623	)
Unfunded pension liability:
Plan actuarial gains and losses        included in other comprehensive income		27,236			(11,721	)		(60,404	)
Accumulated other comprehensive income ( loss)	$	(3,466,332	)	$	1,218,698		$	(2,247,634	)

33

Changes in the components of accumulated other comprehensive income (loss) 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 (Loss)
Six Months Ended June 30, 2014:
Balance, beginning of period	$	(1,932,526	)	$	(330,623	)	$	15,515	$	(2,247,634	)
Other comprehensive income (loss) before      reclassifications		1,522,880			-			95,160		1,618,040
Amounts reclassified from accumulated other      comprehensive income (loss) (1)		1,510			-			-		1,510
Other comprehensive income (loss)		1,524,390			-			95,160		1,619,550
Balance, end of period	$	(408,136	)	$	(330,623	)	$	110,675	$	(628,084	)

(1) Amounts reclassified are included in Other Income on the Consolidated Statement of Income.

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Six Months Ended June 30, 2013:
Balance, beginning of period	$	1,235,204		$	(330,623	)	$	(100,288	)	$	804,293
Other comprehensive income (loss) before      reclassifications		(2,912,215	)		-			39,884			(2,872,331	)
Amounts reclassified from accumulated other      comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,912,216	)		-			39,884			(2,872,331	)
Balance, end of period	$	(1,677,012	)	$	(330,623	)	$	(60,403	)	$	(2,068,038	)

34

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2014:
Balance, beginning of period	$	(1,088,261	)	$	(330,623	)	$	53,475	$	(1,365,409	)
Other comprehensive income (loss) before      reclassifications		678,615			-			57,200		735,815
Amounts reclassified from accumulated other      comprehensive income (loss) (1)		1,510			-			-		1,510
Other comprehensive income (loss)		680,125			-			57,200		737,325
Balance, end of period	$	(408,136	)	$	(330,623	)	$	110,675	$	(628,084	)

(1) Amounts reclassified are included in Other Income on the Consolidated Statement of Income

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2013:
Balance, beginning of period	$	(802,169	)	$	(330,623	)	$	(98,363	)	$	(373,183	)
Other comprehensive income (loss) before      reclassifications		(2,479,180	)		-			37,959			(2,441,221	)
Amounts reclassified from accumulated other      comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,479,180	)		-			37,959			(2,441,221	)
Balance, end of period	$	(1,677,011	)	$	(330,623	)	$	(60,404	)	$	(2,068,038	)

35

(9) Recent Accounting Pronouncements

ASU 2014-04 (Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure)

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreements. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this update using either a modified retrospective transition method or a prospective transition method. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

ASU 2014-11 Repurchase-to-maturity Transactions, Repurchase Financings, and Disclosures to change the accounting for repurchase-to-maturity transactions and certain linked repurchase financings.

On June 12, 2014, the FASB issued ASU 2014-11, Repurchase-to-maturity Transactions, Repurchase Financings, and Disclosures to change the accounting for repurchase-to-maturity transactions and certain linked repurchase financings. This will result in accounting for both types of arrangements as secured borrowings on the balance sheet. Additionally, the ASU introduces new disclosures to (i) increase transparency about the types of collateral pledged in secured borrowing transactions and (ii) enable users to better understand transactions in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction.

For public business entities, the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. All other accounting and disclosure amendments in the ASU are effective for public business entities for the first interim or annual period beginning after December 15, 2014. The Company is currently evaluating the impact that the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

ASU 2014-12 Accounting for Share-Based-Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FAS Emerging Issues Task Force).

On June 19, 2014, the FASB issued ASU 2014-12, Accounting for Share-Based-Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FAS Emerging Issues Task Force) to clarify that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite service period should be treated as a performance condition that affects the vesting of the award. As such, the performance target should not be reflected in estimating the grant-date fair value of the award.

ASU 2014-12 requires that a performance target included in a share-based payment award that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Therefore, such performance target should not be reflected in estimating the grant-date fair value of the award. A reporting entity should apply existing guidance in Topic 718 as it relates to the award with performance conditions that affect vesting.

36

Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. In current practice, two common performance targets-a change of control event and an IPO-are considered probable when they occur. Consequently, the award would be recognized in earnings at that time.

If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved.

For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company is currently evaluating the impact that the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

 (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 quoted market prices on nationally recognized exchanges (Level 1) or by using Level 2 Inputs.  For Level 2 securities, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the security’s terms and conditions, among other things.

37

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 collateral, 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”), establishing a new accounting basis.  The Company subsequently adjusts the fair value on the OREO utilizing Level 3 inputs on a non-recurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

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

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2014:
Securities available for sale:
U. S. Treasury securities and
`         obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	9,368,000	$	1,537,275	$	-	$	10,905,275
Residential collateralized mortgage obligations – GSE				4,085,830				4,085,830
Residential collateralized mortgage obligations – Non-GSE				2,816,320				2,816,320
Residential mortgage backed securities – GSE				29,974,256				29,974,256
Obligations of State and Political subdivisions				21,009,382				21,009,382
Trust preferred debt securities – single issuer				2,148,600				2,148,600
Corporate debt securities				36,397,749				36,397,749
Restricted stock				3,515,900				3,515,900
Mutual fund				25,000				25,000

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
December 31, 2013:
Securities available for sale:
U. S. Treasury securities and
obligations of U.S. Government
sponsored corporations (“GSE”) and agencies	$	19,994,430	$	1,515,270	$	-	$	21,509,700
Residential collateralized mortgage obligations – GSE		-		3,681,792		-		3,681,792
Residential collateralized mortgage obligations – non-GSE		-		2,826,396		-		2,826,396
Residential mortgage backed securities – GSE		-		31,965,947		-		31,965,947
Obligations of State and Political subdivisions		-		19,646,044		-		19,646,044
Trust preferred debt securities – single issuer		-		2,013,100		-		2,013,100
Corporate debt securities		-		16,517,728		-		16,517,728
Restricted stock		-		1,013,100		-		1,013,100
Mutual fund		-		25,000		-		25,000

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013 were as follows:

38

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2014:
Impaired loans	$	-	$	-	$	8,016,178	$	8,016,178
December 31, 2013:
Impaired loans	$	-	$	-	$	7,879,005	$	7,879,005
Other real estate owned		-		-		209,937		209,937

Impaired loans measured at fair value and included in the above table consisted of 9 loans having an aggregate recorded investment of $9,537,381 and specific loan loss allowances of $1,521,203 at June 30, 2014 and 17 loans at December 31, 2013, having an aggregate balance of $9,662,862 and specific loan loss allowances of $1,783,861.

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 (Weighted Average)
June 30, 2014
Impaired loans	$	8,016,178	Appraisal of	Appraisal		10-40% (19.1%)
			collateral (1)	adjustments (2)
December 31, 2013
Impaired loans	$	7,879,005	Appraisal of	Appraisal
			collateral (1)	adjustments (2)		5-15% (9.7%)
Other real estate owned	$	209,937	Appraisal of	Appraisal
			collateral (1)	adjustments (2)		10-50% (32.6%)

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

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

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

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

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

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

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

39

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

Gross Loans Receivable (Carried at Cost). The fair values of loans, excluding impaired loans subject to specific loss reserves, are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values.

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

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

40

The estimated fair values and carrying amounts of financial assets and liabilities were as follows:

June 30, 2014
	Carrying			Level 1		Level 2			Level 3		Fair
	Value			Inputs		Inputs			Inputs		Value
Cash and cash equivalents	$	23,149,148			23,149,148	$	-		$	-	$	23,149,148
Securities available for sale		110,878,312			9,368,000		101,510,312			-		110,878,312
Securities held to maturity		155,318,690			-		159,434,845			-		159,434,845
Loans held for sale		9,877,863			-		9,900,291			-		9,900,291
Loans, net		628,041,343			-		-			630,109,000		630,109,000
Accrued interest receivable		3,161,963			-		3,161,963			-		3,161,963
Deposits		(819,867,329	)		-		(820,796,000	)		-		(820,796,000	)
Borrowings		(59,888,511	)		-		(60,615,000	)		-		(60,615,000	)
Redeemable subordinated    debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(904,892	)		-		(904,892	)		-		(904,892	)

December 31, 2013
	Carrying			Level 1		Level 2			Level 3		Fair
	Value			Inputs		Inputs			Inputs		Value
Cash and cash equivalents	$	69,278,771		$	69,278,771	$	-		$	-	$	69,278,771
Securities available for sale		99,198,807			19,994,430		79,204,377			-		99,198,807
Securities held to maturity		152,816,815			-		153,629,773			-		153,629,000
Loans held for sale		10,923,689			-		10,924,000			-		10,924,000
Loans		366,297,511			-		-			372,548,000		372,548,000
Accrued interest receivable		2,542,602			-		2,542,602			-		2,542,602
Deposits		(638,552,030	)		-		(639,539,000	)		-		(639,539,000	)
Borrowings		(10,000,000	)		-		(11,148,000	)		-		(11,148,000	)
Redeemable subordinated   debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(883,212	)		-		(883,212	)		-		(883,212	)

Loan commitments and standby letters of credit as of June 30, 2014 and December 31, 2013 are based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit is nominal.

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

The purpose of this discussion and analysis of the operating results and financial condition at June 30, 2014 is intended to help readers analyze the accompanying financial statements, notes and other supplemental information contained in this document. Results of operations for the three month and six month periods ended June 30, 2014 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 Operation) for the year ended December 31, 2013, as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2014.

41

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, and thereby enabling the Bank to operate within a bank holding company structure. The Company became an active bank holding company on July 1, 1999. The Bank is a wholly-owned subsidiary of the Company. Other than its ownership interest in the Bank, the Company currently conducts no other significant business activities.

The Bank operates nineteen branches, and manages its investment portfolio through its subsidiary, 1st Constitution Investment Company of New Jersey, Inc. During the second quarter of 2014, the Bank completed the merger of RFHB Investment Company, a subsidiary of Rumson that managed Rumson’s investment portfolio, with and into 1st Constitution Investment Company of New Jersey, Inc.  FCB Assets Holdings, Inc., a subsidiary of the Bank, is used by the Bank to manage and dispose of repossessed real estate.

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

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward looking statements.  When used in this and in future filings by the Company with the SEC, in the Company’s press releases and in oral statements made with the approval of an authorized executive officer of the Company, the words or phrases “will,” “will likely result,” “could,” “anticipates,” “believes,” “continues,” “expects,” “plans,” “will continue,” “is anticipated,” “estimated,” “project” or “outlook” or similar expressions (including confirmations by an authorized executive officer of the Company of any such expressions made by a third party with respect to the Company) are intended to identify forward-looking statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speaks 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 31, 2014, 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.

42

Recent Developments

On February 7, 2014, the Company completed its acquisition of Rumson-Fair Haven Bank and Trust Company, a New Jersey state chartered commercial bank (“Rumson”), which merged with and into the Bank, with the Bank as the surviving entity. The merger agreement among the Company, the Bank and Rumson (the “Merger Agreement”) provided that the shareholders of Rumson would receive, at their election, for each outstanding share of Rumson common stock that they own at the effective time of the merger, either 0.7772 shares of the Company common stock or $7.50 in cash or a combination thereof, subject to proration as described in the Merger Agreement, so that 60% of the aggregate merger consideration consisted of cash and 40% consisted of shares of the Company’s common stock. The Company issued an aggregate of 1,019,223 shares of its common stock and paid $14.8 million in cash in the transaction.

The merger was accounted for under the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at their estimated fair values as of the acquisition date. Rumson’s results of operations have been included in the Company’s Consolidated Statements of Income since February 7, 2014.

In May of 2013, the Bank entered into a loan participation agreement with a lead lender and another bank to provide financing to Projuban, LLC d/b/a G3K Displays (the “Borrower” or “Projuban”). The loan is secured by a first security interest in the Borrower’s accounts receivable, inventory, equipment and fixtures, and is further secured by the continuing guarantees of the Borrower’s principals.

As previously disclosed in the Company’s Current Report on Form 8-K dated June 20, 2014 (the “Current Report”), the Bank became aware of an apparent fraud by the Borrower and its principals during the second quarter of 2014. The Bank, together with the lending group to the Borrower, commenced a review and investigation of the matter, which included the engagement of forensic accountants. This review and investigation revealed that the principals of the Borrower made fraudulent misrepresentations about the collateral securing the loan and the overall financial condition of the Borrower. The loan was current in payments prior to the initial discovery of the apparent fraud. As reported in the Current Report, management determined that the Borrower’s financial capacity to repay the remaining balance of the loan was unlikely due to the apparent fraud and the Borrower’s cessation of operations, and that substantial doubt existed regarding future repayment of the loan. Accordingly, the Bank recorded a provision for loan losses and a corresponding charge-off of the entire balance of the loan in the amount of $3.7 million in the second quarter of 2014.

Each of these events had a significant impact on the results of operations for the six month period ended June 30, 2014.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Summary

The Company reported a net loss of $439,918, or $0.06 per diluted share, for the three month period ended June 30, 2014 compared to net income of $1,557,030, or $0.25 per diluted share, for the three month period ended June 30, 2013.

The results of operations for the first and second quarters of 2014 were impacted by the two events described above in the “Recent Developments” section. In the first quarter, the Company completed the acquisition of Rumson and incurred $1.4 million of merger-related expenses that reduced earnings in that quarter by $897,000, or $0.13 per diluted share.

43

In the second quarter of 2014, $109,000 of merger related expenses were incurred, which reduced net income by $65,000, or $0.01 per diluted share. Also in the second quarter, the Projuban loan with a balance of approximately $3.7 million was fully charged off and the provision for loan losses was increased by a similar amount due to the apparent fraud by the borrower and its principals. This additional provision reduced net income in the second quarter by $2.2 million, or $0.30 per diluted share, and resulted in a net loss for the second quarter of 2014. Net income, adjusted for the effect of these events (“Adjusted Net Income”), was $1.8 million, or $0.25 per diluted share. For the three month period ended June 30, 2013, net income was $1.6 million, or $0.25 per diluted share.

Adjusted Net Income and Adjusted Net Income per diluted share are measures not in accordance with generally accepted accounting principles (“GAAP”). The Company used the non-GAAP financial measures, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per diluted share, because the Company believes that it is useful for the users of the financial information to understand the effect on net income of the merger related expenses incurred in the merger with Rumson and the large provision for loan losses recorded as a result of the apparent fraud by a borrower and its principals. Management believes that thesenon-GAAP financial measures improve the comparability of the current period results with the results of prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for the Company's GAAP results.

A reconciliation of these non-GAAP measures to the reported net income or loss and net income or loss per diluted share follows.

Reconciliation of Non-GAAP Measures

	Three Month Ended					Six Month Ended
	June 30, 2014			June 30, 2013		June 30, 2014			June 30, 2013
Net Income (loss)	$	(439,918	)	$	1,557,030	$	201,794		$	2,882,348
Adjustments to Net Income (loss):
Provisions for Loan losses (1)		3,656,000			-		3,656,000			-
Merger-Related Expenses		109,430			-		1,532,153			-
Income Tax Effect of Adjustments (2)		(1,503,913	)		-		(2,030,818	)		-
Adjusted Net Income	$	1,821,599		$	1,557,030	$	3,359,129		$	2,882,348
Average Diluted Shares Outstanding (3)		7,180,127			6,143,610		7,032,265			6,093,131
Adjusted Net Income per Diluted     Share	$	0.25		$	0.25	$	0.48		$	0.47
Net Income (Loss) per Diluted Share	$	(0.06	)	$	0.25	$	0.03		$	0.47

(1)	The amount represents the full charge – off of the Projuban loan that was subject to apparent fraud.
(2)	Tax effected at an income tax rate of 39.94%, less the impact of non-deductible merger expenses.
(3)	The adjustments to the reported loss for the three month period ended June 30, 2014 result in adjusted net income. Accordingly,diluted shares outstanding include the dilutive share equivalents for purposes of computing adjusted netincome per diluted share.

44

Second Quarter Highlights

· Net interest income was $8.4 million in the second quarter of 2014 compared to $6.9 million in the first quarter of 2014 and $6.1 million in the second quarter of 2013. The net interest margin for each of these periods was 3.89%, 3.56% and 3.39%, respectively.

· Loans increased $104 million during the second quarter of 2014 with mortgage warehouse loans increasing $78 million and construction, commercial and commercial real estate loans increasing a combined $26 million. The loan to asset ratio increased to 64.5% at June 30, 2014 compared to 50.3% at December 31, 2013.

· The integration of the former Rumson operations was completed at the end of the first quarter of 2014 and customer retention has been as expected with loans of $134 million and deposits of $179 million at June 30, 2014.

· Beginning in the second quarter of 2014, a significant shift in the source and purpose of loans originated by the Bank’s residential lending operations and loans financed by the residential mortgage warehouse operations developed. At June 30, 2014, 75% of the Bank’s residential mortgage pipeline of $57 million (pending loan applications, approved applications and closed loans) was for the purchase of a home compare to 29% at June 30, 2013. A similar shift was experienced in the residential mortgage warehouse lending operation with 70% of the residential mortgages financed for the purchase of a home compared to 30% at June 30, 2013. This trend, if it continues, will provide a more consistent source of revenue in future periods.

Earnings Analysis

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.

Net Interest Income

Net interest income, the Company’s largest and most significant component of net 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 86.9% of the Company’s net revenues (defined as net interest income plus non-interest income) for the three month period ended June 30, 2014 and 80.9% of net revenues for the three month period ended June 30, 2013. 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.

Average interest earning assets increased by $139,590,330, or 18.5%, to $893,599,777 for the three month period ended June 30, 2014 compared to $754,009,447 for the three month period ended June 30, 2013. The overall yield on interest earning assets, on a tax-equivalent basis, increased 46 basis points to 4.42% for the three month period ended June 30, 2014 when compared to 3.96% for the three month period ended June 30, 2013 due primarily to the increase in the higher-yielding average balance of the loan portfolio in the current period.

This increase in the overall yield on interest earning assets for the quarter ended June 30, 2014 compared with the corresponding quarter in 2013 was primarily due to (1) the second quarter increase in construction, commercial real estate and commercial business loans; and (2) the increase in loans and investments resulting from the Rumson merger. All of these factors contributed to an increase in the yield on earning assets, which primarily drove the increase in the net interest margin and net interest income.

Average interest bearing liabilities increased by $116,055,968, or 19.4%, to $713,342,209 for the three month period ended June 30, 2014 compared to $597,286,241 for the three month period ended June 30, 2013.  Overall, the cost of total interest bearing liabilities decreased 4 basis points to 0.67% for the three months ended June 30, 2014 compared to 0.71% for the three months ended June 30, 2013. The increase in average interest bearing liabilities is due principally to the Rumson merger.

45

The net interest margin (on a tax-equivalent basis), which is net interest income divided by average interest earning assets, was 3.89% for the three months ended June 30, 2014 compared to 3.39% for the three months ended June 30, 2013.  

The following table sets forth the Company’s consolidated average balances of assets and liabilities and shareholders’ equity as well as interest income and expense on related items, and the Company’s average yield or rate for the three month periods ended June 30, 2014 and 2013. 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)

	Three months ended June 30, 2014							Three months ended June 30, 2013
	Average Balance		Interest		Average Yield			Average Balance		Interest		Average Yield
Assets:
Federal Funds Sold/Short-Term       Investments	$	66,804,945	$	45,392		0.27	%	$	131,756,567	$	89,454		0.27	%
Investment Securities:
Taxable		180,120,731		1,059,160		2.35	%		151,524,528		901,712		2.38	%
Tax-exempt (4)		91,394,368		871,349		3.81	%		68,322,175		807,517		4.73	%
Total		271,515,099		1,930,509		2.84	%		219,846,703		1,709,228		3.11	%
Loan Portfolio: (1)
Construction		75,431,970		1,362,736		7.25	%		39,980,233		614,693		6.17	%
Residential real estate		49,348,093		505,144		4.11	%		11,143,951		143,421		5.16	%
Home Equity		23,974,678		352,091		5.89	%		9,010,504		123,961		5.52	%
Commercial and commercial    real estate		279,259,866		4,158,148		5.97	%		140,846,437		2,551,463		7.27	%
Mortgage warehouse lines		108,601,198		1,253,362		4.63	%		160,777,185		1,885,001		4.70	%
Installment		269,618		4,092		6.09	%		239,208		3,679		6.17	%
All Other Loans		18,394,309		234,687		5.12	%		40,408,657		323,040		3.21	%
Total		555,279,733		7,870,260		5.68	%		402,406,176		5,645,259		5.63	%
Total Interest-Earning Assets		893,599,777		9,846,161		4.42	%		754,009,447		7,443,941		3.96	%
Allowance for Loan Losses		(7,360,782)							(6,221,038)
Cash and Due From Bank		15,110,875							13,663,462
Other Assets		59,535,711							48,937,696
Total Assets	$	960,885,581						$	810,389,566
Liabilities and Shareholders’ Equity:
Money Market and NOW Accounts	$	292,375,327	$	239,686		0.33	%	$	225,749,825	$	184,070		0.33	%
Savings Accounts		204,238,031		226,884		0.45	%		201,463,594		221,449		0.44	%
Certificates of Deposit		175,814,908		505,815		1.15	%		141,515,821		464,287		1.32	%
Other Borrowed Funds		22,356,944		127,839		2.29	%		10,000,000		104,255		4.18	%
Trust Preferred Securities		18,557,000		85,673		1.83	%		18,557,000		87,772		1.87	%
Total Interest-Bearing Liabilities		713,342,209		1,185,897		0.67	%		597,286,241		1,061,833		0.71	%
Net Interest Spread (2)						3.75	%						3.25	%
Demand Deposits		158,603,674							139,381,895
Other Liabilities		6,898,724							7,263,328
Total Liabilities		878,844,607							743,931,463
Shareholders’ Equity		82,040,974							66,458,103
Total Liabilities and Shareholders’ Equity	$	960,885,581						$	810,389,566
Net Interest Margin (3)			$	8,660,264		3.89	%			$	6,382,108		3.39	%

46

(1) Loan origination fees are considered an adjustment to interest income.  For the purpose of calculating loan yields, average loan balances include nonaccrual loans with no related interest income and includes the average balance of loans held for sale. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation under the heading “Non-Performing Assets” for a discussion of the Bank’s policy with regard to non-accrual loans.

(2) The interest rate spread is the difference between the average yield on interest earning assets and the average rate paid on interest bearing liabilities.

(3) The net interest margin is equal to net interest income divided by average interest earning assets.

(4) Tax-equivalent basis.

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, the level of non-accrual loans and problem loans as identified through internal classification, collateral values, and the growth and size of the loan portfolio.

In addition to these factors, management takes into consideration current economic conditions and local real estate market conditions.  Using this evaluation process, the Company recorded a provision for loan losses of $4,099,998 for the three months ended June 30, 2014 compared to $236,666 for the three months ended June 30, 2013. The principal reason for the increase in the provision for loan losses in the second quarter of 2014 was the $3.7 million charge-off and replenishment of the allowance due to the Projuban loan, which was previously performing prior to the apparent fraud.  At June 30, 2014, non-performing loans increased by $1,989,117, or 31.5%, to $8,311,073 and the ratio of non-performing loans to total loans was 1.31% at June 30, 2014 compared to 1.69% at December 31, 2013.

At June 30, 2014, the loan portfolio balance was $635,459,722, which represented an increase of $261,123,640 compared to the December 31, 2013 loan portfolio balance of $373,336,082. The primary reasons for the current period increase in the loan portfolio were the $143,714,000 of loans acquired in the Rumson merger and the internal growth of the loan portfolio during the second quarter of 2014.

 There were no changes in the expected cash flows of the acquired loans from the Rumson merger during the second quarter of 2014.  No allowance for loan losses was recorded for acquired loans with or without evidence of deteriorated credit quality as of June 30, 2014.

Non-Interest Income

Total non-interest income for the three months ended June 30, 2014 was $1,260,032, a decrease of $187,827, or 13.0%, from non-interest income of $1,447,859 for the three months ended June 30, 2013. This component represented 13.1% of the Company’s net revenues for the three month period ended June 30, 2014 compared to 19.1% of net revenues for the three month period ended June 30, 2013.

Service charges on deposit accounts represent a consistent source of non-interest income. Service charge revenues increased by $45,631, or 20.6%, to $267,235 for the three months ended June 30, 2014 from $221,604 for the three months ended June 30, 2013. This increase was the result of a higher volume of uncollected funds and overdraft fees collected on deposit accounts in the second quarter of 2014.

47

Gain on sales of loans held for sale decreased by $211,991, or 44.2%, to $267,155 for the three months ended June 30, 2014 when compared to $479,146 for the three months ended June 30, 2013.  The Bank originates and sells both residential mortgage loans and loans guaranteed by the Small Business Administration in the secondary market.  The higher interest rate environment that existed in the second quarter of 2014 compared to the same period in 2013 resulted in lower demand to refinance residential mortgages. As a result, the volume of mortgage loans originated and sold decreased for the three months ended June 30, 2014 compared to the three months ended June 30, 2013.

Non-interest income also includes income from bank-owned life insurance (“BOLI”), which amounted to $148,987 for the three months ended June 30, 2014 compared to $119,758 for the three months ended June 30, 2013. The increase in income from BOLI in the second quarter of 2014 was due primarily to the acquisition of $4.5 million of BOLI assets in the Rumson merger.

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rentals, wire transfer service fees, cash counting fees and Automated Teller Machine fees for non-Bank customers. Decreased customer demand for these services contributed to the other income component of non-interest income declining to $576,655 for the three months ended June 30, 2014 compared to $627,351 for the three months ended June 30, 2013, a decrease of $50,697 for the second quarter of 2014 as compared to the second quarter of 2013.

Non-Interest Expense

Non-interest expenses increased by $1,543,515, or 29.9%, to $6,705,815 for the three months ended June 30, 2014 from $5,162,300 for the three months ended June 30, 2013. Non-interest expenses attributable to the former Rumson operation were approximately $690,000 in the second quarter of 2014. The following table presents the major components of non-interest expenses for the three months ended June 30, 2014 and 2013.

Non-interest Expenses
	Three months ended June 30,
	2014		2013
Salaries and employee benefits	$	3,684,723	$	3,045,241
Occupancy expenses		838,895		622,499
Data processing services		311,760		294,306
Equipment expense		235,528		188,286
Marketing		83,753		92,087
Regulatory, professional and other fees		460,614		271,908
Merger-related expenses		109,430		-
FDIC insurance expense		184,631		15,000
Directors’ fees		21,500		22,000
Other real estate owned expenses		98,609		48,557
Amortization of intangible assets		121,030		66,992
Other expenses		555,342		495,424
Total	$	6,705,815	$	5,162,300

Salaries and employee benefits, which represent the largest portion of non-interest expenses, increased by $639,482, or 21.0%, to $3,684,723 for the three months ended June 30, 2014 compared to $3,045,241 for the three months ended June 30, 2013. Of this increase, $232,000 was due to salary and benefits for former Rumson employees who were retained by the Bank. The balance of the increase in salaries and employee benefits for the three months ended June 30, 2014 was a result of an increase in the number of employees, regular annual merit increases and increased health care costs. Staffing levels have increased to 179 full time equivalent employees at June 30, 2014 as compared to 156 full time equivalent employees at June 30, 2013.

Occupancy expenses increased by $216,396, or 34.8%, to $838,895 for the three months ended June 30, 2014 compared to $622,499 for the three months ended June 30, 2013.  The current period increase resulted primarily from increased depreciation, property taxes and maintenance costs of the five branch offices acquired as a result of the Rumson merger.  

48

The cost of data processing services increased to $311,760 for the three months ended June 30, 2014 from $294,306 for the three months ended June 30, 2013 as additional expenses were incurred to support and maintain the five new locations acquired as a result of the Rumson merger within the Bank’s information technology systems and the growth of loan and deposit transaction volumes.

Equipment expense increased by $47,242, or 25.1%, to $235,528 for the three months ended June 30, 2014 compared to $188,286 for the three months ended June 30, 2013 primarily due to maintenance agreement costs associated with the expansion of the branch network due to the Rumson merger that were incurred during the second quarter of 2014.

Regulatory, professional and other fees increased by $188,706, or 69.4%, to $460,614 for the three months ended June 30, 2014 compared to $271,908 for the three months ended June 30, 2013.  During the three months ended June 30, 2014, the Company incurred higher professional fees in connection with lending, collections, general corporate matters and post-merger matters.

FDIC insurance expense increased to $184,631 for the three months ended June 30, 2014 compared to $15,000 for the three months ended June 30, 2013 as a result of the assumption of deposits upon completion of the Rumson merger, which accounted for approximately $45,000 of the increase. The balance of the increase is due to changes in the insurance premium calculation in 2013 mandated by the Dodd-Frank Act.

Other real estate owned expenses increased by $50,052 to $98,609 for the three months ended June 30, 2014 compared to $48,557 for the three months ended June 30, 2013 as the Company incurred a higher level of property taxes, maintenance, disposition costs and other costs on repossessed properties held as other real estate owned during the second quarter of 2014 compared to the second quarter of 2013. At June 30, 2014, the Company held one property with a value of $1,860,000 as other real estate owned compared to eight properties with an aggregate value of $7,926,851 at June 30, 2013.

Amortization of intangible assets increased $54,038 to $121,030 during the second quarter of 2014 when compared to the second quarter of 2013 due to the increase in core deposit intangible assets of $1,189,000 recorded in the Rumson merger.

All other expenses increased to $555,342 for the three months ended June 30, 2014 compared to $495,424 for the three months ended June 30, 2013 as current year increases 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.

Income Taxes

The pre-tax loss was $1,168,068 for the three months ended June 30, 2014 compared to pre-tax income of $2,169,522 for the three months ended June 30, 2013.  

The Company recorded an income tax benefit of $728,150 for the three months ended June 30, 2014 compared to income tax expense of $612,492 for the three months ended June 30, 2013. The effective tax rate for the second quarter of 2014 was a benefit of 62.3%, which was significantly higher than the combined statutory rate of 39.9% due to the impact of tax exempt interest income. The effective tax rate for the 2013 quarter was 28.2%.

Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Summary

The Company reported net income of $201,794, or $0.03 per diluted share, for the six month period ended June 30, 2014 compared to net income of $2,882,348, or $0.47 per diluted share, for the six month period ended June 30, 2013.

49

The results of operations for the six months ended June 30, 2014 were impacted by the two events described above in the “Recent Developments” section. In the first quarter of 2014, the Company completed the acquisition of Rumson.  For the six months ended June 30, 2014, the Company incurred a total of $1.5 million of merger-related expenses that reduced net income by $962,000, or $0.14 per diluted share.

In the second quarter, the Projuban loan for approximately $3.7 million was fully charged-off and the provision for loan losses was increased by a similar amount due to the apparent fraud by the borrower and its principals. This additional provision reduced net income by $2.2 million, or $0.31 per diluted share, and resulted in a net loss for the second quarter of 2014 and substantially lower net income for the six months ended June 30, 2014 when compared to the six months ended June 30, 2013.

Net income, adjusted for the effect of these events (“Adjusted Net Income”), was $3.4 million for the six month period ended June 30, 2014, or $0.48 per diluted share. For the six month period ended June 30, 2013, net income was $2.9 million, or $0.47 per diluted share. Adjusted Net Income and Adjusted Net Income per diluted share are non-GAAP measures. A reconciliation of these non-GAAP measures to the reported net income or loss and net income of loss per diluted share is summarized in the table entitled “Reconciliation of Non-GAAP Measures” in “Results of Operations, Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013, Summary.”

Earnings Analysis

The Banks’ 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.

Net Interest Income

Net interest income, the Company’s largest and most significant component of net income, is the difference between interest and fees earned on loans and other earning assets, and interest paid on deposits and borrowed funds. This component represented 84.1% of the Company’s net revenues (defined as net interest income plus non-interest income) for the six month period ended June 30, 2014 and 79.8% of net revenues for the six-month period ended June 30, 2013. 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 following table sets forth the Company’s consolidated average balances of assets and liabilities and shareholders’ equity as well as interest income and expense on related items, and the Company’s average yield or rate for the six month periods ended June 30, 2014 and 2013. The average rates are derived by dividing interest income and expense by the average balance of assets and liabilities, respectively.

50

Average Balance Sheets with Resultant Interest and Rates

(yields on a tax-equivalent basis)

	Six months ended June 30, 2014							Six months ended June 30, 2013
	Average Balance		Interest		Average Yield			Average Balance			Interest		Average Yield
Assets:
Federal Funds Sold/Short-Term   Investments	$	81,499,665	$	100,708		0.25	%	$	108,464,342		$	139,342		0.26	%
Investment Securities:
Taxable		182,440,056		2,180,744		2.39	%		155,253,462			1,838,797		2.39	%
Tax-exempt (4)		85,521,465		1,731,201		4.05	%		65,948,918			1,566,576		4.79	%
Total		267,961,521		3,911,945		2.92	%		221,202,380			3,405,373		3.10	%
Loan Portfolio: (1)
Construction		67,764,651		2,382,937		7.09	%		42,304,486			1,295,504		6.18	%
Residential real estate		42,370,454		838,609		3.99	%		11,033,073			288,311		5.50	%
Home Equity		21,419,673		565,208		5.32	%		9,115,975			248,644		5.48	%
Commercial and commercial  real estate		253,561,642		7,473,017		5.94	%		141,990,388			5,078,830		7.21	%
Mortgage warehouse lines		100,277,323		2,332,888		4.69	%		175,027,892			4,074,237		4.69	%
Installment		271,935		8,198		6.08	%		247,069			8,070		6.59	%
All Other Loans		20,382,878		507,842		5.02	%		44,819,859			623,858		2.81	%
Total		506,048,556		14,108,699		5.62	%		424,538,742			11,617,453		5.52	%
Total Interest-Earning Assets		855,509,742		18,121,352		4.27	%		754,206,116			15,162,168		4.05	%
Allowance for Loan Losses		(7,549,774)							(6,789,347	)
Cash and Due From Bank		16,411,917							22,409,931
Other Assets		56,382,830							51,299,291
Total Assets	$	920,754,715						$	821,125,991
Liabilities and Shareholders’ Equity:
Money Market and NOW Accounts	$	273,839,435	$	447,611		0.33	%	$	228,737,438		$	401,594		0.35	%
Savings Accounts		201,985,023		449,518		0.45	%		205,378,084			457,986		0.45	%
Certificates of Deposit		168,364,496		973,964		1.17	%		141,510,623			966,354		1.38	%
Other Borrowed Funds		19,146,190		243,417		2.56	%		10,574,309			207,527		3.96	%
Trust Preferred Securities		18,557,000		170,780		1.83	%		18,557,000			175,644		1.91	%
Total Interest-Bearing Liabilities		681,892,144		2,285,290		0.68	%		604,757,454			2,209,105		0.74	%
Net Interest Spread (2)						3.59	%							3.31	%
Demand Deposits		152,619,014							140,566,574
Other Liabilities		7,292,269							9,826,621
Total Liabilities		841,803,427							755,150,649
Shareholders’ Equity		78,951,288							65,975,341
Total Liabilities and Shareholders’ Equity	$	920,754,715						$	821,125,990
Net Interest Margin (3)			$	15,836,062		3.73	%				$	12,953,063		3.46	%

51

(1)  Loan origination fees are considered an adjustment to interest income. For the purpose of calculating loan

       yields, average loan balances include nonaccrual loans with no related interest income and includes the average

       balance of loans held for sale. Please refer to Management’s Discussion and Analysis of Financial Condition

       and Results of Operation under the heading “Non-Performing Assets” for a discussion of the Bank’s policy

       with regard to non-accrual loans.

(2)  The interest rate spread is the difference between the average yield on interest earning assets and the average

       rate paid on interest bearing liabilities.

(3)  The net interest margin is equal to net interest income divided by average interest earning assets.

(4)  Tax-equivalent basis.

Average interest earning assets increased by $101,303,626, or 13.4%, to $855,509,742 for the six month period ended June 30, 2014 compared to $754,206,116 for the six month period ended June 30, 2013.  The average investment securities portfolio increased by $46,759,141 to $267,961,521 for the six month period ended June 30, 2014 compared to $221,202,380 for the six month period ended June 30, 2013. The average loan portfolio increased by $81,509,814, or 19.2%, to $506,048,556 for the six month period ended June 30, 2014 compared to $424,538,742 for the six month period ended June 30, 2013.  

Average interest bearing liabilities increased by $77,134,690, or 12.8%, to $681,892,144 for the six month period ended June 30, 2014 from $604,757,454 for the six month period ended June 30, 2013.  

The net interest margin (on a tax-equivalent basis), which is net interest income divided by average interest earning assets, was 3.73% for the six months ended June 30, 2014 compared to 3.46% for the six months ended June 30, 2013.

The Company’s net interest income increased on a tax-equivalent basis by $2,883,000, or 22.3%, to $15,836,062 for the six months ended June 30, 2014 compared to $12,953,063 for the six months ended June 30, 2013. This increase in the Company’s net interest income and net interest margin for the six months ended June 30, 2014 compared to the corresponding period in 2013 was primarily due to higher yields earned on an increased level of interest-earning assets, combined with lower rates paid on interest-bearing liabilities during the current period. The average yield on interest-earning assets was 4.27% for the six month period ended June 30, 2014, an increase of 22 basis points from the yield of 4.05% for the comparable period of 2013. The average rate paid on interest-bearing liabilities for the six months ended June 30, 2014 was 0.68%, a reduction of 6 basis points from 0.74% paid for the six months ended June 30, 2013. The average balances of both interest-earning assets and interest-bearing liabilities increased for the six-month period ended June 30, 2014 compared to the same period in 2013 due primarily to the merger with Rumson, which was completed on February 7, 2014.

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, the level of non-accrual loans and problem loans as identified through internal review and classification, collateral values and the growth and size of the loan portfolio.

In addition to these factors, management takes into consideration current economic conditions and local real estate market conditions.  Using this evaluation process, the Company recorded a provision for loan losses of $4,599,996 for the six months ended June 30, 2014 compared to a provision of $236,666 for the six months ended June 30, 2013. The provision for loan losses increased to $4.6 million in the first six months of 2014 due to the $3.7 million charge-off of the Projuban loan in the second quarter, other charge-offs of $511,000 in the first quarter of 2014 and growth of the loan portfolio. At June 30, 2014, non-performing loans increased by $1,989,117, or 31.5%, to $8,311,073 and the ratio of non-performing loans to total loans was 1.31% at June 30, 2014 compared to 1.69% at December 31, 2013.  At June 30, 2014, the loan portfolio balance was $635,459,722, which represented an increase of $261,123,640 compared to the December 31, 2013 loan portfolio balance of $373,336,082.

There were no changes in the expected cash flows of the acquired loans from the Rumson merger from the date of merger to June 30, 2014.  No allowance for loan losses was recorded for acquired loans with or without evidence of deteriorated credit quality as of June 30, 2014.  The primary cause of the current period increase in the loan portfolio balance was the $143,714,000 of loans acquired in the Rumson merger and the growth of construction, commercial real estate and commercial loans during the second quarter of 2014.

52

Non-Interest Income

Total non-interest income for the six months ended June 30, 2014 was $2,897,014, a decrease of $159,408, or 5.2%, compared to non-interest income of $3,056,422 for the six months ended June 30, 2013.

Service charges on deposit accounts represent a consistent source of non-interest income. Service charge revenues increased to $486,351 for the six months ended June 30, 2014 from $444,670 for the six months ended June 30, 2013. This increase was the result of a higher volume of uncollected funds and overdraft fees collected on deposit accounts during the second quarter of 2014 compared to the second quarter of 2013.

Gain on sales of loans originated for sale decreased by $204,119, or 16.9%, to $1,006,736 for the six months ended June 30, 2014 when compared to $1,210,855 for the six months ended June 30, 2013.  The Bank sells both residential mortgage loans and loans guaranteed by the Small Business Administration in the secondary market. The resulting volume of residential mortgage loans originated and sold decreased for the first six months of 2014 compared to the first six months of 2013 due to the higher interest rate environment and lower level of mortgage refinancing activity in 2014 than in 2013.

Non-interest income also includes income from bank-owned life insurance (“BOLI”), which amounted to $278,138 for the six months ended June 30, 2014 compared to $232,366 for the six months ended June 30, 2013. The increase in income from BOLI was due to the Bank’s acquisition of $4.5 million of BOLI assets in the Rumson merger.

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rentals, wire transfer service fees, cash counting fees and Automated Teller Machine fees for non-Bank customers. Decreased customer demand for these services contributed to the other income component of non-interest income amounting to $1,125,788 for the six months ended June 30, 2014 compared to $1,168,531 for the six months ended June 30, 2013.

Non-Interest Expense

Non-interest expenses increased by $2,806,572, or 25.0%, to $14,051,840 for the six months ended June 30, 2014 from $11,245,268 for the six months ended June 30, 2013.  Excluding merger related expenses of $1,523,153, non-interest expenses would have been $12,528,687 in the first six months of 2014, which would have been an increase of $1,283,419 when compared to non-interest expenses for the first six months of 2013. Non-interest expenses attributable to the former Rumson operation were approximately $1,120,000 from February 7, 2014 (the date of the closing of the Rumson merger) through June 30, 2014. The following table presents the major components of non-interest expenses for the six months ended June 30, 2014 and 2013.

Non-interest Expenses
	Six months ended June 30,
	2014		2013
Salaries and employee benefits	$	7,272,628	$	6,398,104
Occupancy expenses		1,665,090		1,300,305
Data processing services		627,809		595,688
Equipment expense		420,340		499,933
Marketing		153,547		139,670
Regulatory, professional and other fees		667,252		466,901
Merger-related expenses		1,532,153		0
FDIC insurance expense		334,631		34,687
Directors’ fees		46,000		54,000
Other real estate owned expenses		140,041		594,062
Amortization of intangible assets		224,047		133,984
Other expenses		968,302		1,027,934
Total	$	14,051,840	$	11,245,268

53

Salaries and employee benefits, which represent the largest portion of non-interest expenses, increased by $874,524, or 13.7%, to $7,272,628 for the six months ended June 30, 2014 compared to $6,398,104 for the six months ended June 30, 2013. Of this increase, $384,000 was due to salary and benefits for former Rumson employees that were retained by the Bank. The balance of the increase in salaries and employee benefits for the six months ended June 30, 2014 was a result of an increase in the number of employees, regular merit increases and increased health care costs. As a result of the Rumson merger completed on February 7, 2014, staffing levels increased to 179 full time equivalent employees at June 30, 2014 as compared to 156 full time equivalent employees at June 30, 2013.

Occupancy expenses increased by $364,785, or 28.1%, to $1,665,090 for the six months ended June 30, 2014 compared to $1,300,305 for the six months ended June 30, 2013.  The current period increase resulted primarily from increased depreciation, property taxes and maintenance costs of the five new branch office locations acquired as a result of the Rumson merger.

The cost of data processing services increased to $627,809 for the six months ended June 30, 2014 from $595,688 for the six months ended June 30, 2013 as additional expenses were incurred to support and maintain the five new locations acquired as a result of the Rumson merger within the Bank’s information technology systems and the cost of processing a higher level of loan and deposit transactions.

Equipment expense decreased by $79,593, or 15.9%, to $420,340 for the six months ended June 30, 2014 compared to $499,933 for the six months ended June 30, 2013 primarily due to non-recurring costs associated with the expansion of mobile banking capabilities incurred during the first six months of 2013.

During the first six months of 2014, the Company incurred merger-related expenses of $1,532,153 in connection with the Rumson transaction. These pre-tax expenses consisted primarily of (1) change-in-control payments of $883,000; (2) data processing contract termination payments of $228,000; (3) investment banker fees of $207,000; (4) legal fees of $94,430; and (5) severance payments of $119,723.

Regulatory, professional and other fees increased by $200,351 to $667,252 for the six months ended June 30, 2014 compared to $466,901 for the six months ended June 30, 2013.  During the first six months of 2014, the Company incurred higher professional fees in connection with lending, collections other general corporate matters and post-merger related matters.

FDIC insurance expense increased to $334,631 for the six months ended June 30, 2014 compared to $34,687 for the six months ended June 30, 2013 as a result of the assumption of deposits upon completion of the Rumson merger, which accounted for approximately $90,000 of the increase. The balance of the increase is due to changes in the insurance premium calculation in 2013 mandated by the Dodd-Frank Act.

Other real estate owned expenses decreased by $454,021 to $140,041 for the six months ended June 30, 2014 compared to $594,062 for the six months ended June 30, 2013 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 six months of 2014 compared with the same period in 2013. At June 30, 2014, the Company held one property with a value of $1,860,000 as other real estate owned compared to eight properties with an aggregate value of $7,926,851 at June 30, 2013.

Amortization of intangible assets increased $90,063 to $224,047 during the six months ended June 30, 2014 when compared to the corresponding period in 2013 due to the increase in core deposit intangible assets of $1,189,000 as recorded in the Rumson merger.

All other expenses decreased to $968,302 for the six months ended June 30, 2014 compared to $1,027,934 for the six months ended June 30, 2013 as current year decreases occurred primarily in correspondent bank fees, maintenance agreements and ATM operating expenses.  All other expenses are also comprised of a variety of operating expenses and fees, as well as expenses associated with lending activities.

54

Income Taxes

The pre-tax loss was $480,230 for the six months ended June 30, 2014 compared to pre-tax income of $4,019,473 for the six months ended June 30, 2013.

The Company recorded an income tax benefit of $682,024 for the six months ended June 30, 2014 compared to income tax expense of $1,137,125 for the six months ended June 30, 2013. The effective tax rate was a 142% tax benefit for the six months ended June 30, 2014 due principally to the pre-tax loss and the effect of tax exempt interest income. The effective tax rate was 28.3% for the six months ended June 30, 2013.

Financial Condition

June 30, 2014 Compared with December 31, 2013

Total consolidated assets at June 30, 2013 were $985,970,231, representing an increase of $243,645,144, or 32.8%, from total consolidated assets of $742,325,087 at December 31, 2013.  The increase in assets was primarily attributable to the merger with Rumson, which was completed on February 7, 2014. The merger was accounted for under the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at their fair values as of the acquisition date. Included in the acquisition were the assumption of deposit liabilities of $189.5 million, the acquisition of cash and cash equivalents of $36.0 million, securities available for sale of $30.0 million and loans of $143.7 million. The Bank recorded goodwill of approximately $7.8 million and a core deposit intangible asset of approximately $1.1 million as a result of the acquisition.

Cash and Cash Equivalents

Cash and cash equivalents at June 30, 2014 totaled $23,149,148 compared to $69,278,771 at December 31, 2013. Cash and cash equivalents at June 30, 2014 consisted entirely of cash and due from banks of $23,149,148. The corresponding balances at December 31, 2013 were cash and due from banks of $69,267,345 and short term investments of $11,426, respectively. The current period decrease was primarily due to the cash outflow to fund loan demand which occurred primarily during the second quarter of 2014. To the extent that the Bank did not utilize the funds for loan originations or securities purchases, the cash inflows accumulated in cash and cash equivalents.

Loans Held for Sale

Loans held for sale at June 30, 2014 amounted to $9,877,863 compared to $10,923,689 at December 31, 2013. As indicated in the Consolidated Statements of Cash Flows, the amount of mortgage loans originated for sale was $39,760,548 for the six months ended June 30, 2014 compared to $83,349,024 for the six months ended June 30, 2013. The increase in long-term market interest rates that occurred during late 2013 and continued into 2014 reduced the demand for mortgage loan financings during the first half of 2014. As a result, the balance of Loans Held for Sale decreased accordingly.

Investment Securities

Investment securities represented 27.0% of total assets at June 30, 2014 and 33.9% of total assets at December 31, 2013. Total investment securities increased $14,181,380, or 5.6%, to $266,197,002 at June 30, 2014 from $252,015,622 at December 31, 2013 primarily as a result of the Rumson merger.  Purchases of investments totaled $14,229,098 during the six months ended June 30, 2014, and proceeds from calls and repayments totaled $25,849,824 during the period.

55

Securities available for sale are investments that may be sold in response to changing market and interest rate conditions or for other business purposes.  Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk and to take advantage of market conditions that create more economically attractive returns.  At June 30, 2014, securities available for sale totaled $110,878,312, which is an increase of $11,679,505, or 11.8%, from securities available for sale totaling $99,198,807 at December 31, 2013.

At June 30, 2014, the securities available for sale portfolio had net unrealized losses of $708,448 compared to net unrealized losses of $2,992,624 at December 31, 2013.  These unrealized losses are reflected, net of tax, in shareholders’ equity as a component of accumulated other comprehensive income.

Securities held to maturity, which are carried at amortized historical cost, are investments for which there is the positive intent and ability to hold to maturity.  At June 30, 2014, securities held to maturity were $155,318,690, an increase of $2,501,075, from $152,816,815 at December 31, 2013.  The fair value of the held to maturity portfolio at June 30, 2014 was $159,434,845.

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 commercial real estate mortgage loans on income producing assets.

The following table represents the components of the loan portfolio at June 30, 2014 and December 31, 2013.  

Loan Portfolio Composition	June 30, 2014					December 31, 2013
Component	Amount		%			Amount		%
Construction loans	$	78,990,549		12	%	$	51,002,172		14	%
Residential real estate loans		50,086,532		8	%		13,764,178		4	%
Commercial business		107,013,541		17	%		82,348,055		22	%
Commercial real estate		191,955,036		30	%		98,389,730		26	%
Mortgage warehouse lines		181,911,743		29	%		116,951,357		31	%
Loans to individuals		24,615,035		4	%		9,766,114		3	%
Deferred loan costs		681,713		0	%		943,950		0	%
All other loans		205,573		0	%		170,526		0	%
	$	635,459,722		100	%	$	373,336,082		100	%

The loan portfolio increased by $262,123,640, or 70.2%, to $635,459,722 at June 30, 2014 compared to $373,336,082 at December 31, 2013.  The primary reason for this increase in the loan portfolio was the Rumson merger which was completed on February 7, 2014 and added approximately $143.7 million in loans to the Bank’s existing loan portfolio, principally in the residential real estate and commercial real estate components. In addition, internally generated loans increased $104 million during the second quarter of 2014.

Commercial and commercial real estate loans totaled $298,968,577 at June 30, 2014, an increase of $118,230,792 when compared to $180,737,785 at December 31, 2013. Commercial loans consist primarily of loans to small and middle market businesses and are typically working capital loans used to finance inventory, receivables or equipment needs. These loans are generally secured by business assets of the commercial borrower. The overall increase was due principally to the Rumson merger; however, construction, commercial and commercial real estate loans also increased a combined $26 million during the second quarter of 2014.

56

The mortgage warehouse lines component of the loan portfolio increased by $64,960,386, or 55.5%, to $181,911,743 compared to $116,951,357 at December 31, 2013, reflecting the growth in residential mortgages originated for sale by our mortgage banking customers and the seasonality of the residential home purchases in our markets. The principal home buying season occurs in general from April through October.

The Bank’s Mortgage Warehouse Funding Group offers revolving lines of credit that are available to licensed mortgage banking companies (the “Warehouse Line of Credit”). The Warehouse Line of Credit is used by the mortgage banker 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 and a transaction fee are collected by the Bank at the time of repayment.  Additionally, customers of the Warehouse Line of Credit are required to maintain deposit relationships with the Bank that, on average, represent 10% to 15% of the loan balances.

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

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 which 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 the restructured terms. 

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

Non-performing loans increased by $1,989,117 to $8,311,073 at June 30, 2014 from $6,321,956 at December 31, 2013.  The major segments of non-accrual loans consist of commercial real estate loans and commercial 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, non-performing loans to total loans decreased to 1.31% at June 30, 2014 from 1.69% at December 31, 2013 principally due to the increase in loans as a result of the Rumson merger.  Loan quality is considered to be sound. This was accomplished through quality loan underwriting, a proactive approach to loan monitoring and aggressive workout strategies.

57

Non-Performing Assets and Loans	June 30,			December 31,
	2014			2013
Non-Performing loans:
Loans 90 days or more past due and still accruing	$	-		$	-
Non-accrual loans		8,311,073			6,321,956
Total non-performing loans		8,311,073			6,321,956
Other real estate owned		1,860,000			2,136,341
Other repossessed asset		66,404			0
Total non-performing assets		10,237,477			8,458,297
Performing troubled debt restructurings		4,011,765			3,858,796
Performing troubled debt restructurings and total non-performing assets	$	14,249,242		$	12,317,093
Non-performing loans to total loans		1.31	%		1.69	%
Non-performing loans to total loans excluding mortgage          warehouse lines		1.83	%		2.47	%
Non-performing assets to total assets		1.04	%		1.14	%
Non-performing assets to total assets excluding mortgage          warehouse lines		1.27	%		1.35	%
Total non-performing assets and performing troubled debt restructurings to          total assets		1.45	%		1.66	%

Non-performing assets increased by $1,779,180 to $10,237,477 at June 30, 2014 from $8,458,297 at December 31, 2013.  Other real estate owned was $1,860,000 and other repossessed assets totaled $66,404 at June 30, 2014.  Other real estate owned was $2,136,341 at December 31, 2013.  

At June 30, 2014, the Bank had 7 loans totaling $4,381,679 which were troubled debt restructurings.  Two of these loans totaling $369,914 are included in the above table as non-accrual loans; the remaining four loans totaling $4,011,765 are considered performing.

As provided by ASC 310-30, the excess of cash flows expected at acquisition over the initial investment in the purchase of a credit impaired loan is recognized as interest income over the life of the loan. Accordingly, Rumson loans acquired with evidence of deteriorated credit quality of $1,650,366 at June 30, 2014 were not classified as non-performing loans.

Non-performing assets represented 1.04% of total assets at June 30, 2014 and 1.14% at December 31, 2013.

Management takes a proactive approach in addressing delinquent loans. The Company’s President and Chief Executive Officer 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. If the collateral is foreclosed upon, the real estate is carried at fair market value less the estimated selling costs. The amount, if any, by which the recorded amount of the loan exceeds the fair market value of the collateral, less estimated selling costs, is a loss which is charged to the allowance for loan losses at the time of foreclosure or repossession. Resolution of a past-due loan can be delayed if the borrower files a bankruptcy petition because a collection action cannot be continued unless the Company first obtains relief from the automatic stay provided by the bankruptcy code.

58

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 and is consistent with GAAP and interagency supervisory guidance. The allowance for loan losses methodology consists of two major components. The first component is an estimation of losses associated with individually identified impaired loans, which follows Accounting Standards Codification (ASC) Topic 310 (formerly SFAS 114). The second major component is an estimation of losses under ASC Topic 450 (formerly SFAS 5), which provides guidance for estimating losses on groups of loans with similar risk characteristics. The Company’s methodology results in an allowance for loan losses which includes a specific reserve for impaired loans, an allocated reserve, and an unallocated portion.

When analyzing groups of loans under ASC 450, the Bank follows the Interagency Policy Statement on the Allowance for Loan and Lease Losses.  The methodology considers the Company’s historical loss experience adjusted for changes in trends, conditions, and other relevant factors that affect repayment of the loans as of the evaluation date. These adjustment factors, known as qualitative factors, include:

· Delinquencies and nonaccruals

· Portfolio quality

· Concentration of credit

· Trends in volume of loans

· Quality of collateral

· Policy and procedures

· Experience, ability, and depth of management

· Economic trends – national and local

· External factors – competition, legal and regulatory

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

59

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-off against the allowance for loan losses.

The specific allowance for impaired loans is established for specific loans which have been identified by management as being impaired. These loans are considered to be impaired primarily because the loans have 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 impaired 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, warehouse lines of credit, 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 qualitative 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, mortgage warehouse lines of credit, and consumer.

Commercial

The Company’s primary lending emphasis is the origination of commercial and commercial real estate loans. 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.

Mortgage Warehouse Lines of Credit

The Company’s Mortgage Warehouse Group provides revolving lines of credit that are available to licensed mortgage banking companies. The Warehouse Line of Credit is used by the mortgage banker 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 and a transaction fee are collected by the Bank at the time of repayment. Additionally, customers of the Warehouse Lines of Credit are required to maintain deposit relationships with the Bank that, on average, represent 10% to 15% of the loan balances.

60

As a separate segment of the total portfolio, the warehouse loan portfolio is individually analyzed as a whole for allowance for loan losses purposes. Warehouse Lines of Credit are subject to the same inherent risks as other commercial lending, but the overall degree of risk differs. While the Company’s loss experience with this type of lending has been non-existent since the product was introduced in 2008; there are other risks unique to this lending that still must be considered in assessing the adequacy of the allowance for loan losses. These unique risks may include, but are not limited to, (i) credit risks relating to the mortgage bankers that borrow from us, (ii) the risk of intentional misrepresentation or fraud by any of such mortgage bankers, (iii) changes in the market value of mortgage loans originated by the mortgage banker, the sale of which is the expected source of repayment of the borrowings under a warehouse line of credit, due to changes in interest rates during the time in warehouse, or (iv) unsalable or impaired mortgage loans so originated, which could lead to decreased collateral value and the failure of a purchaser of the mortgage loan to purchase the loan from the mortgage banker.

These factors, along with the other qualitative factors such as economic trends, concentrations of credit, trends in the volume of loans, portfolio quality, delinquencies and nonaccruals, are also considered and may have positive or negative effects on the allocated allowance. The aggregate amount resulting from the application of these qualitative factors determines the overall risk for the portfolio and results in an allocated allowance for warehouse lines of credit.

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 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

61

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

Allowance for Loan Losses
	Six Months Ended June 30,			Year Ended December 31,			Six Months Ended June 30,
	2014			2013			2013
Balance, beginning of period	$	7,038,571		$	7,151,212		$	7,151,212
Provision charged to operating expenses		4,599,996			1,076,662			236,666
Loans charged off :
Construction loans		-			(561,993	)		(561,993	)
Residential real estate loans		-			-			-
Commercial and commercial real estate		(4,224,741	)		(554,827	)		(483,966	)
Loans to individuals		-			(91,920	)		(90,865	)
Lease financing		-			-			-
All other loans		-			-			-
		(4,224,741	)		(1,208,740	)		(1,136,824	)
Recoveries
Construction loans		-			417			417
Residential real estate loans		-			-			-
Commercial and commercial real estate		4,553			19,020			17,469
Loans to individuals		-			-			-
Lease financing		-			-			-
All other loans		-			-			-
		4,553			19,437			17,886
Net (charge offs) / recoveries		(4,220,188	)		(1,189,303	)		(1,118,938	)
Balance, end of period	$	7,418,379		$	7,038,571		$	6,268,940
Loans :
At period end	$	635,459,722		$	373,336,082		$	407,482,758
Average during the period		506,048,556			248,126,605			424,538,742
Net charge offs to average loans outstanding		(0.83	%)		(0.48	%)		(0.26	%)
Allowance for loan losses to :
Total loans at period end		1.17	%		1.89	%		1.54	%
Total loans at period  end excluding mortgage warehouse         lines		1.44	%		2.52	%		2.41	%
Non-performing loans		89.26	%		111.34	%		474.32	%

62

The following table represents the allocation of the allowance for loan losses (ALL”) among the various categories of loans and certain other information as of June 30, 2014 and December 31, 2013, respectively.  The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of loans.

	June 30, 2014								December 31, 2013
	Amount		ALL as a % of Loans			% of Loans			Amount		ALL as a % of Loans			% of Loans
Commercial and commercial real estate	$	5,153,849		1.72	%		47	%	$	4,293,499		2.38	%		48	%
Construction loans		950,014		1.20	%		12	%		1,205,267		2.36	%		14	%
Residential real estate loans		172,853		0.35	%		8	%		164,673		1.20	%		4	%
Consumer and other		92,397		0.37	%		4	%		111,032		1.14	%		3	%
Subtotal		6,369,113		1.41	%		71	%		5,774,471		2.26	%		69	%
Mortgage warehouse lines		909,559		0.50	%		29	%		584,757		0.50	%		31	%
Unallocated reserves		139,707		-			-			679,343		-			-
Total	$	7,418,379		1.17	%		100	%	$	7,038,571		1.89	%		100	%

The Company recorded a provision for loan losses of $4,599,996 for the six months ended June 30, 2014 compared to a loan loss provision of $236,666 for the six months ended June 30, 2013.   Net charge offs/recoveries amounted to a net charge-off of $4,220,188 for the six months ended June 30, 2014.  The provision for loan losses and net charge offs for the six months ended June 30, 2014 resulted primarily from the charge-off of the Projuban loan disclosed earlier in the “Recent Developments” section.

At June 30, 2014, the allowance for loan losses was $7,418,379 compared to $7,038,571 at December 31, 2013, an increase of $379,808.  The ratio of the allowance for loan losses to total loans was 1.17% and 1.89%, respectively, at June 30, 2014 and December 31, 2013.  The allowance for loan losses declined to 1.17% of total loans at June 30, 2014 due to the recording of $143,714,000 of loans at fair value that were acquired in the Rumson merger. No allowance for loan losses was recorded at the date of acquisition or at June 30, 2014 with respect to these loans. The allowance for loan losses as a percentage of non-performing loans was 89.26% at June 30, 2014 compared to 111.34% at December 31, 2013. Management believes that the quality of the loan portfolio remains sound considering the economic climate 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 the building and expanding of long-term relationships.

63

The following table summarizes deposits at June 30, 2014 and December 31, 2013.

	June 30, 2014		December 31, 2013
Demand
Non-interest bearing	$	166,866,851	$	121,891,752
Interest bearing		282,864,619		200,737,912
Savings		197,119,687		180,002,971
Time		173,016,172		135,919,395
	$	819,867,329	$	638,552,030

At June 30, 2014, total deposits were $819,867,329, an increase of $181,315,299 or 28.4%, from $638,552,030 at December 31, 2013.  This increase was primarily due to the inflow of deposits resulting from the Rumson merger. On the closing date of February 7, 2014 for the Rumson merger, the Company assumed approximately $189.5 million in total deposits. Of these deposits, $179 million were retained at June 30, 2014.

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 $59,888,511 at June 30, 2014, consisting of long-term FHLB borrowing of $20,888,511 and overnight borrowings of $39,000,000. The corresponding balance of borrowings at December 31, 2013 was $10,000,000, consisting solely of long-term FHLB borrowings.  Two long term FHLB fixed rate convertible advances were assumed by the Bank as a result of the Rumson merger. These two advances total $10,000,000 and bear interest at 4.11% and 4.63%, respectively. As a result of acquisition accounting, the two advances were fair valued and a premium of $1,030,000 was assigned. The premium is amortized over the remaining term of the borrowings. The two advances had a combined carrying amount of $10,888,511 at June 30, 2014.

The Bank also 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. The increase in the overnight borrowings of $39 million was utilized to partially fund the $104 million increase in loans during the second quarter of 2014.

Shareholders’ Equity and Dividends

Shareholders’ equity increased by $13,315,416, or 19.5%, to $81,673,730 at June 30, 2014 from $68,358,314 at December 31, 2013.  Tangible book value per common share decreased by $0.90 to $9.56 at June 30, 2014 from $10.46 at December 31, 2013.  The ratio of average shareholders’ equity to total average assets was 9.23% at June 30, 2014 and 8.26% at December 31, 2013, respectively.  

During February 2014, the Company issued an aggregate of 1,019,223 shares of its common stock in conjunction with the Rumson merger that increased shareholders’ equity by $11,160,700. Shareholders’ equity was also increased by net income of $201,794 and other comprehensive income of $1,619,550 for the six month period ended June 30, 2014. Partially offsetting these increases were treasury stock purchases of $39,844 during the period.

In lieu of cash dividends to common shareholders, the Company (and its predecessor, the Bank) had declared a stock dividend every year (except 2013) since 1992 and has paid such stock dividends every year since 1993 (except 2014). A 5% stock dividend was declared in 2012 and paid in 2013. No stock dividend was declared in 2013.  

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 June 30, 2014 is set forth under Part II, Item 2 of this report

64

Actual capital amounts and ratios for the Company and the Bank as of June 30, 2014 and December 31, 2013 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 June 30, 2014
Company
Total Capital to Risk Weighted Assets	$	94,105,230		11.95%	$	62,979,600	>8%		N/A	N/A
Tier 1 Capital to Risk Weighted Assets		86,686,851		11.01%		31,489,800	>4%		N/A	N/A
Tier 1 Capital to Average Assets		86,686,851		9.14%		37,940,121	>4%		N/A	N/A
Bank
Total Capital to Risk Weighted Assets	$	91,801,622		11.66%	$	62,979,600	>8%	$	78,724,800	>10%
Tier 1 Capital to Risk Weighted Assets		84,383,243		10.72%		31,489,800	>4%		47,234,700	>6-%
Tier 1 Capital to Average Assets		84,383,243		8.90%		37,940,121	>4%		47,425,152	>5%

As of December 31, 2013
Company
Total Capital to Risk Weighted Assets	$	89,532,373	19.29%	$	37,123,200	>8%		N/A	N/A
Tier 1 Capital to Risk Weighted Assets		83,716,373	18.04%		18,561,600	>4%		N/A	N/A
Tier 1 Capital to Average Assets		83,716,373	10.89%		30,757,840	>4%		N/A	N/A
Bank
Total Capital to Risk Weighted Assets	$	87,253,384	18.80%	$	37,123,200	>8%	$	46,404,000	>10%
Tier 1 Capital to Risk Weighted Assets		81,437,384	17.55%		18,561,600	>4%		27,842,400	>6%
Tier 1 Capital to Average Assets		81,437,384	10.59%		30,757,840	>4%		38,447,300	>5%

The minimum regulatory capital requirements for financial institutions require institutions to have a Tier 1 capital to average assets ratio of 4.0%, a Tier 1 capital to risk weighted assets ratio of 4.0% and a total capital to risk weighted assets ratio of 8.0%.  To be considered “well capitalized,” an institution must have a minimum Tier 1 leverage ratio of 5.0%.  At June 30, 2014, 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 expansion of the Bank 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 Basel III and address relevant provisions of 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.

65

 Liquidity

At June 30, 2014, 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 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 $492,985,116, of its total assets at June 30, 2014.  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. At June 30, 2014, the Bank pledged collateral to the FHLB to support a borrowing line of $106,634,000, of which $59,000,000 was utilized at June 30, 2014. The Bank also maintains an unsecured federal funds line of $25,000,000 with a correspondent bank.

The Consolidated Statements of Cash Flows present the changes in cash from operating, investing and financing activities.  At June 30, 2014, the balance of cash and cash equivalents was $23,149,148.

Net cash provided by operating activities totaled $6,681,466 for the six months ended June 30, 2014 compared to net cash provided by operations of $14,183,817 for the six months ended June 30, 2013.  The decline in the current period was due primarily to a lower level of net proceeds from the origination and sale of residential mortgages compared to the prior year period. A 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 used in investing activities totaled $83,814,804 for the six months ended June 30, 2014. The primary uses of funds for the six months ended June 30, 2014 were the increase in the loan portfolio and purchase of securities. For the corresponding period in 2013, net cash was provided by investing activities due to the reduction of loans, primarily mortgage warehouse lines. Net cash of $21,375,071 was received in the Rumson merger and represents cash of $36,145,071 held by Rumson, less cash consideration of $14,770,000 paid to shareholders of Rumson.

Net cash provided by financing activities totaled $31,003,715 for the six months ended June 30, 2014 compared to net cash used in financing activities of $36,327,886 for the six months ended June 30, 2013.  The primary source of funds for the six months ended June 30, 2014 was the net increase in borrowings while for the six months ended June 30, 2013, the decrease in borrowings was the primary use of funds.

The securities portfolios are also a source of liquidity, providing cash flows from maturities and periodic repayments of principal.  For the six months ended June 30, 2014, prepayments and maturities of investment securities totaled $25,849,824. Proceeds from the sale of securities were $5,957,188 during  the six month period ended June 30, 2014. Another source of liquidity is the loan portfolio, which provides a flow of payments and maturities.

66

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 and the magnitude of relative changes 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.

Under our interest rate risk policy established by our Board of Directors, we established quantitative guidelines with respect to our interest rate risk and how interest rate shocks are projected to affect our net interest income and economic value of equity. Summarized below is the projected effect of a parallel shift of an increase of 200 and 300 basis points, respectively, in market interest rates on our net interest income and economic value of equity.

Based upon the current interest rate environment, as of June 30, 2014, our sensitivity to interest rate risk was as follows:

(Dollars in thousands)	Next 12 Months Net Interest Income		Economic Value of Equity
Interest Rate Change in Basis Points	$ Change	% Change	$ Change	% Change
300	$5,339	14.7%	($3,698)	(3.50)%
200	3,014	9.1%	(2,604)	(2.46)
-	-	0.0%	-	0.0%

We employ many assumptions to calculate the impact of changes in interest rates on our assets and liabilities, and actual results may not be similar to projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. Actual results may also differ due to our actions, if any, in response to the changing rates. In calculating these exposures, we utilized an interest rate simulation model which is validated by third-party reviewers on an annual basis.

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 and increasing loans. As of June 30, 2014, we were in compliance with our interest rate risk policy.

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 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.

67

The Company’s principal executive officer and principal financial officer have also concluded that there was no change in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

68

PART II. OTHER INFORMATION

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

Issuer Purchases of Equity Securities

On July 21, 2005, the board of directors authorized a stock repurchase program under which the Company may repurchase in open market or privately negotiated transactions up to 5% of its common shares outstanding at that date.  The Company undertook this repurchase program in order to increase shareholder value. The following table provides common stock repurchases made by or on behalf of the Company during the three months ended June 30, 2014, if any.

 Issuer Purchases of Equity Securities (1)

Period		Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased As Part of Publicly Announced Plan or Program	Maximum Number of Shares That May Yet be Purchased Under the Plan or Program
Beginning	Ending
April 1, 2014	April 30, 2014	-	-	-	187,559
May 1, 2014	May 30, 2014	-	-	-	187,559
June 1, 2014	June 30, 2014	-	-	-	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.

69

Item 6.   Exhibits.

10.1		Amendment to the Amended and Restated Employment Agreement, dated April 4, 2014, between the Company and Robert F. Mangano (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on April 8, 2014)
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 Stephen J. Gilhooly, 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.

70

SIGNATURES

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

	1ST CONSTITUTION BANCORP
Date: August 14, 2014	By:	/s/ ROBERT F. MANGANO
		Robert F. Mangano
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 14, 2014	By:	/s/ STEPHEN J. GILHOOLY
		Stephen J. Gilhooly
		Senior Vice President, Treasurer and Chief Financial Officer
		(Principal Financial Officer)

71

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert F. Mangano, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 14, 2014

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

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Stephen J. Gilhooly, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: August 14, 2014

/s/STEPHEN J. GILHOOLY
Name:	Stephen J. Gilhooly
Title:	Senior Vice President, Treasurer and Chief 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 June 30, 2014 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.

ROBERT F. MANGANO
Name:	Robert F. Mangano
Title:	President and Chief Executive Officer
Date:	August 14, 2014

STEPHEN J. GILHOOLY
Name:	Stephen J. Gilhooly
Title:	Senior Vice President, Treasurer and Chief Financial Officer
Date:	August 14, 2014

XML

Note 4 - Investment Securities (Details) - Securities by Contractual Maturity (USD $)	Jun. 30, 2014	Dec. 31, 2013
Due in one year or less
Available for sale, due in one year or less, amortized cost	$ 14,483,868
Available for sale, due in one year or less, fair value	14,513,740
Due after one year through five years
Available for sale, due after one year through five years, amortized cost	32,180,281
Available for sale, due after one year through five years, fair value	32,477,104
Due after five years through ten years
Available for sale, due after five years through ten years, amortized cost	23,436,734
Available for sale, due after five years through ten years, fair value	23,092,711
Due after ten years
Available for sale, due after ten years, amortized cost	41,485,877
Available for sale, due after ten years, fair value	40,794,757
Total	111,586,760	102,191,431
Total	110,878,312	99,198,807
Due in one year or less
Held to maturity, due in one year or less, amortized cost	19,865,764
Held to maturity, due in one year or less, fair value	19,883,073
Due after one year through five years
Held to maturity, due after one year through five years, amortized cost	11,961,666
Held to maturity, due after one year through five years, fair value	12,397,039
Due after five years through ten years
Held to maturity, due after five years through ten years, amortized cost	41,895,280
Held to maturity, due after five years through ten years, fair value	43,157,536
Due after ten years
Held to maturity, due after ten years, amortized cost	82,096,924
Held to maturity, due after ten years, fair value	83,997,197
Total	155,819,634	153,317,759
Total	159,434,845	153,629,773
US Treasury and Government [Member]
Due after one year through five years
Available for sale, due after one year through five years, amortized cost	1,542,897
Available for sale, due after one year through five years, fair value	1,537,275
Due after five years through ten years
Available for sale, due after five years through ten years, amortized cost	9,887,522
Available for sale, due after five years through ten years, fair value	9,368,000
Due after ten years
Total	11,430,419	22,386,761
Total	10,905,275	21,509,700
Due in one year or less
Held to maturity, due in one year or less, amortized cost	501,773
Held to maturity, due in one year or less, fair value	503,345
Due after ten years
Total	501,773	1,524,860
Total	503,345	1,535,170
Residential Mortgage Backed Securities [Member]
Due in one year or less
Available for sale, due in one year or less, amortized cost	327,904
Available for sale, due in one year or less, fair value	329,483
Due after one year through five years
Available for sale, due after one year through five years, amortized cost	6,945,975
Available for sale, due after one year through five years, fair value	6,882,941
Due after five years through ten years
Available for sale, due after five years through ten years, amortized cost	7,557,870
Available for sale, due after five years through ten years, fair value	7,653,670
Due after ten years
Available for sale, due after ten years, amortized cost	14,764,981
Available for sale, due after ten years, fair value	15,437,645
Total	29,974,256	31,965,947
Due after five years through ten years
Held to maturity, due after five years through ten years, amortized cost	20,221,542
Held to maturity, due after five years through ten years, fair value	20,553,756
Due after ten years
Held to maturity, due after ten years, amortized cost	41,117,815
Held to maturity, due after ten years, fair value	42,055,874
US States and Political Subdivisions Debt Securities [Member]
Due in one year or less
Available for sale, due in one year or less, amortized cost	264,650
Available for sale, due in one year or less, fair value	265,665
Due after one year through five years
Available for sale, due after one year through five years, amortized cost	110,000
Available for sale, due after one year through five years, fair value	110,251
Due after five years through ten years
Available for sale, due after five years through ten years, amortized cost	4,861,389
Available for sale, due after five years through ten years, fair value	4,921,297
Due after ten years
Available for sale, due after ten years, amortized cost	16,811,887
Available for sale, due after ten years, fair value	15,712,169
Total	22,047,926	22,206,959
Total	21,009,382	19,646,044
Due in one year or less
Held to maturity, due in one year or less, amortized cost	18,863,582
Held to maturity, due in one year or less, fair value	18,878,243
Due after one year through five years
Held to maturity, due after one year through five years, amortized cost	11,961,666
Held to maturity, due after one year through five years, fair value	12,397,039
Due after five years through ten years
Held to maturity, due after five years through ten years, amortized cost	20,832,099
Held to maturity, due after five years through ten years, fair value	21,759,133
Due after ten years
Held to maturity, due after ten years, amortized cost	18,242,729
Held to maturity, due after ten years, fair value	18,485,041
Total	69,900,076	59,400,916
Total	71,519,456	59,504,497
Corporate Debt Securities [Member]
Due in one year or less
Available for sale, due in one year or less, amortized cost	10,350,414
Available for sale, due in one year or less, fair value	10,377,692
Due after one year through five years
Available for sale, due after one year through five years, amortized cost	23,581,409
Available for sale, due after one year through five years, fair value	23,946,637
Due after five years through ten years
Available for sale, due after five years through ten years, amortized cost	1,020,008
Available for sale, due after five years through ten years, fair value	1,032,500
Due after ten years
Available for sale, due after ten years, amortized cost	1,084,953
Available for sale, due after ten years, fair value	1,040,920
Total	36,036,784	16,228,474
Total	36,397,749	16,517,728
Due in one year or less
Held to maturity, due in one year or less, amortized cost	500,409
Held to maturity, due in one year or less, fair value	501,485
Due after ten years
Total	500,409	1,008,599
Total	501,485	1,018,435
Mutual Fund [Member]
Due in one year or less
Available for sale, due in one year or less, amortized cost	25,000
Available for sale, due in one year or less, fair value	25,000
Due after ten years
Total	25,000	25,000
Total	25,000	25,000
Residential Collateralized Mortgage Obligations- Non GSE [Member]
Due after ten years
Available for sale, due after ten years, amortized cost	2,446,764
Available for sale, due after ten years, fair value	2,486,836
Total	2,774,669	2,782,843
Total	2,816,320	2,826,396
Due after five years through ten years
Held to maturity, due after five years through ten years, amortized cost	841,639
Held to maturity, due after five years through ten years, fair value	844,647
Due after ten years
Held to maturity, due after ten years, amortized cost	8,837,695
Held to maturity, due after ten years, fair value	9,181,327
Total	9,679,334	10,682,363
Total	10,025,974	10,774,614
Residential Collateralized Mortgage Obligations- GSE [Member]
Due after five years through ten years
Available for sale, due after five years through ten years, amortized cost	109,945
Available for sale, due after five years through ten years, fair value	117,244
Due after ten years
Available for sale, due after ten years, amortized cost	3,906,991
Available for sale, due after ten years, fair value	3,968,587
Total	4,016,935	3,547,404
Total	4,085,830	3,681,792
Due after ten years
Held to maturity, due after ten years, amortized cost	13,242,024
Held to maturity, due after ten years, fair value	13,742,645
Total	13,242,024	14,803,739
Total	13,742,645	15,183,554
Trust Preferred Debt Securities [Member]
Due after ten years
Available for sale, due after ten years, amortized cost	2,470,301
Available for sale, due after ten years, fair value	2,148,600
Total	2,470,301	2,468,839
Total	2,148,600	2,013,100
Trust Preferred Debt Securities Pooled [Member]
Due after ten years
Held to maturity, due after ten years, amortized cost	656,661
Held to maturity, due after ten years, fair value	532,310
Total	656,661	656,662
Total	532,310	148,855
Restricted Stock [Member]
Due in one year or less
Available for sale, due in one year or less, amortized cost	3,515,900
Available for sale, due in one year or less, fair value	3,515,900
Due after ten years
Total	3,515,900	1,013,100
Total	$ 3,515,900	$ 1,013,100

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Additional Information for Acquired Credit Impaired Loans (USD $)	Jun. 30, 2014	Feb. 07, 2014
Additional Information for Acquired Credit Impaired Loans [Abstract]
Outstanding balance	$ 3,229,459	$ 3,409,340
Carrying amount	$ 2,481,278	$ 2,613,826

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	$ 7,030,842	$ 7,038,571	$ 6,023,282	$ 7,151,212	$ 7,038,571	$ 7,151,212
Provision charged to operations	4,099,998	499,998	236,666		4,599,996	236,666
Loans charged off	(3,713,789)	(510,952)		(1,136,825)
Recoveries of loans charged off	1,328	3,225	8	8,895
Allowance for loan losses	7,418,379	7,030,842	6,268,940	6,023,282	7,418,379	6,268,940
Construction [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	1,265,430	1,205,267	1,210,289	1,990,292	1,205,267	1,990,292
Provision charged to operations	(315,416)	60,163	1,872	(218,010)
Loans charged off				(561,993)
Recoveries of loans charged off			417
Allowance for loan losses	950,014	1,265,430	1,212,578	1,210,289	950,014	1,212,578
Commercial Business [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	1,218,037	1,271,733	817,181	972,789	1,271,733	972,789
Provision charged to operations	4,041,190	454,031	160,163	(18,319)
Loans charged off	(3,713,789)	(510,952)		(139,289)
Recoveries of loans charged off	1,328	3,225	8,575	2,000
Allowance for loan losses	1,546,766	1,218,037	985,919	817,181	1,546,766	985,919
Commercial Real Estate Portfolio Segment [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	3,135,727	3,021,766	2,130,197	2,262,221	3,021,766	2,262,221
Provision charged to operations	471,356	113,961	321,659	245,769
Loans charged off				(384,688)
Recoveries of loans charged off				6,895
Allowance for loan losses	3,607,083	3,135,727	2,451,856	2,130,197	3,607,083	2,451,856
Mortgage Warehouse Lines [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	521,675	584,757	990,738	1,420,638	584,757	1,420,638
Provision charged to operations	387,884	(63,082)	(62,039)	(429,900)
Allowance for loan losses	909,559	521,675	928,699	990,738	909,559	928,699
Residential Portfolio Segment [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	182,005	164,673	112,365	112,103	164,673	112,103
Provision charged to operations	(9,152)	17,332	(19,632)	262
Allowance for loan losses	172,853	182,005	92,733	112,365	172,853	92,733
Consumer Portfolio Segment [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	92,387	108,849	102,234	102,583	108,849	102,583
Provision charged to operations	(1,655)	(16,462)	(2,444)	50,606
Loans charged off				(50,855)
Allowance for loan losses	90,732	92,387	99,890	102,234	90,732	99,890
Consumer Other Financing Receivable [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	1,623	2,183	2,059	2,271	2,183	2,271
Provision charged to operations	42	(560)	45	(212)
Allowance for loan losses	1,665	1,623	2,104	2,059	1,665	2,104
Unallocated Financing Receivables [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses Activity [Line Items]
Allowance for loan losses	613,958	679,343	658,119	288,315	679,343	288,315
Provision charged to operations	(474,251)	(65,385)	(162,958)	369,804
Allowance for loan losses	$ 139,707	$ 613,958	$ 495,161	$ 658,119	$ 139,707	$ 495,161

XML

Note 6 - Share-Based Compensation (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Note 6 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	440,701
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)	346,166
Allocated Share-based Compensation Expense	$ 70,366	$ 50,568
Employee Stock Option [Member]
Note 6 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	4 years
Restricted Stock [Member]
Note 6 - Share-Based Compensation (Details) [Line Items]
Allocated Share-based Compensation Expense	253,322	217,390
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 956,859
The 2013 Equity Incentive Plan [Member]
Note 6 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)	300,040
2006 Directors Stock Plan [Member]
Note 6 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)	46,126

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Consumer Loans by Credit Quality Indicators (USD $)	Jun. 30, 2014	Feb. 07, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 635,459,722	$ 143,714,000	$ 373,336,082
Loans to Individuals [Member] | Performing Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	24,615,035		9,674,011
Loans to Individuals [Member] | Nonperforming Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			92,103
Loans to Individuals [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	24,615,035		9,766,114
Consumer Other Financing Receivable [Member] | Performing Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	205,573		170,526
Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 205,573		$ 170,526

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Pro Forma Information (USD $)	3 Months Ended		6 Months Ended		5 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Rumson-Fair Haven Bank and Trust Company [Member]	Jun. 30, 2014 Rumson-Fair Haven Bank and Trust Company [Member]	Jun. 30, 2013 Rumson-Fair Haven Bank and Trust Company [Member]
Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Pro Forma Information [Line Items]
Net interest income	$ 8,377,713	$ 6,120,629	$ 15,274,592	$ 12,444,985	$ 2,809,000
Net interest income						16,074,000	16,258,000
Non-interest income	1,260,032	1,447,859	2,897,014	3,056,422	123,000
Non-interest income						2,946,000	3,572,000
Non-interest expenses	6,705,815	5,162,300	14,051,840	11,245,268	1,120,000
Non-interest expenses						13,242,000	14,020,000
Income taxes (benefit)	(728,150)	612,492	(682,024)	1,137,125	724,000
Income taxes (benefit)						(61,000)	1,625,000
Net income	(439,918)	1,557,030	201,794	2,882,348	1,088,000
Net income						$ 1,239,000	$ 3,778,000
Earnings per share – diluted (in Dollars per share)						$ 0.18	$ 0.53

XML

Note 6 - Share-Based Compensation (Details) - Fair Value Inputs, Assets, Quantitative Information (USD $)	1 Months Ended
	Apr. 30, 2014		Jan. 31, 2014
Fair Value Inputs, Assets, Quantitative Information [Abstract]
Fair value of options granted (in Dollars per share)	$ 4.32		$ 4.75
Risk-free rate of return	1.70%		1.65%
Expected option life in years	7 years		7 years
Expected volatility	38.01%		38.01%
Expected dividends (1)		[1]		[1]

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

XML

Note 7 - Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Service cost	$	43,334		$	30,539		$	57,167		$	214,257
Interest cost		32,852			22,229			43,339			155,951
Actuarial (gain) loss recognized		(1,574	)		(29,893	)		(2,077	)		(209,721	)
Prior service cost recognized		-			942			-			6,611
	$	74,612		$	23,817		$	98,429		$	167,098

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Impaired Loans Receivables (USD $)	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Dec. 31, 2013
Commercial
Impaired loans receivable with no related allowance, recorded investment		$ 883,497		$ 517,885
Impaired loans receivable with no related allowance, unpaid principal balance		937,539		674,342
Impaired loans receivable with no related allowance, average recorded investment		1,162,388		2,407,560
Impaired loans receivable with no related allowance, interest income recognized		12,528		39,040
Commercial
Impaired loans receivable with related allowance, recorded investment	9,537,381	5,091,683	9,537,381	9,662,866
Impaired loans receivable with related allowance, unpaid principal balance	9,693,838	5,236,510	9,693,838	9,662,866
Impaired loans, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans receivable with related allowance, average recorded investment	9,588,435	5,033,749	9,644,068	6,404,323
Impaired loans receivable with related allowance, interest income recognized	64,949	65,302	113,822	257,005
Total:
Impaired loans, recorded investment	14,804,116	5,975,180	14,804,116	10,180,751
Impaired loans, unpaid principal balance	15,740,826	6,174,049	15,740,826	10,337,208
Impaired loans, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans, average recorded investment	14,300,366	6,196,137	13,008,897	8,811,883
Impaired loans, interest income recognized	93,449	77,830	156,277	296,045
Construction [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	373,663		373,663
Impaired loans receivable with no related allowance, unpaid principal balance	373,663		373,663
Impaired loans receivable with no related allowance, average recorded investment	338,563		229,152
Impaired loans receivable with no related allowance, interest income recognized	3,752		4,821
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Construction [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		540,975		19,930
Impaired loans receivable with no related allowance, unpaid principal balance		540,975		19,930
Impaired loans receivable with no related allowance, average recorded investment		725,974		965,268
Impaired loans receivable with no related allowance, interest income recognized		11,078		33,946
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0		0	246,853
Impaired loans receivable with related allowance, interest income recognized	0		0
Total:
Impaired loans, recorded investment				19,930
Impaired loans, unpaid principal balance				19,930
Impaired loans, related allowance	0		0
Impaired loans, average recorded investment				1,212,121
Impaired loans, interest income recognized				33,946
Commercial Business [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	723,060		723,060
Impaired loans receivable with no related allowance, unpaid principal balance	1,300,245		1,300,245
Impaired loans receivable with no related allowance, average recorded investment	719,845		819,018
Impaired loans receivable with no related allowance, interest income recognized	8,967		12,232
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Business [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		177,980		243,840
Impaired loans receivable with no related allowance, unpaid principal balance		232,022		400,297
Impaired loans receivable with no related allowance, average recorded investment		168,683		258,139
Impaired loans receivable with no related allowance, interest income recognized		1,450		5,094
Commercial
Impaired loans receivable with related allowance, recorded investment	126,597	614,396	126,597	532,261
Impaired loans receivable with related allowance, unpaid principal balance	283,054	759,223	283,054	532,261
Impaired loans, related allowance	19,141	173,155	19,141	293,692
Impaired loans receivable with related allowance, average recorded investment	171,520	617,054	321,402	562,346
Impaired loans receivable with related allowance, interest income recognized	0	834	0	9,728
Total:
Impaired loans, recorded investment				776,101
Impaired loans, unpaid principal balance				932,558
Impaired loans, related allowance	19,141	173,155	19,141	293,692
Impaired loans, average recorded investment				820,485
Impaired loans, interest income recognized				14,822
Commercial Real Estate Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	2,625,135		2,625,135
Impaired loans receivable with no related allowance, unpaid principal balance	2,812,050		2,812,050
Impaired loans receivable with no related allowance, average recorded investment	2,104,136		1,052,068
Impaired loans receivable with no related allowance, interest income recognized	10,738		17,480
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Real Estate Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, average recorded investment		123,945		1,032,115
Commercial
Impaired loans receivable with related allowance, recorded investment	9,095,169	4,477,287	9,095,169	9,130,605
Impaired loans receivable with related allowance, unpaid principal balance	9,095,169	4,477,287	9,095,169	9,130,605
Impaired loans, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans receivable with related allowance, average recorded investment	9,101,300	4,372,626	9,112,256	5,546,690
Impaired loans receivable with related allowance, interest income recognized	64,949	64,468	113,822	247,277
Total:
Impaired loans, recorded investment				9,130,605
Impaired loans, unpaid principal balance				9,130,605
Impaired loans, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans, average recorded investment				6,578,805
Impaired loans, interest income recognized				247,277
Mortgage Warehouse Lines [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	0		0
Impaired loans receivable with no related allowance, unpaid principal balance	0		0
Impaired loans receivable with no related allowance, average recorded investment	0		0
Impaired loans receivable with no related allowance, interest income recognized	0		0
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Mortgage Warehouse Lines [Member]
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0		0
Impaired loans receivable with related allowance, interest income recognized	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	3,721,858		3,721,858
Impaired loans receivable with no related allowance, unpaid principal balance	4,485,958		4,485,958
Impaired loans receivable with no related allowance, average recorded investment	3,162,544		2,100,238
Impaired loans receivable with no related allowance, interest income recognized	23,457		34,533
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		718,955		263,770
Impaired loans receivable with no related allowance, unpaid principal balance		772,997		420,227
Impaired loans receivable with no related allowance, average recorded investment		1,018,602		2,255,522
Impaired loans receivable with no related allowance, interest income recognized		12,528		39,040
Commercial
Impaired loans receivable with related allowance, recorded investment	9,221,766	5,091,683	9,221,766	9,662,866
Impaired loans receivable with related allowance, unpaid principal balance	9,378,223	5,236,510	9,378,223	9,662,866
Impaired loans, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans receivable with related allowance, average recorded investment	9,272,820	4,989,680	9,433,658	6,355,889
Impaired loans receivable with related allowance, interest income recognized	64,949	65,302	113,822	257,005
Total:
Impaired loans, recorded investment	12,943,624	5,810,638	12,943,624
Impaired loans, unpaid principal balance	13,864,181	6,009,507	13,864,181
Impaired loans, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans, average recorded investment	12,435,364	6,008,282	11,533,896
Impaired loans, interest income recognized	88,406	77,830	148,355
Residential Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	1,310,919		1,310,919
Impaired loans receivable with no related allowance, unpaid principal balance	1,317,592		1,317,592
Impaired loans receivable with no related allowance, average recorded investment	1,310,990		1,002,650
Impaired loans receivable with no related allowance, interest income recognized	5,043		6,767
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Residential Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		164,542		162,012
Impaired loans receivable with no related allowance, unpaid principal balance		164,542		162,012
Impaired loans receivable with no related allowance, average recorded investment		121,246		117,746
Commercial
Impaired loans receivable with related allowance, recorded investment	315,615		315,615
Impaired loans receivable with related allowance, unpaid principal balance	315,615		315,615
Impaired loans, related allowance	15,015		15,015
Impaired loans receivable with related allowance, average recorded investment	315,615	44,069	210,410	44,196
Impaired loans receivable with related allowance, interest income recognized	0		0
Total:
Impaired loans, recorded investment	1,626,534	164,542	1,626,534	162,012
Impaired loans, unpaid principal balance	1,633,207	164,542	1,633,207	162,012
Impaired loans, related allowance	15,015		15,015
Impaired loans, average recorded investment	1,626,605	165,315	1,213,060	161,942
Impaired loans, interest income recognized	5,043		6,767
Loans to Individuals [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	233,958		233,958
Impaired loans receivable with no related allowance, unpaid principal balance	243,438		243,438
Impaired loans receivable with no related allowance, average recorded investment	238,397		261,941
Impaired loans receivable with no related allowance, interest income recognized	0		1,155
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Loans to Individuals [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment				92,103
Impaired loans receivable with no related allowance, unpaid principal balance				92,103
Impaired loans receivable with no related allowance, average recorded investment		22,540		34,292
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0			4,238
Impaired loans receivable with related allowance, interest income recognized	0
Total:
Impaired loans, related allowance	0		0
Consumer Other Financing Receivable [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	0		0
Impaired loans receivable with no related allowance, unpaid principal balance	0		0
Impaired loans receivable with no related allowance, average recorded investment	0
Impaired loans receivable with no related allowance, interest income recognized	0		0
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Consumer Other Financing Receivable [Member]
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0
Impaired loans receivable with related allowance, interest income recognized	0
Total:
Impaired loans, related allowance	0		0
Consumer Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	233,958		233,958
Impaired loans receivable with no related allowance, unpaid principal balance	243,438		243,438
Impaired loans receivable with no related allowance, average recorded investment	238,397		261,941
Impaired loans receivable with no related allowance, interest income recognized	0		0
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Consumer Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment				92,103
Impaired loans receivable with no related allowance, unpaid principal balance				92,103
Impaired loans receivable with no related allowance, average recorded investment		22,540		34,292
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0		0	4,238
Impaired loans receivable with related allowance, interest income recognized	0
Total:
Impaired loans, recorded investment	233,958		233,958	92,103
Impaired loans, unpaid principal balance	243,438		243,438	92,103
Impaired loans, related allowance	0		0
Impaired loans, average recorded investment	238,397	22,540	261,941	38,530
Impaired loans, interest income recognized	0		1,155
With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	5,266,735		5,266,735
Impaired loans receivable with no related allowance, unpaid principal balance	6,046,988		6,046,988
Impaired loans receivable with no related allowance, average recorded investment	4,711,931		3,364,829
Impaired loans receivable with no related allowance, interest income recognized	28,500		41,300
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	$ 0		$ 0

XML

Note 4 - Investment Securities (Details) - Other than Temporary Impairment, Credit Losses Recognized in Earnings (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Abstract]
Balance at beginning of period	$ 364	$ 364	$ 364	$ 364	$ 364	$ 364
Balance at end of period	$ 364	$ 364	$ 364	$ 364	$ 364	$ 364

XML

Note 4 - Investment Securities (Details) - Available-for-sale Securities (USD $)	Jun. 30, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	$ 111,586,760	$ 102,191,431
Available for sale, gross unrealized gains	1,749,946	1,560,546
Available for sale, gross unrealized losses	(2,458,394)	(4,553,170)
Available for sale, fair value	110,878,312	99,198,807
US Treasury and Government [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	11,430,419	22,386,761
Available for sale, gross unrealized gains		33,213
Available for sale, gross unrealized losses	(525,144)	(910,274)
Available for sale, fair value	10,905,275	21,509,700
Residential Collateralized Mortgage Obligations- GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	4,016,935	3,547,404
Available for sale, gross unrealized gains	104,804	134,388
Available for sale, gross unrealized losses	(35,909)
Available for sale, fair value	4,085,830	3,681,792
Residential Collateralized Mortgage Obligations- Non GSE [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	2,774,669	2,782,843
Available for sale, gross unrealized gains	47,862	52,227
Available for sale, gross unrealized losses	(6,211)	(8,674)
Available for sale, fair value	2,816,320	2,826,396
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	29,268,826	31,532,051
Available for sale, gross unrealized gains	966,555	872,169
Available for sale, gross unrealized losses	(261,125)	(438,273)
Available for sale, fair value	29,974,256	31,965,947
US States and Political Subdivisions Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	22,047,926	22,206,959
Available for sale, gross unrealized gains	225,727	149,959
Available for sale, gross unrealized losses	(1,264,271)	(2,710,874)
Available for sale, fair value	21,009,382	19,646,044
Trust Preferred Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	2,470,301	2,468,839
Available for sale, gross unrealized losses	(321,701)	(455,739)
Available for sale, fair value	2,148,600	2,013,100
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	36,036,784	16,228,474
Available for sale, gross unrealized gains	404,998	318,590
Available for sale, gross unrealized losses	(44,033)	(29,336)
Available for sale, fair value	36,397,749	16,517,728
Mutual Fund [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	25,000	25,000
Available for sale, fair value	25,000	25,000
Restricted Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Available for sale, amortized cost	3,515,900	1,013,100
Available for sale, fair value	$ 3,515,900	$ 1,013,100

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Troubled Debt Restructurings (USD $)	6 Months Ended
	Jun. 30, 2013
Commercial Portfolio Segment [Member]
Troubled Debt Restructurings:
Number of Contracts	0
Pre-Modification Outstanding Recording Investment	$ 0
Post-Modification Outstanding Recording Investment	0
Troubled Debt Restructurings Subsequent Default - Number of Contracts	0
Troubled Debt Restructurings Subsequent Default - Recorded Investment	0
Commercial Real Estate Portfolio Segment [Member]
Troubled Debt Restructurings:
Number of Contracts	2
Pre-Modification Outstanding Recording Investment	3,224,980
Post-Modification Outstanding Recording Investment	3,154,157
Troubled Debt Restructurings Subsequent Default - Number of Contracts	0
Troubled Debt Restructurings Subsequent Default - Recorded Investment	0
Residential Portfolio Segment [Member]
Troubled Debt Restructurings:
Number of Contracts	0
Pre-Modification Outstanding Recording Investment	0
Post-Modification Outstanding Recording Investment	0
Troubled Debt Restructurings Subsequent Default - Number of Contracts	0
Troubled Debt Restructurings Subsequent Default - Recorded Investment	$ 0

XML

Note 10 - Fair Value Disclosures (Details) - Estimated Fair Value of Financial Assets and Liabilities (USD $)	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents	$ 23,149,148	$ 69,278,771
Cash and cash equivalents, fair value	23,149,148	69,278,771
Securities available for sale	110,878,312	99,198,807
Securities held to maturity	155,318,690	152,816,815
Securities held to maturity, fair value	159,434,845	153,629,773
Loans held for sale	9,877,863	10,923,689
Loans held for sale, fair value	9,900,291	10,924,000
Loans	628,041,343	366,297,511
Loans, fair value	630,109,000	372,548,000
Accrued interest receivable	3,161,963	2,542,602
Accrued interest receivable, fair value	3,161,963	2,542,602
Deposits	(819,867,329)	(638,552,030)
Deposits, fair value	(820,796,000)	(639,539,000)
Borrowings	(59,888,511)	(10,000,000)
Borrowings, fair value	(60,615,000)	(11,148,000)
Redeemable subordinated debentures	(18,557,000)	(18,557,000)
Redeemable subordinated debentures, fair value	(18,557,000)	(18,557,000)
Accrued interest payable	(904,892)	(883,212)
Accrued interest payable, fair value	(904,892)	(883,212)
Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and cash equivalents, fair value	23,149,148	69,278,771
Securities available for sale	9,368,000	19,994,430
Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Securities available for sale	101,510,312	79,204,377
Securities held to maturity, fair value	159,434,845	153,629,773
Loans held for sale, fair value	9,900,291	10,924,000
Accrued interest receivable, fair value	3,161,963	2,542,602
Deposits, fair value	(820,796,000)	(639,539,000)
Borrowings, fair value	(60,615,000)	(11,148,000)
Redeemable subordinated debentures, fair value	(18,557,000)	(18,557,000)
Accrued interest payable, fair value	(904,892)	(883,212)
Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Loans, fair value	$ 630,109,000	$ 372,548,000

XML

Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Components of Accumulated Other Comprehensive Income (Loss) (USD $)	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Unrealized holding (losses) gains on available-for-sale securities:
Accumulated other comprehensive income (loss) before tax	$ (1,023,555)			$ (3,466,332)
Accumulated other comprehensive income (loss) income tax effect	395,471			1,218,698
Accumulated other comprehensive income (loss) net of tax	(628,084)	(1,365,409)	(2,247,634)	(2,247,634)	(373,183)	804,293
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Unrealized holding (losses) gains on available-for-sale securities:
Accumulated other comprehensive income (loss) before tax	(708,448)			(2,992,624)
Accumulated other comprehensive income (loss) income tax effect	300,312			1,060,098
Accumulated other comprehensive income (loss) net of tax	(408,136)	(1,088,261)	(1,932,526)	(1,932,526)	(802,169)	1,235,204
Accumulated Other-than-Temporary Impairment [Member]
Unrealized holding (losses) gains on available-for-sale securities:
Accumulated other comprehensive income (loss) before tax	(500,944)			(500,944)
Accumulated other comprehensive income (loss) income tax effect	170,321			170,321
Accumulated other comprehensive income (loss) net of tax	(330,623)	(330,623)	(330,623)	(330,623)	(330,623)	(330,623)
Accumulated Defined Benefit Plans Adjustment, Net Unamortized Gain (Loss) [Member]
Unrealized holding (losses) gains on available-for-sale securities:
Accumulated other comprehensive income (loss) before tax	185,837			27,236
Accumulated other comprehensive income (loss) income tax effect	(75,162)			(11,721)
Accumulated other comprehensive income (loss) net of tax	$ 110,675			$ (60,404)

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Allowance for Loan Losses (USD $)	Jun. 30, 2014	Mar. 31, 2014	Feb. 07, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Allowance for loan losses:
Allowance for loan losses	$ 7,418,379	$ 7,030,842		$ 7,038,571	$ 6,268,940	$ 6,023,282	$ 7,151,212
Ending Balance
Allowance for loan losses, individually evaluated for impairment	1,521,203			1,783,861
Allowance for loan losses, collectively evaluated for impairment	5,897,176			5,254,710
Loans receivables:
Loans	635,459,722		143,714,000	373,336,082
Loans, individually evaluated for impairment	12,322,838			10,180,751
Loans acquired with deteriorated credit quality	2,481,278		2,614,000
Loans, collectively evaluated for impairment	620,655,606			363,155,331
Construction [Member]
Allowance for loan losses:
Allowance for loan losses	950,014	1,265,430		1,205,267	1,212,578	1,210,289	1,990,292
Ending Balance
Allowance for loan losses, collectively evaluated for impairment	950,014			1,205,267
Loans receivables:
Loans	78,921,897			51,002,172
Loans, individually evaluated for impairment	373,663			19,930
Loans, collectively evaluated for impairment	78,548,234			50,982,242
Commercial Business [Member]
Allowance for loan losses:
Allowance for loan losses	1,546,766	1,218,037		1,271,733	985,919	817,181	972,789
Ending Balance
Allowance for loan losses, individually evaluated for impairment	19,141			293,692
Allowance for loan losses, collectively evaluated for impairment	1,527,625			978,041
Loans receivables:
Loans	107,082,193			82,348,055
Loans, individually evaluated for impairment	464,725			776,101
Loans acquired with deteriorated credit quality	384,932
Loans, collectively evaluated for impairment	106,232,536			81,571,954
Commercial Real Estate Portfolio Segment [Member]
Allowance for loan losses:
Allowance for loan losses	3,607,083	3,135,727		3,021,766	2,451,856	2,130,197	2,262,221
Ending Balance
Allowance for loan losses, individually evaluated for impairment	1,487,047			1,490,169
Allowance for loan losses, collectively evaluated for impairment	2,120,036			1,531,597
Loans receivables:
Loans	191,955,036			98,389,730
Loans, individually evaluated for impairment	10,041,584			9,130,605
Loans acquired with deteriorated credit quality	1,678,720
Loans, collectively evaluated for impairment	180,234,732			89,259,125
Mortgage Warehouse Lines [Member]
Allowance for loan losses:
Allowance for loan losses	909,559	521,675		584,757	928,699	990,738	1,420,638
Ending Balance
Allowance for loan losses, collectively evaluated for impairment	909,559			584,757
Loans receivables:
Loans	181,911,743			116,951,357
Loans, collectively evaluated for impairment	181,911,743			116,951,357
Residential Portfolio Segment [Member]
Allowance for loan losses:
Allowance for loan losses	172,853	182,005		164,673	92,733	112,365	112,103
Ending Balance
Allowance for loan losses, individually evaluated for impairment	15,015
Allowance for loan losses, collectively evaluated for impairment	157,838			164,673
Loans receivables:
Loans	50,086,532			13,764,178
Loans, individually evaluated for impairment	1,442,866			162,012
Loans acquired with deteriorated credit quality	183,668
Loans, collectively evaluated for impairment	48,459,998			13,602,166
Consumer Portfolio Segment [Member]
Allowance for loan losses:
Allowance for loan losses	90,732	92,387		108,849	99,890	102,234	102,583
Ending Balance
Allowance for loan losses, collectively evaluated for impairment	90,732			108,849
Loans receivables:
Loans	24,615,035			9,766,114
Loans, individually evaluated for impairment				92,103
Loans acquired with deteriorated credit quality	233,958
Loans, collectively evaluated for impairment	24,381,077			9,674,011
Consumer Other Financing Receivable [Member]
Allowance for loan losses:
Allowance for loan losses	1,665	1,623		2,183	2,104	2,059	2,271
Ending Balance
Allowance for loan losses, collectively evaluated for impairment	1,665			2,183
Loans receivables:
Loans	205,573			170,526
Loans, collectively evaluated for impairment	205,573			170,526
Unallocated Financing Receivables [Member]
Allowance for loan losses:
Allowance for loan losses	139,707	613,958		679,343	495,161	658,119	288,315
Ending Balance
Allowance for loan losses, collectively evaluated for impairment	139,707			679,343
Loan Cost [Member]
Loans receivables:
Loans	681,713			943,950
Loans, collectively evaluated for impairment	$ 681,713			$ 943,950

XML

Note 1 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

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, 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, 2013, filed with the SEC on March 31, 2014.

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

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of June 30, 2014 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) - Changes in the Components of AOCI (USD $)	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended								3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Jun. 30, 2013 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Jun. 30, 2014 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Jun. 30, 2013 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Jun. 30, 2014 Accumulated Other-than-Temporary Impairment [Member]	Mar. 31, 2014 Accumulated Other-than-Temporary Impairment [Member]	Dec. 31, 2013 Accumulated Other-than-Temporary Impairment [Member]	Jun. 30, 2013 Accumulated Other-than-Temporary Impairment [Member]	Mar. 31, 2013 Accumulated Other-than-Temporary Impairment [Member]	Dec. 31, 2012 Accumulated Other-than-Temporary Impairment [Member]	Jun. 30, 2014 Accumulated Defined Benefit Plans Adjustment [Member]	Jun. 30, 2013 Accumulated Defined Benefit Plans Adjustment [Member]	Jun. 30, 2014 Accumulated Defined Benefit Plans Adjustment [Member]	Jun. 30, 2013 Accumulated Defined Benefit Plans Adjustment [Member]
Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income (Details) - Changes in the Components of AOCI [Line Items]
Accumulated other comprehensive income (loss)	$ (1,365,409)	$ (373,183)	$ (2,247,634)	$ 804,293	$ (1,088,261)	$ (802,169)	$ (1,932,526)	$ 1,235,204	$ (330,623)	$ (330,623)	$ (330,623)	$ (330,623)	$ (330,623)	$ (330,623)	$ 53,475	$ (98,363)	$ 15,515	$ (100,288)
Other comprehensive income (loss) before reclassifications	735,815	(2,441,221)	1,618,040	(2,872,331)	678,615	(2,479,180)	1,522,880	(2,912,215)							57,200	37,959	95,160	39,884
Amounts reclassified from accumulated other comprehensive income	1,510		1,510		1,510		1,510
Other comprehensive income (loss)	737,325	(2,441,221)	1,619,550	(2,872,331)	680,125	(2,479,180)	1,524,390	(2,912,216)							57,200	37,959	95,160	39,884
Accumulated other comprehensive income (loss)	$ (628,084)	$ (2,247,634)	$ (628,084)	$ (2,247,634)	$ (408,136)	$ (1,932,526)	$ (408,136)	$ (1,932,526)	$ (330,623)	$ (330,623)	$ (330,623)	$ (330,623)	$ (330,623)	$ (330,623)	$ 110,675	$ (60,403)	$ 110,675	$ (60,403)

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) (USD $)	Jun. 30, 2014	Feb. 07, 2014	Dec. 31, 2013
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) [Line Items]
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Carrying Amount, Net	$ 2,481,278	$ 2,613,826
Financing Receivable, Modifications, Recorded Investment	0		0
Financing Receivable, Allowance for Credit Losses, Acquired with Deteriorated Credit Quality	0
Mortgage Warehouse Lines [Member] | Minimum [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) [Line Items]
Line of Credit, Required Deposit Balance, Percent	10.00%
Mortgage Warehouse Lines [Member] | Maximum [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) [Line Items]
Line of Credit, Required Deposit Balance, Percent	15.00%
Nonperforming Financing Receivable [Member]
Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) [Line Items]
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Carrying Amount, Net	$ 911,568

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Assets Acquired and Liabilities Assumed (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Consideration paid:
Company stock issued	$ 11,161
Cash payment	14,770
Total consideration paid	25,931
Recognized amounts of identifiable assets and liabilities assumed at fair value:
Cash and cash equivalents	36,045
Short-term investments	100
Securities available for sale	30,024
Loans	143,714
Premises and equipment, net	2,552
Identifiable intangible assets	1,189
Bank-owned life insurance	4,471
Accrued interest receivable and other assets	1,483
Deposits	(189,490)
Borrowings	(11,030)
Other liabilities	(825)
Total identifiable assets	18,233
Goodwill	$ 7,698

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) (USD $)	3 Months Ended		6 Months Ended				6 Months Ended		5 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Feb. 07, 2014	Feb. 07, 2014 No Evidence of Creidt Quality Deterioration [Member] Rumson-Fair Haven Bank and Trust Company [Member]	Jun. 30, 2014 Acquisition-related Costs [Member] Rumson-Fair Haven Bank and Trust Company [Member]	Jun. 30, 2014 Income Tax Expense (Benefit) [Member] Rumson-Fair Haven Bank and Trust Company [Member]	Jun. 30, 2014 Rumson-Fair Haven Bank and Trust Company [Member]	Jun. 30, 2014 Rumson-Fair Haven Bank and Trust Company [Member]	Feb. 07, 2014 Rumson-Fair Haven Bank and Trust Company [Member]
Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares Per Exchanged Share (in Shares)											0.7772
Business Acquisition, Share Price (in Dollars per share)											$ 7.50
Business Acquisition, Percent of Cash Consideration											60.00%
Business Acquisition, Percent of Equity Consideration											40.00%
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares)										1,019,223
Payments to Acquire Businesses, Gross			$ 14,770,000							$ 14,800,000
Business Combination, Acquired Receivables, Gross Contractual Amount						141,100,000
Financing Receivable, Acquired with Deteriorated Credit Quality	2,481,278		2,481,278		2,614,000						2,600,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles											1,200,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life										10 years
Business Combination, Acquisition Related Costs	109,430		1,532,153				1,800,000			1,500,000
Income Tax Expense (Benefit)	$ (728,150)	$ 612,492	$ (682,024)	$ 1,137,125				$ 505,000	$ 724,000

XML

Note 6 - Share-Based Compensation (Details) - Share-based Compensation Activity (USD $)	6 Months Ended
	Jun. 30, 2014
Share-based Compensation Activity [Abstract]
Outstanding at January 1, 2014	235,598
Outstanding at January 1, 2014	$ 8.81
Granted	11,700
Granted	$ 11.02
Outstanding at June 30, 2014	247,298
Outstanding at June 30, 2014	$ 8.91
Outstanding at June 30, 2014	5 years 146 days
Outstanding at June 30, 2014	$ 485,125
Exercisable at June 30, 2014	199,881
Exercisable at June 30, 2014	$ 9.17
Exercisable at June 30, 2014	4 years 255 days
Exercisable at June 30, 2014	$ 294,904

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Aging of Loan Portfolio (USD $)	Jun. 30, 2014	Feb. 07, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, 30-59 days past due	$ 1,977,584		$ 700,748
Loans, 60-89 days past due	339,656		1,025,764
Loans, greater than 90 days past due	8,759,644		5,703,992
Loans, past due	11,076,884		7,430,504
Loans, current	624,382,838		365,905,578
Loans	635,459,722	143,714,000	373,336,082
Recorded Investment >90 Days Accruing	911,568
Loans, nonaccrual	7,975,753		6,321,956
Construction [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, current	78,921,897		51,002,172
Loans	78,921,897		51,002,172
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, 30-59 days past due	365,090		385,133
Loans, 60-89 days past due			58,665
Loans, greater than 90 days past due	422,820		453,325
Loans, past due	787,910		897,123
Loans, current	106,294,283		81,450,932
Loans	107,082,193		82,348,055
Recorded Investment >90 Days Accruing	53,518
Loans, nonaccrual	369,302		511,990
Commercial Real Estate Other Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, 30-59 days past due	1,315,303
Loans, 60-89 days past due	211,979
Loans, greater than 90 days past due	6,604,013		5,217,173
Loans, past due	8,131,295		5,217,173
Loans, current	183,823,741		93,172,557
Loans	191,955,036		98,389,730
Recorded Investment >90 Days Accruing	440,425
Loans, nonaccrual	6,163,588		5,555,851
Mortgage Warehouse Lines [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, current	181,911,743		116,951,357
Loans	181,911,743		116,951,357
Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, 30-59 days past due	219,759		315,615
Loans, 60-89 days past due	127,677		967,099
Loans, greater than 90 days past due	1,498,854		33,494
Loans, past due	1,846,290		1,316,208
Loans, current	48,240,242		12,447,970
Loans	50,086,532		13,764,178
Recorded Investment >90 Days Accruing	183,668
Loans, nonaccrual	1,442,863		162,012
Loans to Individuals [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, 30-59 days past due	77,432
Loans, greater than 90 days past due	233,957
Loans, past due	311,389
Loans, current	24,303,646		9,766,114
Loans	24,615,035		9,766,114
Recorded Investment >90 Days Accruing	233,957
Loans, nonaccrual			92,103
Consumer Other Financing Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, current	205,573		170,526
Loans	205,573		170,526
Deferred Loan Cost [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans, current	681,713		943,950
Loans	$ 681,713		$ 943,950

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Loans Acquired at Fair Value (USD $)	Jun. 30, 2014	Feb. 07, 2014	Dec. 31, 2013
Commercial
Loans acquired with credit quality deterioration	$ 2,481,278	$ 2,614,000
Loans	635,459,722	143,714,000	373,336,082
Commercial Construction [Member] | No Evidence of Creidt Quality Deterioration [Member]
Commercial
Loans acquired with no credit quality deterioration		11,920,000
Commercial Construction [Member]
Commercial
Loans		11,920,000
Commercial Real Estate [Member] | No Evidence of Creidt Quality Deterioration [Member]
Commercial
Loans acquired with no credit quality deterioration		62,398,000
Commercial Real Estate [Member]
Commercial
Loans acquired with credit quality deterioration		1,832,000
Loans		64,230,000
Commercial Business [Member] | No Evidence of Creidt Quality Deterioration [Member]
Commercial
Loans acquired with no credit quality deterioration		18,086,000
Commercial Business [Member]
Commercial
Loans acquired with credit quality deterioration		368,000
Loans		18,454,000
Residential Mortgage [Member] | No Evidence of Creidt Quality Deterioration [Member]
Commercial
Loans acquired with no credit quality deterioration		32,743,000
Residential Mortgage [Member]
Commercial
Loans acquired with credit quality deterioration		180,000
Loans		32,923,000
Consumer Loan [Member] | No Evidence of Creidt Quality Deterioration [Member]
Commercial
Loans acquired with no credit quality deterioration		15,953,000
Consumer Loan [Member]
Commercial
Loans acquired with credit quality deterioration		234,000
Loans		16,187,000
No Evidence of Creidt Quality Deterioration [Member]
Commercial
Loans acquired with no credit quality deterioration		$ 141,100,000

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Loans Acquired with Evidence of Credit Quality Deterioration (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Loans Acquired with Evidence of Credit Quality Deterioration [Abstract]
Contractually required principal and interest at acquisition	$ 4,451
Contractual cash flows not expected to be collected (non-accretable difference)	1,543
Expected cash flows at acquisition	2,908
Interest component of expected cash flows (accretable difference)	294
Fair value of acquired loans	$ 2,614

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
OPERATING ACTIVITIES:
Net income	$ 201,794	$ 2,882,348
Provision for loan losses	4,599,996	236,666
Provision for loss on other real estate owned		662,918
Depreciation and amortization	880,566	539,640
Net amortization of premiums and discounts on securities	546,824	613,720
Loss on sales of securities held for sale	2,516
Gains on sales of other real estate owned	(21,012)	(291,452)
Gains on sales of loans held for sale	(1,006,736)	(1,210,855)
Originations of loans held for sale	(39,760,548)	(83,349,024)
Proceeds from sales of loans held for sale	41,813,110	92,285,028
Income on Bank – owned life insurance	(278,138)	(232,366)
Share-based compensation expense	70,366	267,958
(Increase) decrease in accrued interest receivable	(22,749)	317,907
Decrease in other assets	1,196,128	1,270,240
Decrease in accrued interest payable	(125,694)	(114,674)
(Decrease) increase in accrued expenses and other liabilities	(1,414,957)	305,763
Net cash provided by operating activities	6,681,466	14,183,817
Purchases of securities -
Available for sale		(15,947,558)
Held to maturity	(14,229,098)	(10,839,022)
Proceeds from maturities and prepayments of securities -
Available for sale	14,315,647	15,257,223
Held to maturity	11,534,177	16,295,574
Proceeds from sales of securities available for sale	5,957,188
Net (increase) decrease in loans	(122,887,249)	110,901,189
Capital expenditures	(111,489)	(113,402)
Net cash received in the acquisition	21,375,071
Proceeds from sales of other real estate owned	230,949	2,653,518
Net cash (used in) provided by investing activities	(83,814,804)	118,207,522
FINANCING ACTIVITIES:
Issuance of vested shares	302,850	219,783
Purchase of Treasury Stock	(39,844)	(58,028)
Net decrease in demand, savings and time deposits	(8,169,253)	(4,089,641)
Net increase (decrease) in borrowings	38,909,962	(32,400,000)
Net cash provided by (used in) financing activities	31,003,715	(36,327,886)
(Decrease) increase in cash and cash equivalents	(46,129,623)	96,063,453
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR	69,278,771	14,044,921
CASH AND CASH EQUIVALENTS
AT END OF YEAR	23,149,148	110,108,374
Cash paid during the period for -
Interest	2,410,984	2,323,779
Income taxes	596,223	1,153,000
Non-cash investing activities
Real estate acquired in full satisfaction of loans in foreclosure		2,311,225
Noncash assets acquired:
	191,130,804
Liabilities assumed:
	201,345,175
Common stock issued as consideration (in Shares)	11,160,700
Investment Securities Available For Sale [Member]
Noncash assets acquired:
Investments	30,024,458
Loans [Member]
Noncash assets acquired:
Investments	143,714,377
Accrued Interest Receivable [Member]
Noncash assets acquired:
Other assets	596,612
Premises and Equipment [Member]
Noncash assets acquired:
Premises and equipment, net	2,551,939
Goodwill [Member]
Noncash assets acquired:
Intangible assets	7,698,427
Core Deposit Intangible [Member]
Noncash assets acquired:
Intangible assets	1,188,836
Bankowned Life Insurance [Member]
Noncash assets acquired:
Other assets	4,470,579
Other Assets [Member]
Noncash assets acquired:
Other assets	885,576
Deposits [Member]
Liabilities assumed:
Other liabilities	189,490,005
Advance from FHLB [Member]
Liabilities assumed:
Other liabilities	11,030,000
Other Liabilities [Member]
Liabilities assumed:
Other liabilities	$ 825,170

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Core Deposit Future Amortization Expense (Core Deposits [Member], Rumson-Fair Haven Bank and Trust Company [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Core Deposits [Member] | Rumson-Fair Haven Bank and Trust Company [Member]
Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Details) - Core Deposit Future Amortization Expense [Line Items]
2014	$ 216
2015	195
2016	173
2017	151
2018	130
Thereafter	324
	$ 1,189

XML

Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position (USD $)	Jun. 30, 2014	Dec. 31, 2013
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	105	150
Securities in a continuous unrealized loss position, less than 12 months, fair value	$ 3,212,695	$ 76,743,619
Securities in a continuous unrealized loss position, less than 12 months, unrealized losses	(42,586)	(4,049,571)
Securities in a continuous unrealized loss position, 12 months or longer, fair value	57,611,857	13,249,260
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(2,953,830)	(2,722,323)
Securities in a continuous unrealized loss position, fair value	60,824,552	89,992,879
Securities in a continuous unrealized loss position, unrealized losses	(2,996,416)	(6,771,894)
US Treasury and Government [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	2	3
Securities in a continuous unrealized loss position, less than 12 months, fair value		11,507,350
Securities in a continuous unrealized loss position, less than 12 months, unrealized losses		(910,274)
Securities in a continuous unrealized loss position, 12 months or longer, fair value	10,905,275
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(525,144)
Securities in a continuous unrealized loss position, fair value	10,905,275	11,507,350
Securities in a continuous unrealized loss position, unrealized losses	(525,144)	(910,274)
Residential Collateralized Mortgage Obligations- GSE [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	1
Securities in a continuous unrealized loss position, less than 12 months, fair value	1,126,559
Securities in a continuous unrealized loss position, less than 12 months, unrealized losses	(35,909)
Securities in a continuous unrealized loss position, fair value	1,126,559
Securities in a continuous unrealized loss position, unrealized losses	(35,909)
Residential Collateralized Mortgage Obligations- Non GSE [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	2	8
Securities in a continuous unrealized loss position, less than 12 months, fair value	988,947	5,328,485
Securities in a continuous unrealized loss position, less than 12 months, unrealized losses	(382)	(28,231)
Securities in a continuous unrealized loss position, 12 months or longer, fair value	105,842	1,094,754
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(5,829)	(7,969)
Securities in a continuous unrealized loss position, fair value	1,094,789	6,423,239
Securities in a continuous unrealized loss position, unrealized losses	(6,211)	(36,200)
Residential Mortgage Backed Securities [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	16	38
Securities in a continuous unrealized loss position, less than 12 months, fair value		40,504,327
Securities in a continuous unrealized loss position, less than 12 months, unrealized losses		(825,307)
Securities in a continuous unrealized loss position, 12 months or longer, fair value	17,570,016
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(395,147)
Securities in a continuous unrealized loss position, fair value	17,570,016	40,504,327
Securities in a continuous unrealized loss position, unrealized losses	(395,147)	(825,307)
US States and Political Subdivisions Debt Securities [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	79	95
Securities in a continuous unrealized loss position, less than 12 months, fair value	1,097,189	19,403,457
Securities in a continuous unrealized loss position, less than 12 months, unrealized losses	(6,295)	(2,285,759)
Securities in a continuous unrealized loss position, 12 months or longer, fair value	25,841,204	8,936,441
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(1,661,976)	(1,721,472)
Securities in a continuous unrealized loss position, fair value	26,938,393	28,339,898
Securities in a continuous unrealized loss position, unrealized losses	(1,668,271)	(4,007,231)
Trust Preferred Debt Securities [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	4	4
Securities in a continuous unrealized loss position, 12 months or longer, fair value	2,148,600	2,013,100
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(321,701)	(455,739)
Securities in a continuous unrealized loss position, fair value	2,148,600	2,013,100
Securities in a continuous unrealized loss position, unrealized losses	(321,701)	(455,739)
Corporate Debt Securities [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number	1	1
Securities in a continuous unrealized loss position, 12 months or longer, fair value	1,040,920	1,056,110
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses	(44,033)	(29,336)
Securities in a continuous unrealized loss position, fair value	1,040,920	1,056,110
Securities in a continuous unrealized loss position, unrealized losses	(44,033)	(29,336)
Trust Preferred Debt Securities Pooled [Member]
Note 4 - Investment Securities (Details) - Securities in a Continuous Unrealized Loss Position [Line Items]
Securities in a continuous unrealized loss position, number		1
Securities in a continuous unrealized loss position, 12 months or longer, fair value		148,855
Securities in a continuous unrealized loss position, 12 months or longer, unrealized losses		(507,807)
Securities in a continuous unrealized loss position, fair value		148,855
Securities in a continuous unrealized loss position, unrealized losses		$ (507,807)

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Acquired Credit Impaired Loans (USD $)	6 Months Ended
	Jun. 30, 2014
Acquired Credit Impaired Loans [Abstract]
Balance at beginning of period	$ 0
Acquisition of impaired loans	293,976
Accretion of discount	(47,333)
Balance at end of period	$ 246,643

XML

Consolidated Balance Sheets (Unaudited) (USD $)	Jun. 30, 2014	Dec. 31, 2013
ASSETS
CASH AND DUE FROM BANKS	$ 23,149,148	$ 69,267,345
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS		11,426
Total cash and cash equivalents	23,149,148	69,278,771
INVESTMENT SECURITIES:
Available for sale, at fair value	110,878,312	99,198,807
Held to maturity (fair value of $159,434,845 and $153,629,773 at Mar June 30, 2014 and December 31, 2013, respectively)	155,318,690	152,816,815
Total investment securities	266,197,002	252,015,622
LOANS HELD FOR SALE	9,877,863	10,923,689
LOANS	635,459,722	373,336,082
Less- Allowance for loan losses	(7,418,379)	(7,038,571)
Net loans	628,041,343	366,297,511
PREMISES AND EQUIPMENT, net	12,189,136	10,043,505
ACCRUED INTEREST RECEIVABLE	3,161,963	2,542,602
BANK-OWNED LIFE INSURANCE	20,932,291	16,183,574
OTHER REAL ESTATE OWNED	1,860,000	2,136,341
GOODWILL AND INTANGIBLE ASSETS	13,614,963	4,889,575
OTHER ASSETS	6,946,522	8,013,897
Total assets	985,970,231	742,325,087
Deposits
Non-interest bearing	166,866,851	121,891,752
Interest bearing	653,000,478	516,660,278
Total deposits	819,867,329	638,552,030
BORROWINGS	59,888,511	10,000,000
REDEEMABLE SUBORDINATED DEBENTURES	18,557,000	18,557,000
ACCRUED INTEREST PAYABLE	904,892	883,212
ACCRUED EXPENSES AND OTHER LIABILITIES	5,078,769	5,974,531
Total liabilities	904,296,501	673,966,773
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; 7,136,784 and 6,033,683 shares issued and 7,116,055 and 6,016,845 shares outstanding at June 30,2014 and December 31, 2013, respectively	60,937,366	49,403,450
Retained earnings	21,576,175	21,374,381
Treasury Stock, 20,729 shares and 16,838 shares at June 30, 2014 and December 31, 2013, respectively	(211,727)	(171,883)
Accumulated other comprehensive (loss)	(628,084)	(2,247,634)
Total shareholders’ equity	81,673,730	68,358,314
Total liabilities and shareholders’ equity	$ 985,970,231	$ 742,325,087

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Commercial Loans by Credit Quality Indicators (USD $)	Jun. 30, 2014	Feb. 07, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 635,459,722	$ 143,714,000	$ 373,336,082
Construction [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	78,921,897		47,539,033
Construction [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			3,463,139
Construction [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	78,921,897		51,002,172
Commercial Business [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	103,155,373		79,832,704
Commercial Business [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,545,759		1,406,143
Commercial Business [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	942,648		792,057
Commercial Business [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	438,413		258,486
Commercial Business [Member] | Unlikely to be Collected Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans			58,665
Commercial Business [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	107,082,193		82,348,055
Commercial Real Estate Other Receivable [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	165,905,820		68,620,450
Commercial Real Estate Other Receivable [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	15,475,088		19,396,574
Commercial Real Estate Other Receivable [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	10,574,128		10,372,706
Commercial Real Estate Other Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	191,955,036		98,389,730
Mortgage Warehouse Lines [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	181,911,743		116,951,357
Mortgage Warehouse Lines [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	181,911,743		116,951,357
Residential Portfolio Segment [Member] | Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	48,453,325		12,635,067
Residential Portfolio Segment [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,317,592		1,129,111
Residential Portfolio Segment [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	315,615
Residential Portfolio Segment [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 50,086,532		$ 13,764,178

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, 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 program	219,783				219,783
Share-based compensation	50,568				50,568
Treasury stock purchased			(58,028)		(58,028)
Net income		2,882,348			2,882,348
Other comprehensive income (loss)				(2,872,331)	(2,872,331)
Balance at Jun. 30, 2013	48,986,383	18,476,641	(119,114)	(2,068,038)	65,275,872
Balance at Dec. 31, 2013	49,403,450	21,374,381	(171,883)	(2,247,634)	68,358,314
Exercise of stock options and issuance of vested shares under employee benefit program	302,850				302,850
Share-based compensation	70,366				70,366
Treasury stock purchased			(39,844)		(39,844)
Acquisition of Rumson-Fair Haven Bank and Trust Company (1,019,223 shares)	11,160,700				11,160,700
Net income		201,794			201,794
Other comprehensive income (loss)				1,619,550	1,619,550
Balance at Jun. 30, 2014	$ 60,937,366	$ 21,576,175	$ (211,727)	$ (628,084)	$ 81,673,730

XML

Note 7 - Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
Cash Surrender Value of Life Insurance	$ 20.9	$ 16.2

XML

Note 3 - Net Income Per Common Share (Details) - Earnings Per Share, Basic and Diluted (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Basic earnings per common share:
Net income (in Dollars)	$ (439,918)	$ 1,557,030	$ 201,794	$ 2,882,348
Weighted-average shares, basic	7,113,717	5,992,743	6,958,901	5,944,633
Basic earnings per share (in Dollars per share)	$ (0.06)	$ 0.26	$ 0.03	$ 0.48
Effect of dilutive securities:
Stock options and warrants		150,867	120,293	148,498
Diluted EPS:
Net income plus assumed conversions (in Dollars)	$ (439,918)	$ 1,557,030	$ 201,794	$ 2,882,348
Weighted-average shares, diluted	7,113,717	6,143,610	7,079,194	6,093,131
Dilutued earnings per share (in Dollars per share)	$ (0.06)	$ 0.25	$ 0.03	$ 0.47

XML

Note 10 - Fair Value Disclosures (Details) - Financial Assets and Liabillities at Fair Value Measured on Non-recurring Basis (USD $)	Jun. 30, 2014	Dec. 31, 2013
Note 10 - Fair Value Disclosures (Details) - Financial Assets and Liabillities at Fair Value Measured on Non-recurring Basis [Line Items]
Impaired loans	$ 8,016,178	$ 7,879,005
December 31, 2013:
Other real estate owned		209,937
Fair Value, Inputs, Level 3 [Member]
Note 10 - Fair Value Disclosures (Details) - Financial Assets and Liabillities at Fair Value Measured on Non-recurring Basis [Line Items]
Impaired loans	8,016,178	7,879,005
December 31, 2013:
Other real estate owned		$ 209,937

XML

Note 4 - Investment Securities (Tables)

6 Months Ended

Jun. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Available-for-sale Securities [Table Text Block]

June 30, 2014	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	$	11,430,419	$	-	$	(525,144	)	$	10,905,275
Residential collateralized mortgage obligations – GSE		4,016,935		104,804		(35,909	)		4,085,830
Residential collateralized mortgage obligations – non-GSE		2,774,669		47,862		(6,211	)		2,816,320
Residential mortgage backed securities – GSE		29,268,826		966,555		(261,125	)		29,974,256
Obligations of State and Political subdivisions		22,047,926		225,727		(1,264,271	)		21,009,382
Trust preferred debt securities – single issuer		2,470,301		-		(321,701	)		2,148,600
Corporate debt securities		36,036,784		404,998		(44,033	)		36,397,749
Restricted stock		3,515,900		-		-			3,515,900
Mutual fund		25,000		-		-			25,000
	$	111,586,760	$	1,749,946	$	(2,458,394	)	$	110,878,312

December 31, 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	$	22,386,761	$	33,213	$	(910,274	)	$	21,509,700
Residential collateralized mortgage obligations – GSE		3,547,404		134,388		-			3,681,792
Residential collateralized mortgage obligations – non-GSE		2,782,843		52,227		(8,674	)		2,826,396
Residential mortgage backed securities – GSE		31,532,051		872,169		(438,273	)		31,965,947
Obligations of State and Political subdivisions		22,206,959		149,959		(2,710,874	)		19,646,044
Trust preferred debt securities-single issuer		2,468,839		-		(455,739	)		2,013,100
Corporate debt securities		16,228,474		318,590		(29,336	)		16,517,728
Restricted stock		1,013,100		-		-			1,013,100
Mutual fund		25,000		-		-			25,000
	$	102,191,431	$	1,560,546	$	(4,553,170	)	$	99,198,807

Held-to-maturity Securities [Table Text Block]

June 30, 2014	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Loss			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	$	501,773	$	-		$	501,773	$	1,572	$	-		$	503,345
Residential collateralized mortgage obligations – GSE		13,242,024		-			13,242,024		500,621		-			13,742,645
Residential collateralized mortgage obligations – non-GSE		9,679,334		-			9,679,334		346,640					10,025,974
Residential mortgage backed securities – GSE		61,339,357		-			61,339,357		1,404,295		(134,022	)		62,609,630
Obligations of State and Political subdivisions		69,900,076		-			69,900,076		2,023,380		(404,000	)		71,519,456
Trust preferred debt securities-pooled		656,661		(500,944	)		155,717		376,593		-			532,310
Corporate debt securities		500,409		-			500,409		1,076		-			501,485
	$	155,819,634	$	(500,944	)	$	155,318,690	$	4,654,177	$	(538,022	)	$	159,434,845

December 31, 2013	Amortized Cost		Other-Than-Temporary Impairment Recognized In Accumulated Other Comprehensive Loss			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
Obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	1,524,860	$	-		$	1,524,860	$	10,310	$	-		$	1,535,170
Residential collateralized mortgage obligations – GSE		14,803,739		-			14,803,739		379,815		-			15,183,554
Residential collateralized mortgage obligations – non-GSE		10,682,363		-			10,682,363		119,777		(27,526	)		10,774,614
Residential mortgage backed securities – GSE		65,240,620		-			65,240,620		611,062		(387,034	)		65,464,648
Obligations of State and Political subdivisions		59,400,916		-			59,400,916		1,399,938		(1,296,357	)		59,504,497
Trust preferred debt securities – pooled		656,662		(500,944	)		155,718		-		(6,863	)		148,855
Corporate debt securities		1,008,599		-			1,008,599		9,836		-			1,018,435
	$	153,317,759	$	(500,944	)	$	152,816,815	$	2,530,738	$	(1,717,780	)	$	153,629,773

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 US Government sponsored corporations (“GSE”) and agencies	$	-	$	-
Residential mortgage backed securities – GSE		327,904		329,483
Obligations of State and Political subdivisions		264,650		265,665
Corporate Debt Securities		10,350,414		10,377,692
Restricted Stock		3,515,900		3,515,900
Mutual Fund		25,000		25,000
	$	14,483,868	$	14,513,740
Due after one year through five years
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	1,542,897	$	1,537,275
Residential collateralized mortgage obligations – non-GSE		-		-
Residential mortgage backed securities – GSE		6,945,975		6,882,941
Obligations of State and Political subdivisions		110,000		110,251
Corporate Debt Securities		23,581,409		23,946,637
	$	32,180,281	$	32,477,104
Due after five years through ten years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	9,887,522	$	9,368,000
Residential collateralized mortgage obligations – GSE		109,945		117,244
Residential mortgage backed Securities – GSE		7,557,870		7,653,670
Obligations of State and Political Subdivisions		4,861,389		4,921,297
Corporate Debt Securities		1,020,008		1,032,500
	$	23,436,734	$	23,092,711
Due after ten years
Residential collateralized mortgage obligations – GSE	$	3,906,991	$	3,968,587
Residential collateralized mortgage obligations – non-GSE		2,446,764		2,486,836
Residential mortgage backed securities – GSE		14,764,981		15,437,645
Obligations of State and Political subdivisions		16,811,887		15,712,169
Corporate Debt Securities		1,084,953		1,040,920
Trust Preferred Debt Securities		2,470,301		2,148,600
	$	41,485,877	$	40,794,757
Total	$	111,586,760	$	110,878,312
Held to maturity-
Due in one year or less
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	501,773	$	503,345
Obligations of State and Political subdivisions		18,863,582		18,878,243
Corporate Debt Securities		500,409		501,485
		19,865,764		19,883,073
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		11,961,666		12,397,039
Corporate Debt Securities		-		-
	$	11,961,666	$	12,397,039
Due after five years through ten years
Residential collateralized mortgage obligations – GSE	$	-	$	-
Residential collateralized mortgage obligations – non-GSE		841,639		844,647
Residential mortgage backed securities – GSE		20,221,542		20,553,756
Obligations of State and Political subdivisions		20,832,099		21,759,133
	$	41,895,280	$	43,157,536
Due after ten years
Residential collateralized mortgage obligations – GSE	$	13,242,024	$	13,742,645
Residential collateralized mortgage obligations – non-GSE		8,837,695		9,181,327
Residential mortgage backed securities – GSE		41,117,815		42,055,874
Obligations of State and Political subdivisions		18,242,729		18,485,041
Trust Preferred Debt Securities – Pooled		656,661		532,310
	$	82,096,924	$	83,997,197
Total	$	155,819,634	$	159,434,845

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

June 30, 2014			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		2	$	-	$	-		$	10,905,275	$	(525,144	)	$	10,905,275	$	(525,144	)
Residential collateralized mortgage obligations – GSE		1		1,126,559		(35,909	)		-		-			1,126,559		(35,909	)
Residential collateralized mortgage bligations – non-GSE		2		988,947		(382	)		105,842		(5,829	)		1,094,789		(6,211	)
Residential mortgage backed securities – GSE		16		-		-			17,570,016		(395,147	)		17,570,016		(395,147	)
Obligations of State and Political Subdivisions		79		1,097,189		(6,295	)		25,841,204		(1,661,976	)		26,938,393		(1,668,271	)
Trust preferred debt securities – single issuer		4		-		-			2,148,600		(321,701	)		2,148,600		(321,701	)
Corporate Debt Securities		1		-		-			1,040,920		(44,033	)		1,040,920		(44,033	)
Total temporarily impaired securities		105	$	3,212,695	$	(42,586	)	$	57,611,857	$	(2,953,830	)	$	60,824,552	$	(2,996,416	)

December 31, 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 (GSE) and agencies		3	$	11,507,350	$	(910,274	)	$	-	$	-		$	11,507,350	$	(910,274	)
Residential collateralized mortgage Obligations – non-GSE		8		5,328,485		(28,231	)		1,094,754		(7,969	)		6,423,239		(36,200	)
Residential mortgage backed securities GSE		38		40,504,327		(825,307	)		-		-			40,504,327		(825,307	)
Obligations of State and Political Subdivisions		95		19,403,457		(2,285,759	)		8,936,441-		(1,721,472	)		28,339,898		(4,007,231	)
Trust preferred debt securities – single issuer		4		-		-			2,013,100		(455,739	)		2,013,100		(455,739	)
Trust preferred debt securities – Pooled		1		-		-			148,855		(507,807	)		148,855		(507,807	)
Corporate debt securities		1		-		-			1,056,110		(29,336	)		1,056,110		(29,336	)
Total temporarily impaired securities		150	$	76,743,619	$	(4,049,571	)	$	13,249,260	$	(2,722,323	)	$	89,992,879	$	(6,771,894	)

Schedule of Unrealized Loss on Investments [Table Text Block]

Expected Deferrals and

Excess Subordination             (2)

Security

Class

Book Value

Fair Value

Unrealized Gain (Loss)

Percent of Underlying Collateral Performing

Percent of Underlying Collateral In Deferral (1)

Percent of Underlying Collateral In Default (1)

Defaults as a % of Remaining Performing Collateral

Moody's S&P / Ratings

Amount

% of Current Performing Collateral

PreTSL XXV

B-1

$155,717

$532,310

$376,593

70.7%

6.7%

22.6%

13.7%

Ca/ NR

$146,000

27.0%

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

(in thousands)	Three months ended June 30, 2014		Three months ended June 30, 2013
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

(in thousands)	Six months ended June 30, 2014		Six months ended June 30, 2013
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

XML

Note 4 - Investment Securities (Details) (USD $)	12 Months Ended			6 Months Ended
	Dec. 31, 2009	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Texas Ratio Bucket One [Member] Minimum [Member]	Jun. 30, 2014 Texas Ratio Bucket Two [Member] Minimum [Member]	Jun. 30, 2014 Texas Ratio Bucket Two [Member] Maximum [Member]	Jun. 30, 2014 Texas Ratio Bucket Three [Member] Maximum [Member]	Jun. 30, 2014 Scenario, Actual [Member] Texas Ratio Below 75 [Member]	Jun. 30, 2014 Scenario, Forecast [Member] Texas Ratio Below 75 [Member]	Jun. 30, 2014 Texas Ratio Above 100 [Member]	Jun. 30, 2014 Texas Ratio Between 75 and 100 [Member]
Note 4 - Investment Securities (Details) [Line Items]
Federal Home Loan Bank Stock (in Dollars)		$ 3,450,900	$ 948,100
Atlantic Central Bankers Bank Stock (in Dollars)		65,000	65,000
Other than Temporary Impairment Losses, Investments (in Dollars)	864,727
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net (in Dollars)	363,783
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Loss, before Tax, Including Portion Attributable to Noncontrolling Interest (in Dollars)	$ 500,944
Texas Ratio				100	75	100	75
Default Rate										0.00%
Recovery Rate										0.00%	15.00%
Deferral Rate											100.00%
Recovery Period											2 years
Expected Deferrals And Defaults, Default Basis Points Rate								0.36%	0.75%

XML

Note 6 - Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

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, 2014		235,598	$	8.81
Granted		11,700		11.02
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at June 30, 2014		247,298	$	8.91		5.4	$	485,125
Exercisable at June 30, 2014		199,881	$	9.17		4.7	$	294,904

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

	January 2014			April 2014
Fair value of options granted	$	4.75		$	4.32
Risk-free rate of return		1.65	%		1.70	%
Expected option life in years		7			7
Expected volatility		38.01	%		38.01	%
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, 2014		136,490		$	6.59
Granted		35,600			11.21
Vested		(29,065	)		6.73
Forfeited		-			-
Non-vested at June 30, 2014		143,025		$	7.71

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) (Parentheticals)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Common Stock [Member]
Issuance of vested shares under employee benefit program	35,600	23,233
Acquisition of Rumson-Fair Haven Bank and Trust Company	1,019,223
Treasury Stock [Member]
Treasury stock purchased	3,891	6,440

XML

Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Held to maturity, fair value (in Dollars)	$ 159,434,845	$ 153,629,773
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in Dollars per share)	$ 0	$ 0
Common stock, shares authorized	30,000,000	30,000,000
Common stock, shares issued	7,136,784	6,033,683
Common Stock, shares outstanding	7,116,055	6,016,845
Treasury stock shares	20,729	16,838

XML

Note 9 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

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

(9) Recent Accounting Pronouncements

ASU 2014-04 (Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure)

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreements. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this update using either a modified retrospective transition method or a prospective transition method. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

ASU 2014-11 Repurchase-to-maturity Transactions, Repurchase Financings, and Disclosures to change the accounting for repurchase-to-maturity transactions and certain linked repurchase financings.

On June 12, 2014, the FASB issued ASU 2014-11, Repurchase-to-maturity Transactions, Repurchase Financings, and Disclosures to change the accounting for repurchase-to-maturity transactions and certain linked repurchase financings. This will result in accounting for both types of arrangements as secured borrowings on the balance sheet. Additionally, the ASU introduces new disclosures to (i) increase transparency about the types of collateral pledged in secured borrowing transactions and (ii) enable users to better understand transactions in which the transferor retains substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction.

For public business entities, the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. All other accounting and disclosure amendments in the ASU are effective for public business entities for the first interim or annual period beginning after December 15, 2014. The Company is currently evaluating the impact that the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

ASU 2014-12 Accounting for Share-Based-Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FAS Emerging Issues Task Force).

On June 19, 2014, the FASB issued ASU 2014-12, Accounting for Share-Based-Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FAS Emerging Issues Task Force) to clarify that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite service period should be treated as a performance condition that affects the vesting of the award. As such, the performance target should not be reflected in estimating the grant-date fair value of the award.

ASU 2014-12 requires that a performance target included in a share-based payment award that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Therefore, such performance target should not be reflected in estimating the grant-date fair value of the award. A reporting entity should apply existing guidance in Topic 718 as it relates to the award with performance conditions that affect vesting.

Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. In current practice, two common performance targets-a change of control event and an IPO-are considered probable when they occur. Consequently, the award would be recognized in earnings at that time.

If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved.

For all entities, the amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The Company is currently evaluating the impact that the adoption of the standard will have on the Company’s consolidated financial position or results of operations.

XML

Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 12, 2014
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		7,116,055
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	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

XML

Note 10 - Fair Value Disclosures

6 Months Ended

Jun. 30, 2014

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 quoted market prices on nationally recognized exchanges (Level 1) or by using Level 2 Inputs.  For Level 2 securities, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus 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 collateral, 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”), establishing a new accounting basis.  The Company subsequently adjusts the fair value on the OREO utilizing Level 3 inputs on a non-recurring basis to reflect partial write-downs based on the observable market price, current appraised value of the asset or other estimates of fair value.

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

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2014:
Securities available for sale:
U. S. Treasury securities and ` obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	9,368,000	$	1,537,275	$	-	$	10,905,275
Residential collateralized mortgage obligations – GSE				4,085,830				4,085,830
Residential collateralized mortgage obligations – Non-GSE				2,816,320				2,816,320
Residential mortgage backed securities – GSE				29,974,256				29,974,256
Obligations of State and Political subdivisions				21,009,382				21,009,382
Trust preferred debt securities – single issuer				2,148,600				2,148,600
Corporate debt securities				36,397,749				36,397,749
Restricted stock				3,515,900				3,515,900
Mutual fund				25,000				25,000

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
December 31, 2013:
Securities available for sale:
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	19,994,430	$	1,515,270	$	-	$	21,509,700
Residential collateralized mortgage obligations – GSE		-		3,681,792		-		3,681,792
Residential collateralized mortgage obligations – non-GSE		-		2,826,396		-		2,826,396
Residential mortgage backed securities – GSE		-		31,965,947		-		31,965,947
Obligations of State and Political subdivisions		-		19,646,044		-		19,646,044
Trust preferred debt securities – single issuer		-		2,013,100		-		2,013,100
Corporate debt securities		-		16,517,728		-		16,517,728
Restricted stock		-		1,013,100		-		1,013,100
Mutual fund		-		25,000		-		25,000

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).  Financial assets and financial liabilities measured at fair value on a non-recurring basis at June 30, 2014 and December 31, 2013 were as follows:

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2014:
Impaired loans	$	-	$	-	$	8,016,178	$	8,016,178
December 31, 2013:
Impaired loans	$	-	$	-	$	7,879,005	$	7,879,005
Other real estate owned		-		-		209,937		209,937

Impaired loans measured at fair value and included in the above table consisted of 9 loans having an aggregate recorded investment of $9,537,381 and specific loan loss allowances of $1,521,203 at June 30, 2014 and 17 loans at December 31, 2013, having an aggregate balance of $9,662,862 and specific loan loss allowances of $1,783,861.

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 (Weighted Average)
June 30, 2014
Impaired loans	$	8,016,178	Appraisal of     collateral (1)	Appraisal adjustments (2)		10-40%	(19.1%)
December 31, 2013
Impaired loans	$	7,879,005	Appraisal of    collateral (1)	Appraisal adjustments (2)		5-15%	(9.7%)
Other real estate owned	$	209,937	Appraisal of    collateral (1)	Appraisal adjustments (2)		10-50%	(32.6%)

(1)	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable.
(2)	Includes qualitative adjustments by management and estimated liquidation expenses.

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

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

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

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

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

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

Gross Loans Receivable (Carried at Cost). The fair values of loans, excluding impaired loans subject to specific loss reserves, are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.  Generally, for variable rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values.

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

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

The estimated fair values and carrying amounts of financial assets and liabilities were as follows:

June 30, 2014
	Carrying Value			Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	23,149,148		$	23,149,148	$	-		$	-	$	23,149,148
Securities available for sale		110,878,312			9,368,000		101,510,312			-		110,878,312
Securities held to maturity		155,318,690			-		159,434,845			-		159,434,845
Loans held for sale		9,877,863			-		9,900,291			-		9,900,291
Loans, net		628,041,343			-		-			630,109,000		630,109,000
Accrued interest receivable		3,161,963			-		3,161,963			-		3,161,963
Deposits		(819,867,329	)		-		(820,796,000	)		-		(820,796,000	)
Borrowings		(59,888,511	)		-		(60,615,000	)		-		(60,615,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(904,892	)		-		(904,892	)		-		(904,892	)

December 31, 2013
	Carrying Value			Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	69,278,771		$	69,278,771	$	-		$	-	$	69,278,771
Securities available for sale		99,198,807			19,994,430		79,204,377			-		99,198,807
Securities held to maturity		152,816,815			-		153,629,773			-		153,629,000
Loans held for sale		10,923,689			-		10,924,000			-		10,924,000
Loans		366,297,511			-		-			372,548,000		372,548,000
Accrued interest receivable		2,542,602			-		2,542,602			-		2,542,602
Deposits		(638,552,030	)		-		(639,539,000	)		-		(639,539,000	)
Borrowings		(10,000,000	)		-		(11,148,000	)		-		(11,148,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(883,212	)		-		(883,212	)		-		(883,212	)

Loan commitments and standby letters of credit as of June 30, 2014 and December 31, 2013 are based on fees charged for similar agreements; accordingly, the estimated fair value of loan commitments and standby letters of credit is nominal.

XML

Consolidated Statements of Income (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
INTEREST INCOME:
Loans, including fees	$ 7,870,260	$ 5,645,259	$ 14,108,699	$ 11,617,454
Securities:
Taxable	1,059,160	901,711	2,180,744	1,838,796
Tax-exempt	588,750	545,620	1,169,731	1,058,498
Federal funds sold and short-term investments	45,417	89,662	100,708	139,342
Total interest income	9,563,587	7,182,252	17,559,882	14,654,090
INTEREST EXPENSE:
Deposits	972,362	869,598	1,871,093	1,825,934
Borrowings	127,839	104,254	243,417	207,527
Redeemable subordinated debentures	85,673	87,771	170,780	175,644
Total interest expense	1,185,874	1,061,623	2,285,290	2,209,105
Net interest income	8,377,713	6,120,629	15,274,592	12,444,985
PROVISION FOR LOAN LOSSES	4,099,998	236,666	4,599,996	236,666
Net interest income after provision for loan losses	4,277,715	5,883,963	10,674,596	12,208,319
NON-INTEREST INCOME:
Service charges on deposit accounts	267,235	221,604	486,351	444,670
Gain on sales of loans	267,155	479,146	1,006,736	1,210,855
Income on Bank-owned life insurance	148,987	119,758	278,138	232,366
Other income	576,655	627,351	1,125,789	1,168,531
Total non-interest income	1,260,032	1,447,859	2,897,014	3,056,422
NON-INTEREST EXPENSE:
Salaries and employee benefits	3,684,723	3,045,241	7,272,628	6,398,104
Occupancy expense	838,895	622,499	1,665,090	1,300,305
Data processing expense	311,760	294,306	627,809	595,688
Other real estate owned expenses	98,609	48,557	140,041	594,062
Merger related expenses	109,430		1,532,153
FDIC insurance expense	184,631	15,000	334,631	34,687
Other operating expenses	1,477,767	1,136,697	2,479,488	2,322,422
Total non-interest expenses	6,705,815	5,162,300	14,051,840	11,245,268
Income (loss) before income taxes	(1,168,068)	2,169,522	(480,230)	4,019,473
INCOME TAXES	(728,150)	612,492	(682,024)	1,137,125
Net income (loss)	$ (439,918)	$ 1,557,030	$ 201,794	$ 2,882,348
NET INCOME (LOSS) PER COMMON SHARE:
Basic (in Dollars per share)	$ (0.06)	$ 0.26	$ 0.03	$ 0.48
Diluted (in Dollars per share)	$ (0.06)	$ 0.25	$ 0.03	$ 0.47

XML

Note 4 - Investment Securities

6 Months Ended

Jun. 30, 2014

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:

June 30, 2014	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	$	11,430,419	$	-	$	(525,144	)	$	10,905,275
Residential collateralized mortgage obligations – GSE		4,016,935		104,804		(35,909	)		4,085,830
Residential collateralized mortgage obligations – non-GSE		2,774,669		47,862		(6,211	)		2,816,320
Residential mortgage backed securities – GSE		29,268,826		966,555		(261,125	)		29,974,256
Obligations of State and Political subdivisions		22,047,926		225,727		(1,264,271	)		21,009,382
Trust preferred debt securities – single issuer		2,470,301		-		(321,701	)		2,148,600
Corporate debt securities		36,036,784		404,998		(44,033	)		36,397,749
Restricted stock		3,515,900		-		-			3,515,900
Mutual fund		25,000		-		-			25,000
	$	111,586,760	$	1,749,946	$	(2,458,394	)	$	110,878,312

June 30, 2014	Amortized Cost		Other-Than- Temporary Impairment Recognized In Accumulated Other Comprehensive Loss			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	$	501,773	$	-		$	501,773	$	1,572	$	-		$	503,345
Residential collateralized mortgage obligations – GSE		13,242,024		-			13,242,024		500,621		-			13,742,645
Residential collateralized mortgage obligations – non-GSE		9,679,334		-			9,679,334		346,640					10,025,974
Residential mortgage backed securities – GSE		61,339,357		-			61,339,357		1,404,295		(134,022	)		62,609,630
Obligations of State and Political subdivisions		69,900,076		-			69,900,076		2,023,380		(404,000	)		71,519,456
Trust preferred debt securities-pooled		656,661		(500,944	)		155,717		376,593		-			532,310
Corporate debt securities		500,409		-			500,409		1,076		-			501,485
	$	155,819,634	$	(500,944	)	$	155,318,690	$	4,654,177	$	(538,022	)	$	159,434,845

December 31, 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	$	22,386,761	$	33,213	$	(910,274	)	$	21,509,700
Residential collateralized mortgage obligations – GSE		3,547,404		134,388		-			3,681,792
Residential collateralized mortgage obligations – non-GSE		2,782,843		52,227		(8,674	)		2,826,396
Residential mortgage backed securities – GSE		31,532,051		872,169		(438,273	)		31,965,947
Obligations of State and Political subdivisions		22,206,959		149,959		(2,710,874	)		19,646,044
Trust preferred debt securities-single issuer		2,468,839		-		(455,739	)		2,013,100
Corporate debt securities		16,228,474		318,590		(29,336	)		16,517,728
Restricted stock		1,013,100		-		-			1,013,100
Mutual fund		25,000		-		-			25,000
	$	102,191,431	$	1,560,546	$	(4,553,170	)	$	99,198,807

December 31, 2013	Amortized Cost		Other-Than-Temporary Impairment Recognized In Accumulated Other Comprehensive Loss			Carrying Value		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Held to maturity-
Obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	1,524,860	$	-		$	1,524,860	$	10,310	$	-		$	1,535,170
Residential collateralized mortgage obligations – GSE		14,803,739		-			14,803,739		379,815		-			15,183,554
Residential collateralized mortgage obligations – non-GSE		10,682,363		-			10,682,363		119,777		(27,526	)		10,774,614
Residential mortgage backed securities – GSE		65,240,620		-			65,240,620		611,062		(387,034	)		65,464,648
Obligations of State and Political subdivisions		59,400,916		-			59,400,916		1,399,938		(1,296,357	)		59,504,497
Trust preferred debt securities – pooled		656,662		(500,944	)		155,718		-		(6,863	)		148,855
Corporate debt securities		1,008,599		-			1,008,599		9,836		-			1,018,435
	$	153,317,759	$	(500,944	)	$	152,816,815	$	2,530,738	$	(1,717,780	)	$	153,629,773

Restricted stock at June 30, 2014 and December 31, 2013 consisted of $3,450,900 and $948,100, respectively, of Federal Home Loan Bank of New York stock and $65,000 of Atlantic Central Bankers Bank stock.

The amortized cost and estimated fair value of investment securities at June 30, 2014, 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 US Government sponsored corporations (“GSE”) and agencies	$	-	$	-
Residential mortgage backed securities – GSE		327,904		329,483
Obligations of State and Political subdivisions		264,650		265,665
Corporate Debt Securities		10,350,414		10,377,692
Restricted Stock		3,515,900		3,515,900
Mutual Fund		25,000		25,000
	$	14,483,868	$	14,513,740
Due after one year through five years
U.S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	1,542,897	$	1,537,275
Residential collateralized mortgage obligations – non-GSE		-		-
Residential mortgage backed securities – GSE		6,945,975		6,882,941
Obligations of State and Political subdivisions		110,000		110,251
Corporate Debt Securities		23,581,409		23,946,637
	$	32,180,281	$	32,477,104
Due after five years through ten years
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	9,887,522	$	9,368,000
Residential collateralized mortgage obligations – GSE		109,945		117,244
Residential mortgage backed Securities – GSE		7,557,870		7,653,670
Obligations of State and Political Subdivisions		4,861,389		4,921,297
Corporate Debt Securities		1,020,008		1,032,500
	$	23,436,734	$	23,092,711
Due after ten years
Residential collateralized mortgage obligations – GSE	$	3,906,991	$	3,968,587
Residential collateralized mortgage obligations – non-GSE		2,446,764		2,486,836
Residential mortgage backed securities – GSE		14,764,981		15,437,645
Obligations of State and Political subdivisions		16,811,887		15,712,169
Corporate Debt Securities		1,084,953		1,040,920
Trust Preferred Debt Securities		2,470,301		2,148,600
	$	41,485,877	$	40,794,757
Total	$	111,586,760	$	110,878,312
Held to maturity-
Due in one year or less
U.S. Treasury securities and obligations of US Government sponsored corporations (“GSE”) and agencies	$	501,773	$	503,345
Obligations of State and Political subdivisions		18,863,582		18,878,243
Corporate Debt Securities		500,409		501,485
		19,865,764		19,883,073
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		11,961,666		12,397,039
Corporate Debt Securities		-		-
	$	11,961,666	$	12,397,039
Due after five years through ten years
Residential collateralized mortgage obligations – GSE	$	-	$	-
Residential collateralized mortgage obligations – non-GSE		841,639		844,647
Residential mortgage backed securities – GSE		20,221,542		20,553,756
Obligations of State and Political subdivisions		20,832,099		21,759,133
	$	41,895,280	$	43,157,536
Due after ten years
Residential collateralized mortgage obligations – GSE	$	13,242,024	$	13,742,645
Residential collateralized mortgage obligations – non-GSE		8,837,695		9,181,327
Residential mortgage backed securities – GSE		41,117,815		42,055,874
Obligations of State and Political subdivisions		18,242,729		18,485,041
Trust Preferred Debt Securities – Pooled		656,661		532,310
	$	82,096,924	$	83,997,197
Total	$	155,819,634	$	159,434,845

Gross unrealized losses on available for sale and held to maturity securities and the estimated fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013 were as follows:

June 30, 2014			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		2	$	-	$	-		$	10,905,275	$	(525,144	)	$	10,905,275	$	(525,144	)
Residential collateralized mortgage obligations – GSE		1		1,126,559		(35,909	)		-		-			1,126,559		(35,909	)
Residential collateralized mortgage bligations – non-GSE		2		988,947		(382	)		105,842		(5,829	)		1,094,789		(6,211	)
Residential mortgage backed securities – GSE		16		-		-			17,570,016		(395,147	)		17,570,016		(395,147	)
Obligations of State and Political Subdivisions		79		1,097,189		(6,295	)		25,841,204		(1,661,976	)		26,938,393		(1,668,271	)
Trust preferred debt securities – single issuer		4		-		-			2,148,600		(321,701	)		2,148,600		(321,701	)
Corporate Debt Securities		1		-		-			1,040,920		(44,033	)		1,040,920		(44,033	)
Total temporarily impaired securities		105	$	3,212,695	$	(42,586	)	$	57,611,857	$	(2,953,830	)	$	60,824,552	$	(2,996,416	)

December 31, 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 (GSE) and agencies		3	$	11,507,350	$	(910,274	)	$	-	$	-		$	11,507,350	$	(910,274	)
Residential collateralized mortgage Obligations – non-GSE		8		5,328,485		(28,231	)		1,094,754		(7,969	)		6,423,239		(36,200	)
Residential mortgage backed securities GSE		38		40,504,327		(825,307	)		-		-			40,504,327		(825,307	)
Obligations of State and Political Subdivisions		95		19,403,457		(2,285,759	)		8,936,441-		(1,721,472	)		28,339,898		(4,007,231	)
Trust preferred debt securities – single issuer		4		-		-			2,013,100		(455,739	)		2,013,100		(455,739	)
Trust preferred debt securities – Pooled		1		-		-			148,855		(507,807	)		148,855		(507,807	)
Corporate debt securities		1		-		-			1,056,110		(29,336	)		1,056,110		(29,336	)
Total temporarily impaired securities		150	$	76,743,619	$	(4,049,571	)	$	13,249,260	$	(2,722,323	)	$	89,992,879	$	(6,771,894	)

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 increases in market interest rates.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. 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; therefore, 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 increases in market interest rates. The contractual cash flows of these securities are guaranteed by the issuer, which are primarily 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. The decline in fair value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell these investments and it is not likely that the Company will be required to sell these investments before a market price recovery or maturity; therefore, these investments are not considered other-than-temporarily impaired.

Obligations of State and Political Subdivisions:  The unrealized losses or investments in these securities were caused by increases in market interest rates.  It is expected that the securities would not be settled at a price less than the amortized cost of the investment.  The decline in fair value is attributable to changes in interest rates and not credit quality, 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; therefore, these investments are not considered other-than-temporarily impaired.

Corporate debt securities:   The unrealized losses on investments in corporate debt securities were caused by increases to market interest rates.  None of the corporate issuers have defaulted on interest payments.   The decline in fair value is attributable to changes in interest rates and not a decline in credit quality, 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; therefore, 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 issued by two large financial institutions that mature in 2027. 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.  Both of the issuers continue to maintain investment grade credit ratings and neither has defaulted on interest payments.  The decline in fair value is attributable to the widening of interest rate spreads and the lack of an active trading market for these securities and, to a lesser degree, market concerns about the issuers’ credit quality. The Company does not intend to sell these investments and it is not likely that the Company will be required to sell these investments before a market price recovery or maturity; therefore, these investments are not considered other-than-temporarily impaired.

Trust preferred debt securities – 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 securities issued by financial institution holding companies. During 2009, the Company recognized an other-than-temporary impairment of $864,727, of which $363,783 was determined to be a credit loss and charged to operations and $500,944 was recognized in the other comprehensive income (loss) component of shareholders’ equity.

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

On a quarterly basis, management evaluates this security to determine if any additional other-than-temporary impairment is required. As of June 30, 2014, our evaluation was as follows:

a. We obtained the PRETSL XXV Depository Institutions Issuer List as of June 30, 2014 from the FTN Financial Corp. (“FTN”) website and reviewed the financial ratios and capital levels of each individual financial institution issuer.

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

(1) Above 100;

(2) 75 to 100; and

(3) Below 75.

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

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

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

(3) Below 75 – no deferral/default.

d. We then performed 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 the doubling of 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 23-year stated maturity of this pooled security even though the individual institutions are currently performing according to terms.

e. This June 30, 2014 projection of future cash flows produced a present value that exceeded the carrying value of the pooled trust preferred security; therefore, management concluded that no other-than-temporary impairment issues were present at June 30, 2014.

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

The following table sets forth information with respect to this security at June 30, 2014:

Expected Deferrals and

Excess Subordination             (2)

Security

Class

Book Value

Fair Value

Unrealized Gain (Loss)

Percent of Underlying Collateral Performing

Percent of Underlying Collateral In Deferral (1)

Percent of Underlying Collateral In Default (1)

Defaults as a % of Remaining Performing Collateral

Moody's S&P / Ratings

Amount

% of Current Performing Collateral

PreTSL XXV

B-1

$155,717

$532,310

$376,593

70.7%

6.7%

22.6%

13.7%

Ca/ NR

$146,000

27.0%

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 percentage 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 months ended June 30, 2014		Three months ended June 30, 2013
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

(in thousands)	Six months ended June 30, 2014		Six months ended June 30, 2013
Balance at beginning of period	$	364	$	364
Change during the period		-		-
Balance at end of period	$	364	$	364

XML

Note 3 - Net Income Per Common Share

6 Months Ended

Jun. 30, 2014

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, and common stock options, using the treasury stock method. For periods when a net loss is incurred, there is no dilutive effect of share equivalents. Accordingly, these shares are not included in the calculation of diluted earnings per share.

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

	Three Months Ended June 30, 2014
	Net (loss)			Weighted- average shares		Per share amount
Basic earnings per common share:
Net (loss)	$	(439,918	)		7,113,717	$	(0.06	)
Effect of dilutive securities:
Stock options and warrants					-
Diluted EPS:
Net (loss) income plus assumed conversion	$	(439,918	)		7,113,717	$	(0.06	)

	Three Months Ended June 30, 2013
	Net Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	1,557,030		5,992,743	$	0.26
Effect of Dilutive Securities:
Stock options and warrants				150,867
Diluted EPS:
Net income plus assumed conversions	$	1,557,030		6,143,610	$	0.25

	Six Months Ended June 30, 2014
	Net Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	201,794		6,958,901	$	0.03
Effect of Dilutive Securities:
Stock options and warrants				120,293
Diluted EPS:
Net income plus assumed conversions	$	201,794		7,079,194	$	0.03

	Six Months Ended June 30, 2013
	Net Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	2,882,348		5,944,633	$	0.48
Effect of Dilutive Securities:
Stock options and warrants				148,498
Diluted EPS:
Net income plus assumed conversions	$	2,882,348		6,093,131	$	0.47

 For the three months and six months ended June 30, 2014 and 2013, 247,298 and 90,296 options, respectively, were anti-dilutive and were not included in the computation of diluted earnings per common shares.

XML

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

6 Months Ended

12 Months Ended

Jun. 30, 2014

Jun. 30, 2013

Dec. 31, 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	$	-	$	-	$	-	$	-	$	78,921,897	$	78,921,897	$	-	$	-
Commercial Business		365,090		-		422,820		787,910		106,294,283		107,082,193		53,518		369,302
Commercial Real Estate		1,315,303		211,979		6,604,013		8,131,295		183,823,741		191,955,036		440,425		6,163,588
Mortgage Warehouse Lines		-		-		-		-		181,911,743		181,911,743		-		-
Residential Real Estate		219,759		127,677		1,498,854		1,846,290		48,240,242		50,086,532		183,668		1,442,863
Consumer
Loans to Individuals		77,432		-		233,957		311,389		24,303,646		24,615,035		233,957		-
Other		-		-		-		-		205,573		205,573		-		-
Deferred Loan Costs		-		-		-		-		681,713		681,713		-		-
Total	$	1,977,584	$	339,656	$	8,759,644	$	11,076,884	$	624,382,838	$	635,459,722	$	911,568	$	7,975,753

	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	$	-	$	-	$	-	$	-	$	51,002,172	$	51,002,172	$	-	$	-
Commercial Business		385,133		58,665		453,325		897,123		81,450,932		82,348,055		-		511,990
Commercial Real Estate		-		-		5,217,173		5,217,173		93,172,557		98,389,730		-		5,555,851
Mortgage Warehouse Lines		-		-		-		-		116,951,357		116,951,357		-		-
Residential Real Estate		315,615		967,099		33,494		1,316,208		12,447,970		13,764,178		-		162,012
Consumer
Loans to Individuals		-		-		-		-		9,766,114		9,766,114		-		92,103
Other		-		-		-		-		170,526		170,526		-		-
Deferred Loan Costs		-		-		-		-		943,950		943,950		-		-
Total	$	700,748	$	1,025,764	$	5,703,992	$	7,430,504	$	365,905,578	$	373,336,082		-	$	6,321,956

Financing Receivable Credit Quality Indicators [Table Text Block]

	At February 7, 2014
($ in thousands)	Loans  acquired with  no credit  quality  deterioration		Loans  acquired with credit  quality  deterioration		Total
Commercial
Construction	$	11,920	$	-	$	11,920
Commercial Real Estate		62,398		1,832		64,230
Commercial Business		18,086		368		18,454
Residential Real Estate		32,743		180		32,923
Consumer		15,953		234		16,187
Total	$	141,100	$	2,614	$	143,714

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

Period-End Allowance for Loan Losses by Impairment Method June 30, 2014
					Commercial		Mortgage		Residential								Loan		Total
	Construction		Commercial		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Costs
Allowance for loan losses:
Ending Balance	$	950,014	$	1,546,766	$	3,607,083	$	909,559	$	172,853	$	90,732	$	1,665	$	139,707	$	-	$	7,418,379
Ending Balance
Individually evaluated for impairment		-		19,141		1,487,047		-		15,015		-		-		-		-		1,521,203
Collectively evaluated for impairment	$	950,014	$	1,527,625	$	2,120,036	$	909,559	$	157,838	$	90,732	$	1,665	$	139,707	$	-	$	5,897,176
Loans receivables:
Ending Balance	$	78,921,897	$	107,082,193	$	191,955,036	$	181,911,743	$	50,086,532	$	24,615,035	$	205,573	$	-	$	681,713	$	635,459,722
Individually evaluated for impairment		373,663		464,725		10,041,584		-		1,442,866		-		-		-		-		12,322,838
Loans acquired with deteriorated credit quality		-		384,932		1,678,720		-		183,668		233,958		-		-		-		2,481,278
Collectively evaluated for impairment	$	78,548,234	$	106,232,536	$	180,234,732	$	181,911,743	$	48,459,998	$	24,381,077	$	205,573	$	-	$	681,713	$	620,655,606

Period-End Allowance for Loan Losses by Impairment Method December 31, 2013
					Commercial		Mortgage		Residential								Loan		Total
	Construction		Commercial		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Costs
Allowance for loan losses:
Ending Balance	$	1,205,267	$	1,271,733	$	3,021,766	$	584,757	$	164,673	$	108,849	$	2,183	$	679,343	$	-	$	7,038,571
Ending Balance
Individually evaluated for impairment		-		293,692		1,490,169		-		-		-		-		-		-		1,783,861
Collectively evaluated for impairment	$	1,205,267	$	978,041	$	1,531,597	$	584,757	$	164,673	$	108,849	$	2,183	$	679,343	$	-	$	5,254,710
Loans receivables:
Ending Balance	$	51,002,172	$	82,348,055	$	98,389,730	$	116,951,357	$	13,764,178	$	9,766,114	$	170,526	$	-	$	943,950	$	373,336,082
Individually evaluated for impairment		19,930		776,101		9,130,605		-		162,012		92,103		-		-		-		10,180,751
Collectively evaluated for impairment	$	50,982,242	$	81,571,954	$	89,259,125	$	116,951,357	$	13,602,166	$	9,674,011	$	170,526	$	-	$	943,950	$	363,155,331

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

	Construction			Commercial Business			Commercial Real Estate		Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2013	$	1,205,267		$	1,271,733		$	3,021,766	$	584,757		$	164,673		$	108,849		$	2,183		$	679,343		$	7,038,571
Provision charged to operations		60,163			454,031			113,961		(63,082	)		17,332			(16,462	)		(560	)		(65,385	)		499,998
Loans charged off		-			(510,952	)		-		-			-			-			-			-			(510,952	)
Recoveries of loans charged off		-			3,225			-		-			-			-			-			-			3,225
Balance – March 31, 2014	$	1,265,430		$	1,218,037		$	3,135,727	$	521,675		$	182,005		$	92,387		$	1,623		$	613,958		$	7,030,842
Provision charged to operations		(315,416	)		4,041,190			471,356		387,884			(9,152	)		(1,655	)		42			(474,251	)		4,099,998
Loans charged off		-			(3,713,789	)		-		-			-			-			-			-			(3,713,789	)
Recoveries of loans charged off		-			1,328			-		-			-			-			-			-			1,328
Balance – June 30, 2014	$	950,014		$	1,546,766		$	3,607,083	$	909,559		$	172,853		$	90,732		$	1,665		$	139,707		$	7,418,379

	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		$	102,234		$	2,059		$	658,119		$	6,023,282
Provision charged to operations		1,872			160,163			321,659			(62,039	)		(19,632	)		(2,444	)		45			(162,958	)		236,666
Loans charged off		-			-			-			-			-			-			-			-			-
Recoveries of loans charged off		417			8,575			-			-			-			-			-			-			8
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

Impaired Financing Receivables [Table Text Block]

							Three months ended				Six months ended
							June 30, 2014				June 30, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	373,663	$	373,663	$	0	$	338,563	$	3,752	$	229,152	$	4,821
Commercial Business		723,060		1,300,245		0		719,845		8,967		819,018		12,232
Commercial Real Estate		2,625,135		2,812,050		0		2,104,136		10,738		1,052,068		17,480
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Subtotal		3,721,858		4,485,958		0		3,162,544		23,457	$	2,100,238	$	34,533
Residential Real Estate		1,310,919		1,317,592		0		1,310,990		5,043		1,002,650		6,767
Consumer
Loans to Individuals		233,958		243,438		0		238,397		0		261,941		1,155
Other		0		0		0		0		0				0
Subtotal		233,958		243,438		0		238,397		0		261,941		0
Subtotal with no related allowance		5,266,735		6,046,988		0		4,711,931		28,500	$	3,364,829		41,300
With an allowance:
Commercial
Construction		0		0		0		0		0		0		0
Commercial Business		126,597		283,054		19,141		171,520		0		321,402		0
Commercial Real Estate		9,095,169		9,095,169		1,487,047		9,101,300		64,949		9,112,256		113,822
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Subtotal		9,221,766		9,378,223		1,506,188		9,272,820		64,949		9,433,658		113,822
Residential Real Estate		315,615		315,615		15,015		315,615		0		210,410		0
Consumer
Loans to Individuals		0		0		0		0		0
Other		0		0		0		0		0
Subtotal		0		0		0		0		0		0
Subtotal with an allowance		9,537,381		9,693,838		1,521,203		9,588,435		64,949		9,644,068		113,822
Total:
Commercial		12,943,624		13,864,181		1,506,188		12,435,364		88,406		11,533,896		148,355
Residential Real Estate		1,626,534		1,633,207		15,015		1,626,605		5,043		1,213,060		6,767
Consumer		233,958		243,438		0		238,397		0		261,941		1155
Total	$	14,804,116	$	15,740,826	$	1,521,203	$	14,300,366	$	93,449	$	13,008,897	$	156,277

							Three months ended
							June 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	540,975	$	540,975	$	-	$	725,974	$	11,078
Commercial Business		177,980		232,022		-		168,683		1,450
Commercial Real Estate		-		-		-		123,945		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		718,955		772,997		-		1,018,602		12,528
Residential Real Estate		164,542		164,542		-		121,246		-
Consumer
Loans to Individuals		-		-		-		22,540		-
Other		-		-		-		-		-
Subtotal				-		-		22,540		-
With no related allowance:	$	883,497	$	937,539	$	-	$	1,162,388	$	12,528
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		614,396		759,223		173,155		617,054		834
Commercial Real Estate		4,477,287		4,477,287		793,926		4,372,626		64,468
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		5,091,683		5,236,510		967,081		4,989,680		65,302
Residential Real Estate		-		-		-		44,069		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		5,091,683		5,236,510		967,081		5,033,749		65,302
Total:
Commercial		5,810,638		6,009,507		967,081		6,008,282		77,830
Residential Real Estate		164,542		164,542		-		165,315		-
Consumer		-		-		-		22,540		-
Total	$	5,975,180	$	6,174,049	$	967,081	$	6,196,137	$	77,830

							Year ended
							12/31/2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	19,930	$	19,930	$	-	$	965,268	$	33,946
Commercial Business		243,840		400,297				258,139		5,094
Commercial Real Estate		-		-		-		1,032,115		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		263,770		420,227		-		2,255,522		39,040
Residential Real Estate		162,012		162,012		-		117,746		-
Consumer
Loans to Individuals		92,103		92,103		-		34,292		-
Other		-		-		-		-		-
Subtotal		92,103		92,103		-		34,292		-
With no related allowance	$	517,885	$	674,342	$	-	$	2,407,560	$	39,040
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	246,853	$	-
Commercial Business		532,261		532,261		293,692		562,346		9,728
Commercial Real Estate		9,130,605		9,130,605		1,490,169		5,546,690		247,277
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		9,662,866		9,662,866		1,783,861		6,355,889		257,005
Residential Real Estate		-		-		-		44,196		-
Consumer
Loans to Individuals		-		-		-		4,238		-
Other		-		-		-		-		-
Subtotal		-		-		-		4,238		-
With an allowance	$	9,662,866	$	9,662,866	$	1,783,861	$	6,404,323	$	257,005
Total:
Construction		19,930		19,930		-		1,212,121		33,946
Commercial Business		776,101		932,558		293,692		820,485		14,822
Commercial Real Estate		9,130,605		9,130,605		1,490,169		6,578,805		247,277
Mortgage Warehouse		-		-		-		-		-
Residential Real Estate		162,012		162,012		-		161,942		-
Consumer		92,103		92,103		-		38,530		-
Total	$	10,180,751	$	10,337,208	$	1,783,861	$	8,811,883	$	296,045

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		-		-		-
Commercial Real Estate		2		3,224,980		3,154,157
Residential Real Estate		-		-		-

	Number of Contracts		Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Commercial		-		-
Commercial Real Estate		-		-
Residential Real Estate		-		-

Credit Impaired Loans Acquired, Change In Amortizable Yield [Table Text Block]

Balance at beginning of period	$	-
Acquisition of impaired loans		293,976
Accretion of discount		( 47,333)
Balance at end of period	$	246,643

Loans Acquired, With Evidence Of Credit Deterioration [Table Text Block]

	February 7, 2014		June 30, 2014
	Acquired loans with Evidence of Credit Deterioration		Acquired loans with Evidence of Credit Deterioration
Outstanding balance	$	3,409,340	$	3,229,459
Carrying amount	$	2,613,826	$	2,481,278

Commercial Portfolio Segment [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	$	78,921,897	$	103,155,373	$	165,905,820	$	181,911,743	$	48,453,325
Special Mention		-		2,545,759		15,475,088		-		1,317,592
Substandard		-		942,648		10,574,128		-		315,615
Doubtful		-		438,413		-		-		-
Total	$	78,921,897	$	107,082,193	$	191,955,036	$	181,911,743	$	50,086,532

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	47,539,033	$	79,832,704	$	68,620,450	$	116,951,357	$	12,635,067
Special Mention		-		1,406,143		19,396,574		-		1,129,111
Substandard		3,463,139		792,057		10,372,706		-		-
Doubtful		-		258,486		-		-		-
Loss		-		58,665		-		-
Total	$	51,002,172	$	82,348,055	$	98,389,730	$	116,951,357	$	13,764,178

Consumer Portfolio Segment [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	$	24,615,035	$	205,573
Nonperforming		-		-
Total	$	24,615,035	$	205,573

Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	9,674,011	$	170,526
Nonperforming		92,103		-
Total	$	9,766,114	$	170,526

XML

Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

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, 2013, filed with the SEC on March 31, 2014.

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 June 30, 2014 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 7 - Benefit Plans

6 Months Ended

Jun. 30, 2014

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 401(k) plan permits all eligible employees to make contributions to the plan up to the IRS salary deferral limit. The Bank’s contributions to the 401(k) plan are expensed as incurred.

The Company also provides retirement benefits to certain employees under supplemental executive retirement plans.  The plans are unfunded and the Company accrues actuarial 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 as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur, through comprehensive income.

In connection with the benefit plans, the Bank has life insurance policies on the lives of its executives, directors and divisional officers. The Bank is the owner and beneficiary of the policies. The cash surrender values of the policies total approximately $20.9 million and $16.2 million at June 30, 2014 and December 31, 2013, respectively.

The components of net periodic expense for the Company’s supplemental executive retirement plans for the three month and six month periods ended June 30, 2014 and 2013 were as follows:

	Three months ended June 30,						Six months ended June 30,
	2014			2013			2014			2013
Service cost	$	43,334		$	30,539		$	57,167		$	214,257
Interest cost		32,852			22,229			43,339			155,951
Actuarial (gain) loss recognized		(1,574	)		(29,893	)		(2,077	)		(209,721	)
Prior service cost recognized		-			942			-			6,611
	$	74,612		$	23,817		$	98,429		$	167,098

XML

Note 7 - Benefit Plans (Details) - Net Periodic Benefit Costs (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net Periodic Benefit Costs [Abstract]
Service cost	$ 43,334	$ 30,539	$ 57,167	$ 214,257
Interest cost	32,852	22,229	43,339	155,951
Actuarial (gain) loss recognized	(1,574)	(29,893)	(2,077)	(209,721)
Prior service cost recognized		942		6,611
	$ 74,612	$ 23,817	$ 98,429	$ 167,098

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

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

(5)   Allowance for Loan Losses and Credit Quality Disclosure

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

      The following table provides an aging of the loan portfolio by loan class at June 30, 2014:

	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	$	-	$	-	$	-	$	-	$	78,921,897	$	78,921,897	$	-	$	-
Commercial Business		365,090		-		422,820		787,910		106,294,283		107,082,193		53,518		369,302
Commercial Real Estate		1,315,303		211,979		6,604,013		8,131,295		183,823,741		191,955,036		440,425		6,163,588
Mortgage Warehouse Lines		-		-		-		-		181,911,743		181,911,743		-		-
Residential Real Estate		219,759		127,677		1,498,854		1,846,290		48,240,242		50,086,532		183,668		1,442,863
Consumer
Loans to Individuals		77,432		-		233,957		311,389		24,303,646		24,615,035		233,957		-
Other		-		-		-		-		205,573		205,573		-		-
Deferred Loan Costs		-		-		-		-		681,713		681,713		-		-
Total	$	1,977,584	$	339,656	$	8,759,644	$	11,076,884	$	624,382,838	$	635,459,722	$	911,568	$	7,975,753

As provided by ASC 310-30, the excess of cash flows expected at acquisition over the initial investment in the loan is recognized as interest income over the life of the loan. Accordingly, loans acquired with evidence of deteriorated credit quality of $911,568 at June 30, 2014 were not classified as non-performing loans.

The following table provides an aging of the loan portfolio by loan class at December 31, 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	$	-	$	-	$	-	$	-	$	51,002,172	$	51,002,172	$	-	$	-
Commercial Business		385,133		58,665		453,325		897,123		81,450,932		82,348,055		-		511,990
Commercial Real Estate		-		-		5,217,173		5,217,173		93,172,557		98,389,730		-		5,555,851
Mortgage Warehouse Lines		-		-		-		-		116,951,357		116,951,357		-		-
Residential Real Estate		315,615		967,099		33,494		1,316,208		12,447,970		13,764,178		-		162,012
Consumer
Loans to Individuals		-		-		-		-		9,766,114		9,766,114		-		92,103
Other		-		-		-		-		170,526		170,526		-		-
Deferred Loan Costs		-		-		-		-		943,950		943,950		-		-
Total	$	700,748	$	1,025,764	$	5,703,992	$	7,430,504	$	365,905,578	$	373,336,082		-	$	6,321,956

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 and is consistent with generally accepted accounting principles (GAAP) and regulatory interagency supervisory guidance. The allowance for loan losses methodology consists of two major components. The first component is an estimation of losses associated with individually identified impaired loans, which follows Accounting Standards Codification (ASC) Topic 310 (formerly SFAS 114). The second major component is an estimation of losses under ASC Topic 450 (formerly SFAS 5), which provides guidance for estimating losses on groups of loans with similar risk characteristics. The Company’s methodology results in an allowance for loan losses which includes a specific reserve for impaired loans, an allocated reserve, and an unallocated portion.

When analyzing groups of loans under ASC 450, the Bank follows the Interagency Policy Statement on the Allowance for Loan and Lease Losses. The methodology considers the Company’s historical loss experience adjusted for changes in trends, conditions, and other relevant factors that affect repayment of the loans as of the evaluation date. These adjustment factors, known as qualitative factors, include:

● Delinquencies and nonaccruals

● Portfolio quality

● Concentration of credit

● Trends in volume of loans

● Quality of collateral

● Policy and procedures

● Experience, ability, and depth of management

● Economic trends – national and local

● External factors – competition, legal and regulatory

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

The watch list includes loans that are assigned a rating of special mention, substandard, doubtful and loss. Loans rated 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 off against the allowance for loan losses.

The specific allowance for impaired loans is established for specific loans that have been identified by management as being impaired. These loans are considered to be impaired primarily because the loans have 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 impaired loans. To assist in determining the fair value of loan collateral, the Company often utilizes independent third party qualified appraisal firms which in turn employ their own criteria and assumptions that may include occupancy rates, rental rates, and property expenses, among others.

The second category of reserves consists of the allocated portion of the allowance. The allocated portion of the allowance is determined by taking pools of loans outstanding that have similar characteristics and applying historical loss experience for each pool. This estimate represents the potential unconfirmed losses within the portfolio. Individual loan pools are created for commercial and commercial real estate loans, construction loans, warehouse lines of credit 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 qualitative 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, mortgage warehouse lines of credit, and consumer.

Commercial

The Company’s primary lending emphasis is the origination of commercial and commercial real estate loans. 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.

Mortgage Warehouse Lines of Credit

The Company’s Mortgage Warehouse Group provides revolving lines of credit that are available to licensed mortgage banking companies (the “Warehouse Line of Credit”). The Warehouse Line of Credit is used by the mortgage banker to fund the origination of 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 and a transaction fee are collected by the Bank at the time of repayment. Additionally, customers of the Warehouse Lines of Credit are required to maintain deposit relationships with the Bank that, on average, represent 10% to 15% of the loan balances.

As a separate segment of the total portfolio, the warehouse loan portfolio is analyzed as a whole for allowance for loan losses purposes. Warehouse lines of credit are subject to the same inherent risks as other commercial lending, but the overall degree of risk differs. While the Company’s loss experience with this type of lending has been non-existent since the product was introduced in 2008; there are other risks unique to this lending that still must be considered in assessing the adequacy of the allowance for loan losses. These unique risks may include, but are not limited to, (i) credit risks relating to the mortgage bankers that borrow from us, (ii) the risk of intentional misrepresentation or fraud by any of such mortgage bankers, (iii) changes in the market value of mortgage loans originated by the mortgage banker, the sale of which is the expected source of repayment of the borrowings under a warehouse line of credit, due to changes in interest rates during the time in warehouse, or (iv) unsalable or impaired mortgage loans so originated, which could lead to decreased collateral value and the failure of a purchaser of the mortgage loan to purchase the loan from the mortgage banker.

These factors, along with the other qualitative factors such as economic trends, concentrations of credit, trends in the volume of loans, portfolio quality, delinquencies and nonaccruals, are also considered and may have positive or negative effects on the allocated allowance. The aggregate amount resulting from the application of these qualitative factors determines the overall risk for the portfolio and results in an allocated allowance for warehouse lines of credit.

Consumer

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

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

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

● Consumer credit scores

● Internal credit risk grades

● Loan-to-value ratios

● Collateral

● Collection experience

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

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

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

3w. Watch - 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 from 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.

6. Doubtful - Loans with the same 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 be charged off to the Bank's loan loss reserve. Any accrued interest should be backed out of income.

The following table provides a breakdown of the loan portfolio by credit quality indictor at June 30, 2014.

Commercial Credit Exposure -  By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	78,921,897	$	103,155,373	$	165,905,820	$	181,911,743	$	48,453,325
Special Mention		-		2,545,759		15,475,088		-		1,317,592
Substandard		-		942,648		10,574,128		-		315,615
Doubtful		-		438,413		-		-		-
Total	$	78,921,897	$	107,082,193	$	191,955,036	$	181,911,743	$	50,086,532

Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	24,615,035	$	205,573
Nonperforming		-		-
Total	$	24,615,035	$	205,573

The following table provides a breakdown of the loan portfolio by credit quality indictor at December 31, 2013.

Commercial Credit Exposure - By Internally Assigned Grade	Construction		Commercial Business		Commercial Real Estate		Mortgage Warehouse Lines		Residential Real Estate
Grade:
Pass	$	47,539,033	$	79,832,704	$	68,620,450	$	116,951,357	$	12,635,067
Special Mention		-		1,406,143		19,396,574		-		1,129,111
Substandard		3,463,139		792,057		10,372,706		-		-
Doubtful		-		258,486		-		-		-
Loss		-		58,665		-		-
Total	$	51,002,172	$	82,348,055	$	98,389,730	$	116,951,357	$	13,764,178

Consumer Credit Exposure - By Payment Activity	Loans To Individuals		Other
Performing	$	9,674,011	$	170,526
Nonperforming		92,103		-
Total	$	9,766,114	$	170,526

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 the loans are both well secured and in the process of collection.

The following tables summarize the distribution of the allowance for loan losses and loans receivable by loan class and impairment method at June 30, 2014 and December 31, 2013:

Period-End Allowance for Loan Losses by Impairment Method June 30, 2014
					Commercial		Mortgage		Residential								Loan		Total
	Construction		Commercial		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Costs
Allowance for loan losses:
Ending Balance	$	950,014	$	1,546,766	$	3,607,083	$	909,559	$	172,853	$	90,732	$	1,665	$	139,707	$	-	$	7,418,379
Ending Balance
Individually evaluated for impairment		-		19,141		1,487,047		-		15,015		-		-		-		-		1,521,203
Collectively evaluated for impairment	$	950,014	$	1,527,625	$	2,120,036	$	909,559	$	157,838	$	90,732	$	1,665	$	139,707	$	-	$	5,897,176
Loans receivables:
Ending Balance	$	78,921,897	$	107,082,193	$	191,955,036	$	181,911,743	$	50,086,532	$	24,615,035	$	205,573	$	-	$	681,713	$	635,459,722
Individually evaluated for impairment		373,663		464,725		10,041,584		-		1,442,866		-		-		-		-		12,322,838
Loans acquired with deteriorated credit quality		-		384,932		1,678,720		-		183,668		233,958		-		-		-		2,481,278
Collectively evaluated for impairment	$	78,548,234	$	106,232,536	$	180,234,732	$	181,911,743	$	48,459,998	$	24,381,077	$	205,573	$	-	$	681,713	$	620,655,606

Period-End Allowance for Loan Losses by Impairment Method December 31, 2013
					Commercial		Mortgage		Residential								Loan		Total
	Construction		Commercial		Real Estate		Warehouse		Real Estate		Consumer		Other		Unallocated		Costs
Allowance for loan losses:
Ending Balance	$	1,205,267	$	1,271,733	$	3,021,766	$	584,757	$	164,673	$	108,849	$	2,183	$	679,343	$	-	$	7,038,571
Ending Balance
Individually evaluated for impairment		-		293,692		1,490,169		-		-		-		-		-		-		1,783,861
Collectively evaluated for impairment	$	1,205,267	$	978,041	$	1,531,597	$	584,757	$	164,673	$	108,849	$	2,183	$	679,343	$	-	$	5,254,710
Loans receivables:
Ending Balance	$	51,002,172	$	82,348,055	$	98,389,730	$	116,951,357	$	13,764,178	$	9,766,114	$	170,526	$	-	$	943,950	$	373,336,082
Individually evaluated for impairment		19,930		776,101		9,130,605		-		162,012		92,103		-		-		-		10,180,751
Collectively evaluated for impairment	$	50,982,242	$	81,571,954	$	89,259,125	$	116,951,357	$	13,602,166	$	9,674,011	$	170,526	$	-	$	943,950	$	363,155,331

The activity in the allowance for loan loss by loan class for the six months ended June 30, 2014 and 2013 was as follows:

	Construction			Commercial Business			Commercial Real Estate		Mortgage Warehouse			Residential Real Estate			Consumer			Other			Unallocated			Total
Balance - December 31, 2013	$	1,205,267		$	1,271,733		$	3,021,766	$	584,757		$	164,673		$	108,849		$	2,183		$	679,343		$	7,038,571
Provision charged to operations		60,163			454,031			113,961		(63,082	)		17,332			(16,462	)		(560	)		(65,385	)		499,998
Loans charged off		-			(510,952	)		-		-			-			-			-			-			(510,952	)
Recoveries of loans charged off		-			3,225			-		-			-			-			-			-			3,225
Balance – March 31, 2014	$	1,265,430		$	1,218,037		$	3,135,727	$	521,675		$	182,005		$	92,387		$	1,623		$	613,958		$	7,030,842
Provision charged to operations		(315,416	)		4,041,190			471,356		387,884			(9,152	)		(1,655	)		42			(474,251	)		4,099,998
Loans charged off		-			(3,713,789	)		-		-			-			-			-			-			(3,713,789	)
Recoveries of loans charged off		-			1,328			-		-			-			-			-			-			1,328
Balance – June 30, 2014	$	950,014		$	1,546,766		$	3,607,083	$	909,559		$	172,853		$	90,732		$	1,665		$	139,707		$	7,418,379

	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		$	102,234		$	2,059		$	658,119		$	6,023,282
Provision charged to operations		1,872			160,163			321,659			(62,039	)		(19,632	)		(2,444	)		45			(162,958	)		236,666
Loans charged off		-			-			-			-			-			-			-			-			-
Recoveries of loans charged off		417			8,575			-			-			-			-			-			-			8
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

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

 Impaired Loans Receivables (By Class) - June 30, 2014

							Three months ended				Six months ended
							June 30, 2014				June 30, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	373,663	$	373,663	$	0	$	338,563	$	3,752	$	229,152	$	4,821
Commercial Business		723,060		1,300,245		0		719,845		8,967		819,018		12,232
Commercial Real Estate		2,625,135		2,812,050		0		2,104,136		10,738		1,052,068		17,480
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Subtotal		3,721,858		4,485,958		0		3,162,544		23,457	$	2,100,238	$	34,533
Residential Real Estate		1,310,919		1,317,592		0		1,310,990		5,043		1,002,650		6,767
Consumer
Loans to Individuals		233,958		243,438		0		238,397		0		261,941		1,155
Other		0		0		0		0		0				0
Subtotal		233,958		243,438		0		238,397		0		261,941		0
Subtotal with no related allowance		5,266,735		6,046,988		0		4,711,931		28,500	$	3,364,829		41,300
With an allowance:
Commercial
Construction		0		0		0		0		0		0		0
Commercial Business		126,597		283,054		19,141		171,520		0		321,402		0
Commercial Real Estate		9,095,169		9,095,169		1,487,047		9,101,300		64,949		9,112,256		113,822
Mortgage Warehouse Lines		0		0		0		0		0		0		0
Subtotal		9,221,766		9,378,223		1,506,188		9,272,820		64,949		9,433,658		113,822
Residential Real Estate		315,615		315,615		15,015		315,615		0		210,410		0
Consumer
Loans to Individuals		0		0		0		0		0
Other		0		0		0		0		0
Subtotal		0		0		0		0		0		0
Subtotal with an allowance		9,537,381		9,693,838		1,521,203		9,588,435		64,949		9,644,068		113,822
Total:
Commercial		12,943,624		13,864,181		1,506,188		12,435,364		88,406		11,533,896		148,355
Residential Real Estate		1,626,534		1,633,207		15,015		1,626,605		5,043		1,213,060		6,767
Consumer		233,958		243,438		0		238,397		0		261,941		1155
Total	$	14,804,116	$	15,740,826	$	1,521,203	$	14,300,366	$	93,449	$	13,008,897	$	156,277

 Impaired Loans Receivables (By Class)

December 31 , 2013

							Year ended
							12/31/2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	19,930	$	19,930	$	-	$	965,268	$	33,946
Commercial Business		243,840		400,297				258,139		5,094
Commercial Real Estate		-		-		-		1,032,115		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		263,770		420,227		-		2,255,522		39,040
Residential Real Estate		162,012		162,012		-		117,746		-
Consumer
Loans to Individuals		92,103		92,103		-		34,292		-
Other		-		-		-		-		-
Subtotal		92,103		92,103		-		34,292		-
With no related allowance	$	517,885	$	674,342	$	-	$	2,407,560	$	39,040
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	246,853	$	-
Commercial Business		532,261		532,261		293,692		562,346		9,728
Commercial Real Estate		9,130,605		9,130,605		1,490,169		5,546,690		247,277
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		9,662,866		9,662,866		1,783,861		6,355,889		257,005
Residential Real Estate		-		-		-		44,196		-
Consumer
Loans to Individuals		-		-		-		4,238		-
Other		-		-		-		-		-
Subtotal		-		-		-		4,238		-
With an allowance	$	9,662,866	$	9,662,866	$	1,783,861	$	6,404,323	$	257,005
Total:
Construction		19,930		19,930		-		1,212,121		33,946
Commercial Business		776,101		932,558		293,692		820,485		14,822
Commercial Real Estate		9,130,605		9,130,605		1,490,169		6,578,805		247,277
Mortgage Warehouse		-		-		-		-		-
Residential Real Estate		162,012		162,012		-		161,942		-
Consumer		92,103		92,103		-		38,530		-
Total	$	10,180,751	$	10,337,208	$	1,783,861	$	8,811,883	$	296,045

 Impaired Loans Receivables (By Class)

June 30 , 2013

							Three months ended
							June 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance:
Commercial
Construction	$	540,975	$	540,975	$	-	$	725,974	$	11,078
Commercial Business		177,980		232,022		-		168,683		1,450
Commercial Real Estate		-		-		-		123,945		-
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		718,955		772,997		-		1,018,602		12,528
Residential Real Estate		164,542		164,542		-		121,246		-
Consumer
Loans to Individuals		-		-		-		22,540		-
Other		-		-		-		-		-
Subtotal				-		-		22,540		-
With no related allowance:	$	883,497	$	937,539	$	-	$	1,162,388	$	12,528
With an allowance:
Commercial
Construction	$	-	$	-	$	-	$	-	$	-
Commercial Business		614,396		759,223		173,155		617,054		834
Commercial Real Estate		4,477,287		4,477,287		793,926		4,372,626		64,468
Mortgage Warehouse Lines		-		-		-		-		-
Subtotal		5,091,683		5,236,510		967,081		4,989,680		65,302
Residential Real Estate		-		-		-		44,069		-
Consumer
Loans to Individuals		-		-		-		-		-
Other		-		-		-		-		-
Subtotal		-		-		-		-		-
With an allowance:		5,091,683		5,236,510		967,081		5,033,749		65,302
Total:
Commercial		5,810,638		6,009,507		967,081		6,008,282		77,830
Residential Real Estate		164,542		164,542		-		165,315		-
Consumer		-		-		-		22,540		-
Total	$	5,975,180	$	6,174,049	$	967,081	$	6,196,137	$	77,830

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. In evaluating whether a restructuring constitutes a troubled debt restructuring, applicable guidance requires that a creditor must separately conclude that the restructuring constitutes a concession and the borrower is experiencing financial difficulties.

There were no loans modified that were TDRs in the six month period ended June 30, 2014. Loans modified during the three month and six month ended June 30, 3013 were as follows:

	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial		-		-		-
Commercial Real Estate		2		3,224,980		3,154,157
Residential Real Estate		-		-		-

There were no loans modified that were TDR’s during the three and six month periods ended June 30, 2014 and June 30, 2013 that were in default.

	Number of Contracts		Recorded Investment
Troubled Debt Restructurings That Subsequently Defaulted:
Commercial		-		-
Commercial Real Estate		-		-
Residential Real Estate		-		-

Changes in the accretable discount for acquired credit impaired loans for the six months ended June 30, 2014 were as follows:

Balance at beginning of period	$	-
Acquisition of impaired loans		293,976
Accretion of discount		( 47,333)
Balance at end of period	$	246,643

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30:

	February 7, 2014		June 30, 2014
	Acquired loans with Evidence of Credit Deterioration		Acquired loans with Evidence of Credit Deterioration
Outstanding balance	$	3,409,340	$	3,229,459
Carrying amount	$	2,613,826	$	2,481,278

There were no changes in the expected cash flows of these loans during the six month period ended June 30, 2014. No allowance for loan losses has been recorded for acquired loans with or without evidence of deterioration as of the acquisition date or as of June 30, 2014.

XML

Note 6 - Share-Based Compensation

6 Months Ended

Jun. 30, 2014

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

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

(6)  Share-Based Compensation

The Company’s share-based incentive plans (“Stock Plans”) authorize the issuance of an aggregate of 440,701 shares of the Company’s common stock (as adjusted for stock dividends) pursuant to awards that may be granted in the form of stock options to purchase common stock (“Options”) and awards of shares of common stock (“Stock Awards”).  The purpose of the Stock Plans is to attract and retain personnel for positions of substantial responsibility and to provide additional incentive to certain officers, directors, employees and other persons to promote the success of the Company.  Under the Stock Plans, options have a term of ten years after the date of grant, subject to earlier termination in certain circumstances.  Options are granted with an exercise price at the then fair market value of the Company’s common stock. The grant date fair value is calculated using the Black – Scholes option valuation model.  As of June 30, 2014, there were 346,166 shares of common stock available for future grants under the Stock Plans, of which 300,040 shares are available for future grants under the 2013 Equity Incentive Plan and 46,126 shares are available for future grant under the 2006 Directors Stock Plan.

Stock-based compensation expense related to options was $70,366 and $50,568 for the six months ended June 30, 2014 and 2013, respectively.

Transactions under the Stock Plans during the six months ended June 30, 2014 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, 2014		235,598	$	8.81
Granted		11,700		11.02
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at June 30, 2014		247,298	$	8.91		5.4	$	485,125
Exercisable at June 30, 2014		199,881	$	9.17		4.7	$	294,904

The fair value of each option and the significant weighted average assumptions used to calculate the fair value of the options granted for the six months ended June 30, 2014 are as follows:

	January 2014			April 2014
Fair value of options granted	$	4.75		$	4.32
Risk-free rate of return		1.65	%		1.70	%
Expected option life in years		7			7
Expected volatility		38.01	%		38.01	%
Expected dividends (1)		-			-

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

As of June 30, 2014, there was approximately $70,776 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 four years.

The following table summarizes nonvested restricted shares for the six months ended June 30, 2014:

Non-vested shares	Number of Shares			Average Grant-Date Fair Value
Non-vested at January 1, 2014		136,490		$	6.59
Granted		35,600			11.21
Vested		(29,065	)		6.73
Forfeited		-			-
Non-vested at June 30, 2014		143,025		$	7.71

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

Stock based compensation expense related to stock grants was $253,322 and $217,390 for the six months ended June 30, 2014 and 2013.

As of June 30, 2014, there was approximately $956,859 of unrecognized compensation cost related to non-vested stock grants that will be recognized over the next three years.

XML

Note 8 - Other Comprehensive Income and Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

(8)  Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)

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

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
June 30, 2014:
Unrealized holding (losses) gains on available-for-sale securities:
Unrealized holding (losses) on available-for-sale securities	$	(708,448	)	$	300,312		$	(408,136	)
Unrealized impairment loss on held to maturity security:
Unrealized impairment (loss) on held to maturity security		(500,944	)		170,321			(330,623	)
Unfunded pension liability:
Plan actuarial gains and losses included in other comprehensive income		185,837			(75,162	)		110,675
Accumulated other comprehensive income ( loss)	$	(1,023,555	)	$	395,471		$	(628,084	)

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
December 31, 2013:
Unrealized holding (losses) gains on available-for-sale securities:
Unrealized holding (losses) on available-for-sale securities	$	(2,992,624	)	$	1,060,098		$	(1,932,526	)
Unrealized impairment loss on held to maturity security:
Unrealized impairment (loss) on held to maturity security		(500,944	)		170,321			(330,623	)
Unfunded pension liability:
Plan actuarial gains and losses included in other comprehensive income		27,236			(11,721	)		(60,404	)
Accumulated other comprehensive income ( loss)	$	(3,466,332	)	$	1,218,698		$	(2,247,634	)

Changes in the components of accumulated other comprehensive income (loss) 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 (Loss)
Six Months Ended June 30, 2014:
Balance, beginning of period	$	(1,932,526	)	$	(330,623	)	$	15,515	$	(2,247,634	)
Other comprehensive income (loss) before reclassifications		1,522,880			-			95,160		1,618,040
Amounts reclassified from accumulated other comprehensive income (loss) (1)		1,510			-			-		1,510
Other comprehensive income (loss)		1,524,390			-			95,160		1,619,550
Balance, end of period	$	(408,136	)	$	(330,623	)	$	110,675	$	(628,084	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Six Months Ended June 30, 2013:
Balance, beginning of period	$	1,235,204		$	(330,623	)	$	(100,288	)	$	804,293
Other comprehensive income (loss) before reclassifications		(2,912,215	)		-			39,884			(2,872,331	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,912,216	)		-			39,884			(2,872,331	)
Balance, end of period	$	(1,677,012	)	$	(330,623	)	$	(60,403	)	$	(2,068,038	)

	Unrealized Holding Gains (Losses) on Available for  Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2014:
Balance, beginning of period	$	(1,088,261	)	$	(330,623	)	$	53,475	$	(1,365,409	)
Other comprehensive income (loss) before reclassifications		678,615			-			57,200		735,815
Amounts reclassified from accumulated other comprehensive income (loss) (1)		1,510			-			-		1,510
Other comprehensive income (loss)		680,125			-			57,200		737,325
Balance, end of period	$	(408,136	)	$	(330,623	)	$	110,675	$	(628,084	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2013:
Balance, beginning of period	$	(802,169	)	$	(330,623	)	$	(98,363	)	$	(373,183	)
Other comprehensive income (loss) before reclassifications		(2,479,180	)		-			37,959			(2,441,221	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,479,180	)		-			37,959			(2,441,221	)
Balance, end of period	$	(1,677,011	)	$	(330,623	)	$	(60,404	)	$	(2,068,038	)

XML

Note 10 - Fair Value Disclosures (Details) - Financial Assets and Liabillities at Fair Value Measured on Recurring Basis (USD $)	Jun. 30, 2014	Dec. 31, 2013
Securities available for sale:
Available for sale	$ 110,878,312	$ 99,198,807
US Treasury and Government [Member] | Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Available for sale	9,368,000	19,994,430
US Treasury and Government [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	1,537,275	1,515,270
US Treasury and Government [Member]
Securities available for sale:
Available for sale	10,905,275	21,509,700
Residential Collateralized Mortgage Obligations- GSE [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	4,085,830	3,681,792
Residential Collateralized Mortgage Obligations- GSE [Member]
Securities available for sale:
Available for sale	4,085,830	3,681,792
Residential Collateralized Mortgage Obligations- Non GSE [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	2,816,320	2,826,396
Residential Collateralized Mortgage Obligations- Non GSE [Member]
Securities available for sale:
Available for sale	2,816,320	2,826,396
Residential Mortgage Backed Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	29,974,256	31,965,947
Residential Mortgage Backed Securities [Member]
Securities available for sale:
Available for sale	29,974,256	31,965,947
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	21,009,382	19,646,044
US States and Political Subdivisions Debt Securities [Member]
Securities available for sale:
Available for sale	21,009,382	19,646,044
Trust Preferred Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	2,148,600	2,013,100
Trust Preferred Debt Securities [Member]
Securities available for sale:
Available for sale	2,148,600	2,013,100
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	36,397,749	16,517,728
Corporate Debt Securities [Member]
Securities available for sale:
Available for sale	36,397,749	16,517,728
Mutual Fund [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	25,000	25,000
Mutual Fund [Member]
Securities available for sale:
Available for sale	25,000	25,000
Restricted Stock [Member] | Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	3,515,900	1,013,100
Restricted Stock [Member]
Securities available for sale:
Available for sale	3,515,900	1,013,100
Fair Value, Inputs, Level 1 [Member]
Securities available for sale:
Available for sale	9,368,000	19,994,430
Fair Value, Inputs, Level 2 [Member]
Securities available for sale:
Available for sale	$ 101,510,312	$ 79,204,377

XML

Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2014		Dec. 31, 2013
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Impaired loans (in Dollars)	$ 8,016,178		$ 7,879,005
December 31, 2013
Other real estate owned (in Dollars)			209,937
Impaired Loans [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Impaired loans (in Dollars)	8,016,178		7,879,005
Valuation Techniques	Appraisal of collateral (1)	[1]	Appraisal of collateral (1)	[1]
Unobservable Input	Appraisal adjustments (2)	[2]	Appraisal adjustments (2)	[2]
December 31, 2013
Other real estate owned	Appraisal of collateral (1)	[1]	Appraisal of collateral (1)	[1]
Other real estate owned	Appraisal adjustments (2)	[2]	Appraisal adjustments (2)	[2]
Impaired Loans [Member] | Minimum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Unobservable Input Range (Weighted Average)	10.00%		5.00%
December 31, 2013
Other real estate owned	10.00%		5.00%
Impaired Loans [Member] | Maximum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Unobservable Input Range (Weighted Average)	40.00%		15.00%
December 31, 2013
Other real estate owned	40.00%		15.00%
Impaired Loans [Member] | Weighted Average [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Unobservable Input Range (Weighted Average)	(19.10%)		(9.70%)
December 31, 2013
Other real estate owned	(19.10%)		(9.70%)
Other Real Estate Owned [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Valuation Techniques			Appraisal of collateral (1)	[1]
Unobservable Input			Appraisal adjustments (2)	[2]
December 31, 2013
Other real estate owned (in Dollars)			$ 209,937
Other real estate owned			Appraisal of collateral (1)	[1]
Other real estate owned			Appraisal adjustments (2)	[2]
Other Real Estate Owned [Member] | Minimum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Unobservable Input Range (Weighted Average)			10.00%
December 31, 2013
Other real estate owned			10.00%
Other Real Estate Owned [Member] | Maximum [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Unobservable Input Range (Weighted Average)			50.00%
December 31, 2013
Other real estate owned			50.00%
Other Real Estate Owned [Member] | Weighted Average [Member]
Note 10 - Fair Value Disclosures (Details) - Fair Value Qualitative Information [Line Items]
Unobservable Input Range (Weighted Average)			(32.60%)
December 31, 2013
Other real estate owned			(32.60%)

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

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

XML

Note 10 - Fair Value Disclosures (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Note 10 - Fair Value Disclosures (Details) [Line Items]
Impaired Financing Receivable, Recorded Investment	$ 14,804,116	$ 10,180,751	$ 5,975,180
Impaired Financing Receivable, Related Allowance	1,521,203	1,783,861	967,081
Fair Value, Inputs, Level 3 [Member]
Note 10 - Fair Value Disclosures (Details) [Line Items]
Impaired Financing Receivable, Recorded Investment	9,537,381	9,662,862
Impaired Financing Receivable, Related Allowance	$ 1,521,203	$ 1,783,861

XML

Note 3 - Net Income Per Common Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	247,298	90,296	247,298	90,296

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Impaired Loans Receivables (USD $)	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Dec. 31, 2013
Commercial
Impaired loans with no related allowance, recorded investment		$ 883,497		$ 517,885
Impaired loans with no related allowance, unpaid principal balance		937,539		674,342
Impaired loans with no related allowance, average recorded investment		1,162,388		2,407,560
Impaired loans with no related allowance, interest income recognized		12,528		39,040
Commercial
Impaired loans with an related allowance, recorded investment	9,537,381	5,091,683	9,537,381	9,662,866
Impaired loans with an related allowance, unpaid principal balance	9,693,838	5,236,510	9,693,838	9,662,866
Impaired loans with an related allowance, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans with an related allowance, average recorded investment	9,588,435	5,033,749	9,644,068	6,404,323
Impaired loans with an related allowance, interest income recognized	64,949	65,302	113,822	257,005
Total:
Impaired loans, recorded investment	14,804,116	5,975,180	14,804,116	10,180,751
Impaired loans, unpaid principal balance	15,740,826	6,174,049	15,740,826	10,337,208
Impaired loans, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans, average recorded investment	14,300,366	6,196,137	13,008,897	8,811,883
Impaired loans, interest income recognized	93,449	77,830	156,277	296,045
Construction [Member]
Commercial
Impaired loans with no related allowance, recorded investment		540,975		19,930
Impaired loans with no related allowance, unpaid principal balance		540,975		19,930
Impaired loans with no related allowance, average recorded investment		725,974		965,268
Impaired loans with no related allowance, interest income recognized		11,078		33,946
Commercial
Impaired loans with an related allowance, recorded investment	0		0
Impaired loans with an related allowance, unpaid principal balance	0		0
Impaired loans with an related allowance, related allowance	0		0
Impaired loans with an related allowance, average recorded investment	0		0	246,853
Impaired loans with an related allowance, interest income recognized	0		0
Total:
Impaired loans, recorded investment				19,930
Impaired loans, unpaid principal balance				19,930
Impaired loans, related allowance	0		0
Impaired loans, average recorded investment				1,212,121
Impaired loans, interest income recognized				33,946
Commercial Business [Member]
Commercial
Impaired loans with no related allowance, recorded investment		177,980		243,840
Impaired loans with no related allowance, unpaid principal balance		232,022		400,297
Impaired loans with no related allowance, average recorded investment		168,683		258,139
Impaired loans with no related allowance, interest income recognized		1,450		5,094
Commercial
Impaired loans with an related allowance, recorded investment	126,597	614,396	126,597	532,261
Impaired loans with an related allowance, unpaid principal balance	283,054	759,223	283,054	532,261
Impaired loans with an related allowance, related allowance	19,141	173,155	19,141	293,692
Impaired loans with an related allowance, average recorded investment	171,520	617,054	321,402	562,346
Impaired loans with an related allowance, interest income recognized	0	834	0	9,728
Total:
Impaired loans, recorded investment				776,101
Impaired loans, unpaid principal balance				932,558
Impaired loans, related allowance	19,141	173,155	19,141	293,692
Impaired loans, average recorded investment				820,485
Impaired loans, interest income recognized				14,822
Commercial Real Estate Portfolio Segment [Member]
Commercial
Impaired loans with no related allowance, average recorded investment		123,945		1,032,115
Commercial
Impaired loans with an related allowance, recorded investment	9,095,169	4,477,287	9,095,169	9,130,605
Impaired loans with an related allowance, unpaid principal balance	9,095,169	4,477,287	9,095,169	9,130,605
Impaired loans with an related allowance, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans with an related allowance, average recorded investment	9,101,300	4,372,626	9,112,256	5,546,690
Impaired loans with an related allowance, interest income recognized	64,949	64,468	113,822	247,277
Total:
Impaired loans, recorded investment				9,130,605
Impaired loans, unpaid principal balance				9,130,605
Impaired loans, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans, average recorded investment				6,578,805
Impaired loans, interest income recognized				247,277
Mortgage Warehouse Lines [Member]
Commercial
Impaired loans with an related allowance, recorded investment	0		0
Impaired loans with an related allowance, unpaid principal balance	0		0
Impaired loans with an related allowance, related allowance	0		0
Impaired loans with an related allowance, average recorded investment	0		0
Impaired loans with an related allowance, interest income recognized	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Portfolio Segment [Member]
Commercial
Impaired loans with no related allowance, recorded investment		718,955		263,770
Impaired loans with no related allowance, unpaid principal balance		772,997		420,227
Impaired loans with no related allowance, average recorded investment		1,018,602		2,255,522
Impaired loans with no related allowance, interest income recognized		12,528		39,040
Commercial
Impaired loans with an related allowance, recorded investment	9,221,766	5,091,683	9,221,766	9,662,866
Impaired loans with an related allowance, unpaid principal balance	9,378,223	5,236,510	9,378,223	9,662,866
Impaired loans with an related allowance, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans with an related allowance, average recorded investment	9,272,820	4,989,680	9,433,658	6,355,889
Impaired loans with an related allowance, interest income recognized	64,949	65,302	113,822	257,005
Total:
Impaired loans, recorded investment	12,943,624	5,810,638	12,943,624
Impaired loans, unpaid principal balance	13,864,181	6,009,507	13,864,181
Impaired loans, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans, average recorded investment	12,435,364	6,008,282	11,533,896
Impaired loans, interest income recognized	88,406	77,830	148,355
Residential Portfolio Segment [Member]
Commercial
Impaired loans with no related allowance, recorded investment		164,542		162,012
Impaired loans with no related allowance, unpaid principal balance		164,542		162,012
Impaired loans with no related allowance, average recorded investment		121,246		117,746
Commercial
Impaired loans with an related allowance, recorded investment	315,615		315,615
Impaired loans with an related allowance, unpaid principal balance	315,615		315,615
Impaired loans with an related allowance, related allowance	15,015		15,015
Impaired loans with an related allowance, average recorded investment	315,615	44,069	210,410	44,196
Impaired loans with an related allowance, interest income recognized	0		0
Total:
Impaired loans, recorded investment	1,626,534	164,542	1,626,534	162,012
Impaired loans, unpaid principal balance	1,633,207	164,542	1,633,207	162,012
Impaired loans, related allowance	15,015		15,015
Impaired loans, average recorded investment	1,626,605	165,315	1,213,060	161,942
Impaired loans, interest income recognized	5,043		6,767
Loans to Individuals [Member]
Commercial
Impaired loans with no related allowance, recorded investment				92,103
Impaired loans with no related allowance, unpaid principal balance				92,103
Impaired loans with no related allowance, average recorded investment		22,540		34,292
Commercial
Impaired loans with an related allowance, recorded investment	0		0
Impaired loans with an related allowance, unpaid principal balance	0		0
Impaired loans with an related allowance, related allowance	0		0
Impaired loans with an related allowance, average recorded investment	0			4,238
Impaired loans with an related allowance, interest income recognized	0
Total:
Impaired loans, related allowance	0		0
Consumer Other Financing Receivable [Member]
Commercial
Impaired loans with an related allowance, recorded investment	0		0
Impaired loans with an related allowance, unpaid principal balance	0		0
Impaired loans with an related allowance, related allowance	0		0
Impaired loans with an related allowance, average recorded investment	0
Impaired loans with an related allowance, interest income recognized	0
Total:
Impaired loans, related allowance	0		0
Consumer Portfolio Segment [Member]
Commercial
Impaired loans with no related allowance, recorded investment				92,103
Impaired loans with no related allowance, unpaid principal balance				92,103
Impaired loans with no related allowance, average recorded investment		22,540		34,292
Commercial
Impaired loans with an related allowance, recorded investment	0		0
Impaired loans with an related allowance, unpaid principal balance	0		0
Impaired loans with an related allowance, related allowance	0		0
Impaired loans with an related allowance, average recorded investment	0		0	4,238
Impaired loans with an related allowance, interest income recognized	0
Total:
Impaired loans, recorded investment	233,958		233,958	92,103
Impaired loans, unpaid principal balance	243,438		243,438	92,103
Impaired loans, related allowance	0		0
Impaired loans, average recorded investment	238,397	22,540	261,941	38,530
Impaired loans, interest income recognized	$ 0		$ 1,155

XML

Note 3 - Net Income Per Common Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

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

	Three Months Ended June 30, 2014
	Net (loss)			Weighted- average shares		Per share amount
Basic earnings per common share:
Net (loss)	$	(439,918	)		7,113,717	$	(0.06	)
Effect of dilutive securities:
Stock options and warrants					-
Diluted EPS:
Net (loss) income plus assumed conversion	$	(439,918	)		7,113,717	$	(0.06	)

	Three Months Ended June 30, 2013
	Net Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	1,557,030		5,992,743	$	0.26
Effect of Dilutive Securities:
Stock options and warrants				150,867
Diluted EPS:
Net income plus assumed conversions	$	1,557,030		6,143,610	$	0.25

	Six Months Ended June 30, 2014
	Net Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	201,794		6,958,901	$	0.03
Effect of Dilutive Securities:
Stock options and warrants				120,293
Diluted EPS:
Net income plus assumed conversions	$	201,794		7,079,194	$	0.03

	Six Months Ended June 30, 2013
	Net Income		Weighted- average shares		Per share amount
Basic earnings per common share:
Net income	$	2,882,348		5,944,633	$	0.48
Effect of Dilutive Securities:
Stock options and warrants				148,498
Diluted EPS:
Net income plus assumed conversions	$	2,882,348		6,093,131	$	0.47

XML

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

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

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

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
June 30, 2014:
Unrealized holding (losses) gains on available-for-sale securities:
Unrealized holding (losses) on available-for-sale securities	$	(708,448	)	$	300,312		$	(408,136	)
Unrealized impairment loss on held to maturity security:
Unrealized impairment (loss) on held to maturity security		(500,944	)		170,321			(330,623	)
Unfunded pension liability:
Plan actuarial gains and losses included in other comprehensive income		185,837			(75,162	)		110,675
Accumulated other comprehensive income ( loss)	$	(1,023,555	)	$	395,471		$	(628,084	)

	Before-Tax Amount			Income Tax Effect			Net-of-Tax Amount
December 31, 2013:
Unrealized holding (losses) gains on available-for-sale securities:
Unrealized holding (losses) on available-for-sale securities	$	(2,992,624	)	$	1,060,098		$	(1,932,526	)
Unrealized impairment loss on held to maturity security:
Unrealized impairment (loss) on held to maturity security		(500,944	)		170,321			(330,623	)
Unfunded pension liability:
Plan actuarial gains and losses included in other comprehensive income		27,236			(11,721	)		(60,404	)
Accumulated other comprehensive income ( loss)	$	(3,466,332	)	$	1,218,698		$	(2,247,634	)

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 (Loss)
Six Months Ended June 30, 2014:
Balance, beginning of period	$	(1,932,526	)	$	(330,623	)	$	15,515	$	(2,247,634	)
Other comprehensive income (loss) before reclassifications		1,522,880			-			95,160		1,618,040
Amounts reclassified from accumulated other comprehensive income (loss) (1)		1,510			-			-		1,510
Other comprehensive income (loss)		1,524,390			-			95,160		1,619,550
Balance, end of period	$	(408,136	)	$	(330,623	)	$	110,675	$	(628,084	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income
Six Months Ended June 30, 2013:
Balance, beginning of period	$	1,235,204		$	(330,623	)	$	(100,288	)	$	804,293
Other comprehensive income (loss) before reclassifications		(2,912,215	)		-			39,884			(2,872,331	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,912,216	)		-			39,884			(2,872,331	)
Balance, end of period	$	(1,677,012	)	$	(330,623	)	$	(60,403	)	$	(2,068,038	)

	Unrealized Holding Gains (Losses) on Available for  Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability		Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2014:
Balance, beginning of period	$	(1,088,261	)	$	(330,623	)	$	53,475	$	(1,365,409	)
Other comprehensive income (loss) before reclassifications		678,615			-			57,200		735,815
Amounts reclassified from accumulated other comprehensive income (loss) (1)		1,510			-			-		1,510
Other comprehensive income (loss)		680,125			-			57,200		737,325
Balance, end of period	$	(408,136	)	$	(330,623	)	$	110,675	$	(628,084	)

	Unrealized Holding Gains (Losses) on Available for Sale Securities			Unrealized Impairment Loss on Held to Maturity Security			Unfunded Pension Liability			Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2013:
Balance, beginning of period	$	(802,169	)	$	(330,623	)	$	(98,363	)	$	(373,183	)
Other comprehensive income (loss) before reclassifications		(2,479,180	)		-			37,959			(2,441,221	)
Amounts reclassified from accumulated other comprehensive income (loss)		-			-			-			-
Other comprehensive income (loss)		(2,479,180	)		-			37,959			(2,441,221	)
Balance, end of period	$	(1,677,011	)	$	(330,623	)	$	(60,404	)	$	(2,068,038	)

XML

Note 5 - Allowance for Loan Losses and Credit Quality Disclosure (Details) - Impaired Loans Receivables (USD $)	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Dec. 31, 2013
Commercial
Impaired loans receivable with no related allowance, recorded investment		$ 883,497		$ 517,885
Impaired loans receivable with no related allowance, unpaid principal balance		937,539		674,342
Impaired loans receivable with no related allowance, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans receivable with no related allowance, average recorded investment		1,162,388		2,407,560
Impaired loans receivable with no related allowance, interest income recognized		12,528		39,040
Commercial
Impaired loans receivable with related allowance, recorded investment	9,537,381	5,091,683	9,537,381	9,662,866
Impaired loans receivable with related allowance, unpaid principal balance	9,693,838	5,236,510	9,693,838	9,662,866
Impaired loans, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans receivable with related allowance, average recorded investment	9,588,435	5,033,749	9,644,068	6,404,323
Impaired loans receivable with related allowance, interest income recognized	64,949	65,302	113,822	257,005
Total:
Impaired loans, recorded investment	14,804,116	5,975,180	14,804,116	10,180,751
Impaired loans, unpaid principal balance	15,740,826	6,174,049	15,740,826	10,337,208
Impaired loans, related allowance	1,521,203	967,081	1,521,203	1,783,861
Impaired loans, average recorded investment	14,300,366	6,196,137	13,008,897	8,811,883
Impaired loans, interest income recognized	93,449	77,830	156,277	296,045
Construction [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	373,663		373,663
Impaired loans receivable with no related allowance, unpaid principal balance	373,663		373,663
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	338,563		229,152
Impaired loans receivable with no related allowance, interest income recognized	3,752		4,821
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Construction [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		540,975		19,930
Impaired loans receivable with no related allowance, unpaid principal balance		540,975		19,930
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment		725,974		965,268
Impaired loans receivable with no related allowance, interest income recognized		11,078		33,946
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0		0	246,853
Impaired loans receivable with related allowance, interest income recognized	0		0
Total:
Impaired loans, recorded investment				19,930
Impaired loans, unpaid principal balance				19,930
Impaired loans, related allowance	0		0
Impaired loans, average recorded investment				1,212,121
Impaired loans, interest income recognized				33,946
Commercial Business [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	723,060		723,060
Impaired loans receivable with no related allowance, unpaid principal balance	1,300,245		1,300,245
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	719,845		819,018
Impaired loans receivable with no related allowance, interest income recognized	8,967		12,232
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Business [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		177,980		243,840
Impaired loans receivable with no related allowance, unpaid principal balance		232,022		400,297
Impaired loans receivable with no related allowance, related allowance	19,141	173,155	19,141	293,692
Impaired loans receivable with no related allowance, average recorded investment		168,683		258,139
Impaired loans receivable with no related allowance, interest income recognized		1,450		5,094
Commercial
Impaired loans receivable with related allowance, recorded investment	126,597	614,396	126,597	532,261
Impaired loans receivable with related allowance, unpaid principal balance	283,054	759,223	283,054	532,261
Impaired loans, related allowance	19,141	173,155	19,141	293,692
Impaired loans receivable with related allowance, average recorded investment	171,520	617,054	321,402	562,346
Impaired loans receivable with related allowance, interest income recognized	0	834	0	9,728
Total:
Impaired loans, recorded investment				776,101
Impaired loans, unpaid principal balance				932,558
Impaired loans, related allowance	19,141	173,155	19,141	293,692
Impaired loans, average recorded investment				820,485
Impaired loans, interest income recognized				14,822
Commercial Real Estate Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	2,625,135		2,625,135
Impaired loans receivable with no related allowance, unpaid principal balance	2,812,050		2,812,050
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	2,104,136		1,052,068
Impaired loans receivable with no related allowance, interest income recognized	10,738		17,480
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Real Estate Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans receivable with no related allowance, average recorded investment		123,945		1,032,115
Commercial
Impaired loans receivable with related allowance, recorded investment	9,095,169	4,477,287	9,095,169	9,130,605
Impaired loans receivable with related allowance, unpaid principal balance	9,095,169	4,477,287	9,095,169	9,130,605
Impaired loans, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans receivable with related allowance, average recorded investment	9,101,300	4,372,626	9,112,256	5,546,690
Impaired loans receivable with related allowance, interest income recognized	64,949	64,468	113,822	247,277
Total:
Impaired loans, recorded investment				9,130,605
Impaired loans, unpaid principal balance				9,130,605
Impaired loans, related allowance	1,487,047	793,926	1,487,047	1,490,169
Impaired loans, average recorded investment				6,578,805
Impaired loans, interest income recognized				247,277
Mortgage Warehouse Lines [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	0		0
Impaired loans receivable with no related allowance, unpaid principal balance	0		0
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	0		0
Impaired loans receivable with no related allowance, interest income recognized	0		0
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Mortgage Warehouse Lines [Member]
Commercial
Impaired loans receivable with no related allowance, related allowance	0		0
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0		0
Impaired loans receivable with related allowance, interest income recognized	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	3,721,858		3,721,858
Impaired loans receivable with no related allowance, unpaid principal balance	4,485,958		4,485,958
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	3,162,544		2,100,238
Impaired loans receivable with no related allowance, interest income recognized	23,457		34,533
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Commercial Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		718,955		263,770
Impaired loans receivable with no related allowance, unpaid principal balance		772,997		420,227
Impaired loans receivable with no related allowance, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans receivable with no related allowance, average recorded investment		1,018,602		2,255,522
Impaired loans receivable with no related allowance, interest income recognized		12,528		39,040
Commercial
Impaired loans receivable with related allowance, recorded investment	9,221,766	5,091,683	9,221,766	9,662,866
Impaired loans receivable with related allowance, unpaid principal balance	9,378,223	5,236,510	9,378,223	9,662,866
Impaired loans, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans receivable with related allowance, average recorded investment	9,272,820	4,989,680	9,433,658	6,355,889
Impaired loans receivable with related allowance, interest income recognized	64,949	65,302	113,822	257,005
Total:
Impaired loans, recorded investment	12,943,624	5,810,638	12,943,624
Impaired loans, unpaid principal balance	13,864,181	6,009,507	13,864,181
Impaired loans, related allowance	1,506,188	967,081	1,506,188	1,783,861
Impaired loans, average recorded investment	12,435,364	6,008,282	11,533,896
Impaired loans, interest income recognized	88,406	77,830	148,355
Residential Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	1,310,919		1,310,919
Impaired loans receivable with no related allowance, unpaid principal balance	1,317,592		1,317,592
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	1,310,990		1,002,650
Impaired loans receivable with no related allowance, interest income recognized	5,043		6,767
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Residential Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment		164,542		162,012
Impaired loans receivable with no related allowance, unpaid principal balance		164,542		162,012
Impaired loans receivable with no related allowance, related allowance	15,015		15,015
Impaired loans receivable with no related allowance, average recorded investment		121,246		117,746
Commercial
Impaired loans receivable with related allowance, recorded investment	315,615		315,615
Impaired loans receivable with related allowance, unpaid principal balance	315,615		315,615
Impaired loans, related allowance	15,015		15,015
Impaired loans receivable with related allowance, average recorded investment	315,615	44,069	210,410	44,196
Impaired loans receivable with related allowance, interest income recognized	0		0
Total:
Impaired loans, recorded investment	1,626,534	164,542	1,626,534	162,012
Impaired loans, unpaid principal balance	1,633,207	164,542	1,633,207	162,012
Impaired loans, related allowance	15,015		15,015
Impaired loans, average recorded investment	1,626,605	165,315	1,213,060	161,942
Impaired loans, interest income recognized	5,043		6,767
Loans to Individuals [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	233,958		233,958
Impaired loans receivable with no related allowance, unpaid principal balance	243,438		243,438
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	238,397		261,941
Impaired loans receivable with no related allowance, interest income recognized	0		1,155
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Loans to Individuals [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment				92,103
Impaired loans receivable with no related allowance, unpaid principal balance				92,103
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment		22,540		34,292
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0			4,238
Impaired loans receivable with related allowance, interest income recognized	0
Total:
Impaired loans, related allowance	0		0
Consumer Other Financing Receivable [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	0		0
Impaired loans receivable with no related allowance, unpaid principal balance	0		0
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	0
Impaired loans receivable with no related allowance, interest income recognized	0		0
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Consumer Other Financing Receivable [Member]
Commercial
Impaired loans receivable with no related allowance, related allowance	0		0
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0
Impaired loans receivable with related allowance, interest income recognized	0
Total:
Impaired loans, related allowance	0		0
Consumer Portfolio Segment [Member] | With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	233,958		233,958
Impaired loans receivable with no related allowance, unpaid principal balance	243,438		243,438
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	238,397		261,941
Impaired loans receivable with no related allowance, interest income recognized	0		0
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	0		0
Consumer Portfolio Segment [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment				92,103
Impaired loans receivable with no related allowance, unpaid principal balance				92,103
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment		22,540		34,292
Commercial
Impaired loans receivable with related allowance, recorded investment	0		0
Impaired loans receivable with related allowance, unpaid principal balance	0		0
Impaired loans, related allowance	0		0
Impaired loans receivable with related allowance, average recorded investment	0		0	4,238
Impaired loans receivable with related allowance, interest income recognized	0
Total:
Impaired loans, recorded investment	233,958		233,958	92,103
Impaired loans, unpaid principal balance	243,438		243,438	92,103
Impaired loans, related allowance	0		0
Impaired loans, average recorded investment	238,397	22,540	261,941	38,530
Impaired loans, interest income recognized	0		1,155
With No Related Allowance Recorded [Member]
Commercial
Impaired loans receivable with no related allowance, recorded investment	5,266,735		5,266,735
Impaired loans receivable with no related allowance, unpaid principal balance	6,046,988		6,046,988
Impaired loans receivable with no related allowance, related allowance	0		0
Impaired loans receivable with no related allowance, average recorded investment	4,711,931		3,364,829
Impaired loans receivable with no related allowance, interest income recognized	28,500		41,300
Commercial
Impaired loans, related allowance	0		0
Total:
Impaired loans, related allowance	$ 0		$ 0

XML

Note 4 - Investment Securities (Details) - Unrealized Losses on Investments (USD $)			6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Pretsl Xxv [Member]
Note 4 - Investment Securities (Details) - Unrealized Losses on Investments [Line Items]
PreTSL XXV			B-1
PreTSL XXV (in Dollars)	$ 155,819,634	$ 153,317,759	$ 155,717
PreTSL XXV (in Dollars)	159,434,845	153,629,773	532,310
PreTSL XXV (in Dollars)			376,593
PreTSL XXV			70.70%
PreTSL XXV			6.70%	[1]
PreTSL XXV			22.60%	[1]
PreTSL XXV			13.70%
PreTSL XXV			Ca/ NR
PreTSL XXV (in Dollars)			$ 146,000	[2]
PreTSL XXV			27.00%	[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 percentage means there is more excess subordination to absorb additional defaults / deferrals, and the better our security is protected from loss.

XML

Consolidated Statements of Comprehensive Income (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net Income (loss)	$ (439,918)	$ 1,557,030	$ 201,794	$ 2,882,348
Other comprehensive income (loss) :
Unrealized gains (losses) on securities available for sale	1,066,459	(3,833,028)	2,281,660	(4,614,989)
Tax effect	(387,844)	1,353,848	(758,780)	1,702,774
Net of tax amount	678,615	(2,479,180)	1,522,880	(2,912,215)
Realized loss on securities available for sale	2,516		2,516
Tax effect	(1,006)		(1,006)
Net of tax amount	1,510		1,510
Pension liability	95,335	63,266	158,601	66,486
Tax effect	(38,135)	(25,307)	(63,441)	(26,602)
Net of tax amount	57,200	37,959	95,160	39,884
Total other comprehensive income (loss)	737,325	(2,441,221)	1,619,550	(2,872,331)
Comprehensive income (loss)	$ 297,407	$ (884,191)	$ 1,821,344	$ 10,017

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

(2) Acquisition of Rumson-Fair Haven Bank and Trust Company

On February 7, 2014, the Company completed its acquisition of Rumson-Fair Haven Bank and Trust Company, a New Jersey state commercial bank (“Rumson”), which merged with and into the Bank, with the Bank as the surviving entity. The merger agreement among the Company, the Bank and Rumson (the “Merger Agreement”) provided that the shareholders of Rumson would receive, at their election, for each outstanding share of Rumson common stock that they own at the effective time of the merger, either 0.7772 shares of the Company common stock or $7.50 in cash or a combination thereof, subject to proration as described in the Merger Agreement, so that 60% of the aggregate merger consideration consisted of cash and 40% consisted of shares of the Company’s common stock. The Company issued an aggregate of 1,019,223 shares of its common stock and paid $14.8 million in cash in the transaction.

The merger was accounted for under the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at preliminary estimated fair values as of the acquisition date. Rumson’s results of operations have been included in the Company’s Consolidated Statements of Income since February 7, 2014.

The assets acquired and liabilities assumed in the merger were recorded at their estimated fair values based on management’s best estimates using information available at the date of the merger, including the use of a third party valuation specialist. The fair values are preliminary estimates and subject to adjustment for up to one year after the closing date of the merger. The following table summarizes the estimated fair value of the acquired assets and liabilities.

($ in thousands)	Amount
Consideration paid:
Company stock issued	$	11,161
Cash payment		14,770
Total consideration paid		25,931
Recognized amounts of identifiable assets and liabilities assumed at fair value:
Cash and cash equivalents		36,045
Short-term investments		100
Securities available for sale		30,024
Loans		143,714
Premises and equipment, net		2,552
Identifiable intangible assets		1,189
Bank-owned life insurance		4,471
Accrued interest receivable and other assets		1,483
Deposits		(189,490	)
Borrowings		(11,030	)
Other liabilities		(825	)
Total identifiable assets		18,233
Goodwill	$	7,698

Accounting Standards Codification (“ASC”) Topic 805-10 provides that if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the measurement period, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. During the measurement period, the acquirer also shall recognize additional assets or liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period may not exceed one year from the acquisition date. As of June 30, 2014, independent appraisals of branch office real estate and leases had not been completed and the fair value of these assets and liabilities had not been determined.

Loans and leases acquired in the Rumson acquisition were recorded at fair value and subsequently accounted for in accordance with ASC Topic 310, and there was no carryover of Rumson’s allowance for loan losses. The fair values of loans acquired from Rumson were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted for estimated future credit losses and the rate of prepayments. Projected cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.

At the acquisition date, the Company recorded $141.1 million of loans without evidence of credit quality deterioration and $2.6 million of loans with evidence of credit quality deterioration. The following table summarizes the composition of the loans acquired and recorded at fair value.

	At February 7, 2014
($ in thousands)	Loans  acquired with  no credit  quality  deterioration		Loans  acquired with credit  quality  deterioration		Total
Commercial
Construction	$	11,920	$	-	$	11,920
Commercial Real Estate		62,398		1,832		64,230
Commercial Business		18,086		368		18,454
Residential Real Estate		32,743		180		32,923
Consumer		15,953		234		16,187
Total	$	141,100	$	2,614	$	143,714

The following is a summary of the loans acquired with evidence of deteriorated credit quality in the Rumson acquisition as of the closing date.

($ in thousands)	Acquired Credit Impaired Loans
Contractually required principal and interest at acquisition	$	4,451
Contractual cash flows not expected to be collected (non-accretable difference)		1,543
Expected cash flows at acquisition		2,908
Interest component of expected cash flows (accretable difference)		294
Fair value of acquired loans	$	2,614

The core deposit intangible totaled $1.2 million and is being amortized over its estimated useful life of approximately 10 years using an accelerated method. The goodwill will be evaluated annually for impairment. The goodwill is not deductible for tax purposes.

The following table presents the projected amortization of the core deposits intangible for each period presented:

		($ in thousands)
2014	$	216
2015		195
2016		173
2017		151
2018		130
Thereafter		324
	$	1,189

The fair values of deposit liabilities with no stated maturities, such as checking, money market and savings accounts, were assumed to equal the carrying amounts since these deposits are payable on demand. The fair values of certificates of deposits and IRAs represent the present value of contractual cash flows discounted at market rates for similar certificates of deposit.

Direct costs related to the acquisition were expensed as incurred. During the six months ended June 30, 2014, the Company incurred $1.5 million of merger and acquisition integration-related expenses, which have been separately stated in the Company’s Consolidated Statements of Income.

Supplemental Pro Forma Financial Information

The following table presents financial information regarding the former Rumson operations included in our Consolidated Statements of Income from the date of the acquisition, February 7, 2014, through June 30, 2014 under the column “Actual from acquisition date to June 30, 2014.” In addition, the table provides unaudited condensed pro forma financial information assuming that the Rumson acquisition had been completed as of January 1, 2013. In the table below, merger-related expenses of $1.8 million were excluded from pro forma non-interest expenses for the six months ended June 30, 2014. Income taxes were also adjusted to exclude income tax benefits of $505,000 related to the merger expenses for the six months ended June 30, 2014.

The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited pro forma financial information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings that may have occurred as a result of the integration and consolidation of Rumson’s operations. The pro forma financial information reflects adjustments related to certain purchase accounting fair value adjustments; amortization of core deposit and other intangibles; and related income tax effects.

	Actual from acquisition date to June 30, 2014		Pro Forma for the six months ended June 30, 2014			Pro Forma for the six months ended June 30, 2013
	(in thousands, except per share amounts)
Net interest income	$	2,809	$	16,074		$	16,258
Non-interest income		123		2,946			3,572
Non-interest expenses		1,120		13,242			14,020
Income taxes (benefit)		724		(61	)		1,625
Net income		1,088		1,239			3,778
Earnings per share – diluted			$	0.18		$	0.53

XML

Note 6 - Share-Based Compensation (Details) - Restricted Stock Activity (USD $)	6 Months Ended
	Jun. 30, 2014
Restricted Stock Activity [Abstract]
Non-vested at January 1, 2014	136,490
Non-vested at January 1, 2014	$ 6.59
Granted	35,600
Granted	$ 11.21
Vested	(29,065)
Vested	$ 6.73
Non-vested at June 30, 2014	143,025
Non-vested at June 30, 2014	$ 7.71

XML

Note 10 - Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2014

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
June 30, 2014:
Securities available for sale:
U. S. Treasury securities and ` obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	9,368,000	$	1,537,275	$	-	$	10,905,275
Residential collateralized mortgage obligations – GSE				4,085,830				4,085,830
Residential collateralized mortgage obligations – Non-GSE				2,816,320				2,816,320
Residential mortgage backed securities – GSE				29,974,256				29,974,256
Obligations of State and Political subdivisions				21,009,382				21,009,382
Trust preferred debt securities – single issuer				2,148,600				2,148,600
Corporate debt securities				36,397,749				36,397,749
Restricted stock				3,515,900				3,515,900
Mutual fund				25,000				25,000

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
December 31, 2013:
Securities available for sale:
U. S. Treasury securities and obligations of U.S. Government sponsored corporations (“GSE”) and agencies	$	19,994,430	$	1,515,270	$	-	$	21,509,700
Residential collateralized mortgage obligations – GSE		-		3,681,792		-		3,681,792
Residential collateralized mortgage obligations – non-GSE		-		2,826,396		-		2,826,396
Residential mortgage backed securities – GSE		-		31,965,947		-		31,965,947
Obligations of State and Political subdivisions		-		19,646,044		-		19,646,044
Trust preferred debt securities – single issuer		-		2,013,100		-		2,013,100
Corporate debt securities		-		16,517,728		-		16,517,728
Restricted stock		-		1,013,100		-		1,013,100
Mutual fund		-		25,000		-		25,000

Fair Value Measurements, Nonrecurring [Table Text Block]

	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value
June 30, 2014:
Impaired loans	$	-	$	-	$	8,016,178	$	8,016,178
December 31, 2013:
Impaired loans	$	-	$	-	$	7,879,005	$	7,879,005
Other real estate owned		-		-		209,937		209,937

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 (Weighted Average)
June 30, 2014
Impaired loans	$	8,016,178	Appraisal of     collateral (1)	Appraisal adjustments (2)		10-40%	(19.1%)
December 31, 2013
Impaired loans	$	7,879,005	Appraisal of    collateral (1)	Appraisal adjustments (2)		5-15%	(9.7%)
Other real estate owned	$	209,937	Appraisal of    collateral (1)	Appraisal adjustments (2)		10-50%	(32.6%)

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

June 30, 2014
	Carrying Value			Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	23,149,148		$	23,149,148	$	-		$	-	$	23,149,148
Securities available for sale		110,878,312			9,368,000		101,510,312			-		110,878,312
Securities held to maturity		155,318,690			-		159,434,845			-		159,434,845
Loans held for sale		9,877,863			-		9,900,291			-		9,900,291
Loans, net		628,041,343			-		-			630,109,000		630,109,000
Accrued interest receivable		3,161,963			-		3,161,963			-		3,161,963
Deposits		(819,867,329	)		-		(820,796,000	)		-		(820,796,000	)
Borrowings		(59,888,511	)		-		(60,615,000	)		-		(60,615,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(904,892	)		-		(904,892	)		-		(904,892	)

December 31, 2013
	Carrying Value			Level 1 Inputs		Level 2 Inputs			Level 3 Inputs		Fair Value
Cash and cash equivalents	$	69,278,771		$	69,278,771	$	-		$	-	$	69,278,771
Securities available for sale		99,198,807			19,994,430		79,204,377			-		99,198,807
Securities held to maturity		152,816,815			-		153,629,773			-		153,629,000
Loans held for sale		10,923,689			-		10,924,000			-		10,924,000
Loans		366,297,511			-		-			372,548,000		372,548,000
Accrued interest receivable		2,542,602			-		2,542,602			-		2,542,602
Deposits		(638,552,030	)		-		(639,539,000	)		-		(639,539,000	)
Borrowings		(10,000,000	)		-		(11,148,000	)		-		(11,148,000	)
Redeemable subordinated debentures		(18,557,000	)		-		(18,557,000	)		-		(18,557,000	)
Accrued interest payable		(883,212	)		-		(883,212	)		-		(883,212	)

XML

Note 4 - Investment Securities (Details) - Held-to-maturity Securities (USD $)	Jun. 30, 2014	Dec. 31, 2013
Held to maturity-
Held to maturity, amortized cost	$ 155,819,634	$ 153,317,759
Held to maturity, other than temporary impairment recognized in accumlated other comprehensive income	(500,944)	(500,944)
Held to maturity	155,318,690	152,816,815
Held to maturity, gross unrealized gains	4,654,177	2,530,738
Held to maturity, gross unrealized losses	(538,022)	(1,717,780)
Held to maturity, fair value	159,434,845	153,629,773
US Treasury and Government [Member]
Held to maturity-
Held to maturity, amortized cost	501,773	1,524,860
Held to maturity	501,773	1,524,860
Held to maturity, gross unrealized gains	1,572	10,310
Held to maturity, fair value	503,345	1,535,170
Residential Collateralized Mortgage Obligations- GSE [Member]
Held to maturity-
Held to maturity, amortized cost	13,242,024	14,803,739
Held to maturity	13,242,024	14,803,739
Held to maturity, gross unrealized gains	500,621	379,815
Held to maturity, fair value	13,742,645	15,183,554
Residential Collateralized Mortgage Obligations- Non GSE [Member]
Held to maturity-
Held to maturity, amortized cost	9,679,334	10,682,363
Held to maturity	9,679,334	10,682,363
Held to maturity, gross unrealized gains	346,640	119,777
Held to maturity, gross unrealized losses		(27,526)
Held to maturity, fair value	10,025,974	10,774,614
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Held to maturity-
Held to maturity, amortized cost	61,339,357	65,240,620
Held to maturity	61,339,357	65,240,620
Held to maturity, gross unrealized gains	1,404,295	611,062
Held to maturity, gross unrealized losses	(134,022)	(387,034)
Held to maturity, fair value	62,609,630	65,464,648
US States and Political Subdivisions Debt Securities [Member]
Held to maturity-
Held to maturity, amortized cost	69,900,076	59,400,916
Held to maturity	69,900,076	59,400,916
Held to maturity, gross unrealized gains	2,023,380	1,399,938
Held to maturity, gross unrealized losses	(404,000)	(1,296,357)
Held to maturity, fair value	71,519,456	59,504,497
Trust Preferred Debt Securities Pooled [Member]
Held to maturity-
Held to maturity, amortized cost	656,661	656,662
Held to maturity, other than temporary impairment recognized in accumlated other comprehensive income	(500,944)	(500,944)
Held to maturity	155,717	155,718
Held to maturity, gross unrealized gains	376,593
Held to maturity, gross unrealized losses		(6,863)
Held to maturity, fair value	532,310	148,855
Corporate Debt Securities [Member]
Held to maturity-
Held to maturity, amortized cost	500,409	1,008,599
Held to maturity	500,409	1,008,599
Held to maturity, gross unrealized gains	1,076	9,836
Held to maturity, fair value	$ 501,485	$ 1,018,435

XML

Note 2 - Acquisition of Rumson-Fair Haven Bank and Trust Company (Tables)

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

($ in thousands)	Amount
Consideration paid:
Company stock issued	$	11,161
Cash payment		14,770
Total consideration paid		25,931
Recognized amounts of identifiable assets and liabilities assumed at fair value:
Cash and cash equivalents		36,045
Short-term investments		100
Securities available for sale		30,024
Loans		143,714
Premises and equipment, net		2,552
Identifiable intangible assets		1,189
Bank-owned life insurance		4,471
Accrued interest receivable and other assets		1,483
Deposits		(189,490	)
Borrowings		(11,030	)
Other liabilities		(825	)
Total identifiable assets		18,233
Goodwill	$	7,698

Financing Receivable Credit Quality Indicators [Table Text Block]

	At February 7, 2014
($ in thousands)	Loans  acquired with  no credit  quality  deterioration		Loans  acquired with credit  quality  deterioration		Total
Commercial
Construction	$	11,920	$	-	$	11,920
Commercial Real Estate		62,398		1,832		64,230
Commercial Business		18,086		368		18,454
Residential Real Estate		32,743		180		32,923
Consumer		15,953		234		16,187
Total	$	141,100	$	2,614	$	143,714

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Table Text Block]

($ in thousands)	Acquired Credit Impaired Loans
Contractually required principal and interest at acquisition	$	4,451
Contractual cash flows not expected to be collected (non-accretable difference)		1,543
Expected cash flows at acquisition		2,908
Interest component of expected cash flows (accretable difference)		294
Fair value of acquired loans	$	2,614

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

		($ in thousands)
2014	$	216
2015		195
2016		173
2017		151
2018		130
Thereafter		324
	$	1,189

Business Acquisition, Pro Forma Information [Table Text Block]

	Actual from acquisition date to June 30, 2014		Pro Forma for the six months ended June 30, 2014			Pro Forma for the six months ended June 30, 2013
	(in thousands, except per share amounts)
Net interest income	$	2,809	$	16,074		$	16,258
Non-interest income		123		2,946			3,572
Non-interest expenses		1,120		13,242			14,020
Income taxes (benefit)		724		(61	)		1,625
Net income		1,088		1,239			3,778
Earnings per share – diluted			$	0.18		$	0.53