UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549  FORM 10-K   (Mark One) x
        ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2005o
        TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period fromto Commission file Number:  000-32891  1ST CONSTITUTION BANCORP (Exact Name of Registrant as Specified in Its Charter)    New Jersey
    
    22-3665653(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (IRS. Employer Identification No.) 2650 Route 130, P.O. Box 634, Cranbury, NJ  08512(Address of Principal Executive Offices, including Zip Code)  (609) 655-4500(Registrants telephone number, including area code)
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, No Par Value, and Related Stock Purchase Rights(Title of Class)
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes
oNox Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes
oNox 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.    Yesx
Noo    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this

Form 10-K.o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer
o
        Accelerated filer
o
        Non-accelerated filerxIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YesoNox

The aggregate market value of the registrants common stock held by non-affiliates of the registrant, computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of the last business day of the registrants most recently completed second quarter, is $57,045,025.

As of March 1, 2006, 3,436,966 shares of the registrants common stock were outstanding.

Portions of the registrants definitive Proxy Statement for its 2006 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.

 
FORM 10-K

TABLE OF CONTENTS

PART I

Item 1.

Business
1Item 1A.

Risk Factors
10Item 1B.

Unresolved Staff Comments
12Item 2.

Properties
12Item 3.

Legal Proceedings
13Item 4.

Submission of Matters to a Vote of Security Holders
13PART IIItem 5.

Market for Registrants Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities
13Item 6.

Selected Financial Data
15Item 7.

Managements Discussion and Analysis of Financial Condition and Results of Operation
15Item 7A.

Quantitative and Qualitative Disclosures About Market Risk
34Item 8.

Financial Statements and Supplementary Data
34Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
34Item 9A.

Controls and Procedures
35Item 9B.

Other Information
35PART IIIItem 10.

Directors and Executive Officers of the Registrant
35Item 11.

Executive Compensation
35Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
35Item 13.

Certain Relationships and Related Transactions
35Item 14.

Principal Accountant Fees and Services
35PART IVItem 15.

Exhibits and Financial Statement Schedules
36SIGNATURES
40









i


PART I

Item 1. Business.

1st Constitution Bancorp

1st Constitution Bancorp (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 1st
Constitution Bank (the "Bank") 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 investment in the Bank, the Company currently conducts no other
significant business activities.

As of December 31, 2005, the Company, on a consolidated basis,
had total assets of approximately $372.5 million, total deposits of
approximately $305.8 million, total gross loans of approximately $240.0 million
and total shareholders' equity of approximately $29.8 million.

The main office of the Company and the Bank is located at 2650
Route 130 North, Cranbury, New Jersey 08512, and the telephone number is (609)
655-4500.

1st Constitution Bank

The Bank, a commercial bank formed under the laws of the State of
New Jersey, engages in the business of commercial and retail banking. As a
community bank, the Bank offers a wide range of services (including demand,
savings and time deposits and commercial and consumer/installment loans) to
individuals, small businesses and not-for-profit organizations principally in
Middlesex, Mercer and Somerset Counties, New Jersey. The Bank conducts its
operations through its main office located in Cranbury, New Jersey, and operates
eight additional branch offices in downtown Cranbury, Hamilton Square,
Jamesburg, Montgomery, Perth Amboy, Plainsboro, West Windsor, and Princeton, New
Jersey and a loan production office in Fort Lee, New Jersey. The Bank's deposits
are insured up to applicable legal limits by the Federal Deposit Insurance
Corporation ("FDIC").

Management efforts focus on positioning the Bank to meet the
financial needs of the communities in Middlesex, Mercer and Somerset Counties
and to provide financial services to individuals, families, institutions and
small businesses. To achieve this goal, the Bank is focusing its efforts on:

- personal service;

- expansion of its branch network;

- innovative product offerings; and

- technological advances and e-commerce.

Personal Service

The Bank provides a wide range of commercial and consumer banking
services to individuals, families, institutions and small businesses in central
New Jersey. The Bank's focus is to understand the needs of the community and the
customers and tailor products, services and advice to meet those needs. The Bank
seeks to provide a high level of personalized banking services, emphasizing
quick and flexible responses to customer demands.



1


Expansion of Branch Banking

The Bank continually evaluates opportunities for branch bank
expansion, either mini branches or full service banks, to continue to grow and
meet the needs of the community. During the second quarter of 2004, the Bank
opened new branch offices in Jamesburg, Middlesex County, and West Windsor,
Mercer County, New Jersey. During the third quarter of 2004, the Bank relocated
the interim Perth Amboy branch office to its new permanent location in Perth
Amboy, New Jersey. The Bank has received New Jersey Department of Banking and
Insurance and FDIC approval to relocate its Plainsboro branch office from 10
Schalks Crossing Road to 11 Schalks Crossing Road and to open a new branch
office to be located at 180 Main Street, Fort Lee, Bergen County. The Company
currently anticipates that the relocation of the Plainsboro branch office and
the opening of the new branch office in Fort Lee will both occur in the third
quarter of 2006.

Innovative Product Offerings

During April 2005, the Bank introduced "1st Choice
Super Savings", a new high yield savings account product. With a minimum balance
of $25,000 to avoid monthly service charges, customers earn a premium market
yield. By the end of 2005, this product had attracted over $18.0 million in new
deposit balances.

Technological Advances and e-Commerce

The Bank recognizes that customers want to receive service via
their most convenient delivery channel, be it the traditional branch office, by
telephone, ATM, or the internet. For this reason, the Bank continues to enhance
its e-commerce capabilities. At www.1stconstitution.com, customers have easy
access to online banking, including account access, and to the Bank's bill
payment system. Consumers can apply online for loans and interact with senior
management through the e-mail system. Business customers have access to cash
management information and transaction capability through the Bank's online
Business Express product offering. This overall expansion in electronic banking
offers the Bank's customers another means to access the Bank's services easily
and at their own convenience.

Competition

The Bank experiences substantial competition in attracting and
retaining deposits and in making loans. In attracting deposits and borrowers,
the Bank competes with commercial banks, savings banks, and savings and loan
associations, as well as regional and national insurance companies and non-bank
financial institutions, regulated small loan companies and local credit unions,
regional and national issuers of money market funds and corporate and government
borrowers. Within the direct market area of the Bank, there are a significant
number of offices of competing financial institutions. In New Jersey generally,
and in the Bank's local market specifically, large commercial banks, as well as
savings banks and savings and loan associations, including Provident Savings
Bank and Hudson City Savings Bank, hold a dominant market share and there has
been significant merger activity in the last few years, creating even larger
competitors.

Locally, the Bank's most direct competitors include Bank of
America, PNC Bank, Wachovia, and Sovereign Bank. The Bank is at a competitive
disadvantage compared with these larger national and regional commercial and
savings banks. By virtue of their larger capital, asset size or reserves, many
of such institutions have substantially greater lending limits (ceilings on the
amount of credit a bank may provide to a single customer that are linked to the
institution's capital) and other resources than the Bank. Many such institutions
are empowered to offer a wider range of services, including trust services, than
the Bank and, in some cases, have lower funding costs (the price a bank must pay
for deposits and other borrowed monies used to make loans to customers) than the
Bank. In addition to having established deposit bases and loan portfolios, these
institutions, particularly large national and regional commercial and savings
banks, have the financial ability to finance extensive advertising campaigns and
to allocate considerable resources to locations and products perceived as
profitable.



2


In addition, non-bank financial institutions offer services that
compete for deposits with the Bank. For example, brokerage firms and insurance
companies offer such instruments as short-term money market funds, corporate and
government securities funds, mutual funds and annuities. It is expected that
competition in these areas will continue to increase. Some of these competitors
are not subject to the same degree of regulation and supervision as the Company
and the Bank and therefore may be able to offer customers more attractive
products than the Bank.

However, management of the Bank believes that loans to small and
mid-sized businesses and professionals, which represent the main commercial loan
business of the Bank, are not always of primary importance to the larger banking
institutions. The Bank competes for this segment of the market by providing
responsive personalized services, local decision-making, and knowledge of its
customers and their businesses.

Lending Activities

The Bank's lending activities include both commercial and
consumer loans. Loan originations are derived from a number of sources including
real estate broker referrals, mortgage loan companies, direct solicitation by
the Bank's loan officers, existing depositors and borrowers, builders,
attorneys, walk-in customers and, in some instances, other lenders. The Bank has
established disciplined and systematic procedures for approving and monitoring
loans that vary depending on the size and nature of the loan.

Commercial Lending

The Bank offers a variety of commercial loan services including
term loans, lines of credit, and loans secured by equipment and receivables. A
broad range of short-to-medium term commercial loans, both secured and
unsecured, are made available to businesses for working capital (including
inventory and receivables), business expansion (including acquisition and
development of real estate and improvements), and the purchase of equipment and
machinery. The Bank also makes construction loans to real estate developers for
the acquisition, development and construction of residential subdivisions.

Commercial loans are granted based on the borrower's ability to
generate cash flow to support its debt obligations and other cash related
expenses. A borrower's ability to repay commercial loans is substantially
dependent on the success of the business itself and on the quality of its
management. As a general practice, the Bank takes as collateral a security
interest in any available real estate, equipment, inventory, receivables or
other personal property of its borrowers, although occasionally the Bank makes
commercial loans on an unsecured basis. Generally, the Bank requires personal
guaranties of its commercial loans to offset the risks associated with such
loans.

Residential Consumer Lending

A portion of the Bank's lending activities consists of the
origination of fixed and adjustable rate residential first mortgage loans
secured by owner-occupied property located in the Bank's primary market areas.
Home mortgage lending is unique in that a broad geographic territory may be
serviced by originators working from strategically placed offices either within
the Bank's traditional banking facilities or from affordable storefront
locations in commercial buildings. The Bank also offers construction loans,
second mortgage home improvement loans and home equity lines of credit.

The Bank finances the construction of individual, owner-occupied
houses on the basis of written underwriting and construction loan management
guidelines. First mortgage construction loans are made to contractors on both a
pre-sold and a "speculation" basis. Such loans are also made to qualified
individual borrowers and are generally supported by a take-out commitment from a
permanent lender. The Bank makes residential construction loans to individuals
who intend to erect owner occupied housing on a purchased parcel of real estate.
The construction phase of these loans has certain risks, including the viability
of the contractor, the contractor's ability to complete the project and changes
in interest rates.



3


In most cases, the Bank will sell its mortgage loans with terms of
15 years or more in the secondary market. The sale to the secondary market
allows the Bank to hedge against the interest rate risks related to such lending
operations. This brokerage arrangement allows the Bank to accommodate its
clients' demands while eliminating the interest rate risk for the 15- to 30-
year period generally associated with such loans.

The Bank in most cases requires borrowers to obtain and maintain
title, fire, and extended casualty insurance, and, where required by applicable
regulations, flood insurance. The Bank maintains its own errors and omissions
insurance policy to protect against loss in the event of failure of a mortgagor
to pay premiums on fire and other hazard insurance policies. Mortgage loans
originated by the Bank customarily include a "due on sale" clause, which gives
the Bank the right to declare a loan immediately due and payable in certain
circumstances, including, without limitation, upon the sale or other disposition
by the borrower of the real property subject to a mortgage. In general, the Bank
enforces due on sale clauses. Borrowers are typically permitted to refinance or
repay loans at their option without penalty.

Non-Residential Consumer Lending

Non-residential consumer loans made by the Bank include loans for
automobiles, recreation vehicles, and boats, as well as personal loans (secured
and unsecured) and deposit account secured loans. The Bank also conducts various
indirect lending activities through established retail companies in its market
areas. Non-residential consumer loans are attractive to the Bank because they
typically have a shorter term and carry higher interest rates than are charged
on other types of loans. Non-residential consumer loans, however, do pose
additional risk of collectibility when compared to traditional types of loans,
such as residential mortgage loans granted by commercial banks.

Consumer loans are granted based on employment and financial
information solicited from prospective borrowers as well as credit records
collected from various reporting agencies. Stability of the borrower,
willingness to pay and credit history are the primary factors to be considered.
The availability of collateral is also a factor considered in making such a
loan. The Bank seeks collateral that can be assigned and has good marketability
with a clearly adequate margin of value. The geographic area of the borrower is
another consideration, with preference given to borrowers in the Bank's primary
market areas.

Supervision and Regulation

Banking is a complex, highly regulated industry. The primary
goals of the bank regulatory scheme are to maintain a safe and sound banking
system and to facilitate the conduct of monetary policy. In furtherance of those
goals, Congress has created several largely autonomous regulatory agencies and
enacted a myriad of legislation that governs banks, bank holding companies and
the banking industry. This regulatory framework is intended primarily for the
protection of depositors and not for the protection of the Company's
shareholders. Descriptions of, and references to, the statutes and regulations
below are brief summaries thereof, and do not purport to be complete. The
descriptions are qualified in their entirety by reference to the specific
statutes and regulations discussed.

State and Federal Regulations

The Company is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). As a bank holding
company, the Company is subject to inspection, examination and supervision by
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") and is required to file with the Federal Reserve Board an annual report
and such additional information as the Federal Reserve Board may require
pursuant to the BHCA. The Federal Reserve Board may also make examinations of
the Company and its subsidiaries. The Company is subject to capital standards
similar to, but separate from, those applicable to the Bank.

Under the BHCA, bank holding companies that are not financial
holding companies generally may not acquire the ownership or control of more
than 5% of the voting shares, or substantially all the assets, of any company,
including a bank or another bank holding company, without the Federal Reserve
Board's prior approval. The Company has not applied to become a financial
holding company but did obtain such approval to acquire the shares of the Bank.
A bank holding company that does not qualify as a financial holding company is
generally limited in the types of activities in which it may engage to those
that the Federal Reserve Board had recognized as permissible for bank holding
companies prior to the date of enactment of the Gramm-Leach-Bliley Financial
Services Modernization Act of 1999. For example, a holding company and its
banking subsidiary are prohibited from engaging in certain tie-in arrangements
in connection with any extension of credit or lease or sale of any property or
the furnishing of services. At present, the Company does not engage in any
significant activity other than owning the Bank.



4


In addition to federal bank holding company regulation, the
Company is registered as a bank holding company with the New Jersey Department
of Banking and Insurance (the "Department"). The Company is required to file
with the Department copies of the reports it files with the federal banking and
securities regulators.

Capital Adequacy

The Company is required to comply with minimum capital adequacy
standards established by the Federal Reserve Board. There are two basic measures
of capital adequacy for bank holding companies and the depository institutions
that they own: a risk based measure and a leverage measure. All applicable
capital standards must be satisfied for a bank holding company to be considered
in compliance.

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") required each federal banking agency to revise its risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk, concentration of credit risk and the risks of non-traditional activities.
In addition, pursuant to FDICIA, each federal banking agency has promulgated
regulations, specifying the levels at which a bank would be considered "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," or "critically undercapitalized," and to take certain
mandatory and discretionary supervisory actions based on the capital level of
the institution.

The regulations implementing these provisions of FDICIA provide that a bank will
be classified as "well capitalized" if it (i) has a total risk-based capital
ratio of at least 10.0 percent, (ii) has a Tier 1 risk-based capital ratio of at
least 6.0 percent, (iii) has a Tier 1 leverage ratio of at least 5.0 percent,
and (iv) meets certain other requirements. A bank will be classified as
"adequately capitalized" if it (i) has a total risk-based capital ratio of at
least 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 4.0
percent, (iii) has a Tier 1 leverage ratio of (a) at least 4.0 percent, or (b)
at least 3.0 percent if the institution was rated 1 in its most recent
examination, and (iv) does not meet the definition of "well capitalized." A bank
will be classified as "undercapitalized" if it (i) has a total risk-based
capital ratio of less than 8.0 percent, (ii) has a Tier 1 risk-based capital
ratio of less than 4.0 percent, or (iii) has a Tier 1 leverage ratio of (a) less
than 4.0 percent, or (b) less than 3.0 percent if the institution was rated 1 in
its most recent examination. A bank will be classified as "significantly
undercapitalized" if it (i) has a total risk-based capital ratio of less than
6.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 3.0
percent, or (iii) has a Tier 1 leverage ratio of less than 3.0 percent. An
institution will be classified as "critically undercapitalized" if it has a
tangible equity to total assets ratio that is equal to or less than 2.0 percent.
An insured depository institution may be deemed to be in a lower capitalization
category if it receives an unsatisfactory examination.

As of December 31, 2005, the Bank's capital ratios exceed the requirements to be
considered a well capitalized institution under these regulations.

The risk-based capital guidelines for bank holding companies such
as the Company currently require a minimum ratio of total capital to
risk-weighted assets (including off-balance sheet activities, such as standby
letters of credit) of 8%. At least half of the total capital is required to be
Tier 1 capital, consisting principally of common shareholders' equity,
non-cumulative perpetual preferred stock, a limited amount of cumulative
perpetual preferred stock and minority interest in the equity accounts of
consolidated subsidiaries, less goodwill. The remainder of the total capital
(Tier 2 capital) may consist of a limited amount of subordinated debt and
intermediate-term preferred stock, certain hybrid capital instruments and other
debt securities, perpetual preferred stock and a limited amount of the general
loan loss allowance. At December 31, 2005, the Company maintained a Tier 1
capital ratio of 12.47% and total qualifying capital ratio of 13.30%.


In addition to the risk-based capital guidelines, the federal
banking regulators established minimum leverage ratio (Tier 1 capital to total
assets) guidelines for bank holding companies. These guidelines provide for a
minimum leverage ratio of 3% for those bank holding companies which have the
highest regulatory examination ratings and are not contemplating or experiencing
significant growth or expansion. All other bank holding companies are required
to maintain a leverage ratio of at least 1% to 2% above the 3% stated minimum.
The Company's leverage ratio at December 31, 2005 was 9.76%.

5


Management has determined that the 1st Constitution
Capital Trust I (the "Trust") qualifies as a variable interest entity under FASB
Interpretation 46, "Consolidation of Variable Interest Entities" ("FIN
46"). The Trust issued mandatorily redeemable preferred stock to investors and
loaned the proceeds to the Company. The Trust holds, as its sole asset,
subordinated debentures issued by the Company in 2002. Prior to December 31,
2003, the Trust was included in the Company's consolidated balance sheet and
statements of income. Subsequent to the issuance of FIN 46, the FASB issued a
revised interpretation, FIN 46(R), the provisions of which were required to be
applied to certain variable interest entities, including the Trust, by March 31,
2004. The Company adopted the provisions under FIN 46 and accordingly
deconsolidated the Trust as of December 31, 2003.

In March 2005, the Federal Reserve Board adopted a final rule
that would continue to allow the inclusion of trust preferred securities of the
kind issued by the Trust in Tier 1 capital, but with stricter quantitative
limits. Under the final rule, after a five-year transition period, the aggregate
amount of trust preferred securities and certain other capital elements would be
limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust
preferred securities and certain other elements in excess of the limit could be
included in Tier 2 capital, subject to restrictions. Based on the final rule,
the Company expects to include all of its $5.2 million in trust preferred
securities in Tier 1 capital. Management has evaluated the effects of the final
rule and does not anticipate a material impact on its capital ratios by the end
of the transition period.

Restrictions on Dividends

The primary source of cash to pay dividends, if any, to the
Company's shareholders and to meet the Company's obligations is dividends paid
to the Company by the Bank. Dividend payments by the Bank to the Company are
subject to the New Jersey Banking Act of 1948 (the "Banking Act") and the
Federal Deposit Insurance Act (the "FDIA"). Under the Banking Act and the FDIA,
the Bank may not pay any dividends if after paying the dividend, it would be
undercapitalized under applicable capital requirements. In addition to these
explicit limitations, the federal regulatory agencies are authorized to prohibit
a banking subsidiary or bank holding company from engaging in an unsafe or
unsound banking practice. Depending upon the circumstances, the agencies could
take the position that paying a dividend would constitute an unsafe or unsound
banking practice.

It is the policy of the Federal Reserve Board that bank holding
companies should pay cash dividends on common stock only out of income available
over the immediately preceding year and only if prospective earnings retention
is consistent with the organization's expected future needs and financial
condition. The policy provides that bank holding companies should not maintain a
level of cash dividend that undermines the bank holding company's ability to
serve as a source of strength to its banking subsidiary. A bank holding company
may not pay dividends when it is insolvent.

The Company has never paid a cash dividend and the Company's
Board of Directors has no plans to pay a cash dividend in the foreseeable
future. The Bank paid a stock dividend every year from 1993 to 1999, when it was
acquired by the Company. The Company has paid a 5% stock dividend every year
since its formation in 1999. The Company also declared a two-for-one stock split
on January 20, 2005 and paid February 28, 2005 to shareholders of record on
February 10, 2005.

Priority on Liquidation

The Company is a legal entity separate and distinct from the
Bank. The rights of the Company as the sole shareholder of the Bank, and
therefore the rights of the Company's creditors and shareholders, to participate
in the distributions and earnings of the Bank when the Bank is not in
bankruptcy, are subject to various state and federal law restrictions as
discussed above under the heading "Restrictions of Dividends." In the event of a
liquidation or other resolution of an insured depository institution such as the
Bank, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over
the claims of holders of an obligation of the institution to its shareholders
(the Company) or any shareholder or creditor of the Company. The claims on the
Bank by creditors include obligations in respect of federal funds purchased and
certain other borrowings, as well as deposit liabilities.



6


Financial Institution Legislation

The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the
"Modernization Act") became effective in early 2000. The Modernization Act:



        allows bank holding companies meeting management, capital and
Community Reinvestment Act standards to engage in a substantially
broader range of non-banking activities than is permissible for a
bank holding company, including insurance underwriting and making
merchant banking investments in commercial and financial companies;
if a bank holding company elects to become a financial holding
company, it files a certification, effective in 30 days, and
thereafter may engage in certain financial activities without
further approvals;
        allows banks to establish subsidiaries to engage in certain
activities which a financial holding company could engage in, if the
bank meets certain management, capital and Community Reinvestment
Act standards;
        allows insurers and other financial services companies to acquire
banks and removes various restrictions that currently apply to bank
holding company ownership of securities firms and mutual fund
advisory companies; and establishes the overall regulatory structure
applicable to financial holding companies that also engage in
insurance and securities operations.The Modernization Act modified other financial laws, including
laws related to financial privacy and community reinvestment.

The Modernization Act also amends the BHCA and the Bank Merger
Act to require the federal banking agencies to consider the effectiveness of a
financial institution's anti-money laundering activities when reviewing an
application under these acts.

Additional proposals to change the laws and regulations governing
the banking and financial services industry are frequently introduced in
Congress, in the state legislatures and before the various bank regulatory
agencies. The likelihood and timing of any such changes and the impact such
changes might have on the Company cannot be determined at this time.

The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act"), which
became law on July 30, 2002, added new legal requirements affecting corporate
governance, accounting and corporate reporting for companies with publicly
traded securities.

The Sarbanes-Oxley Act provides for, among other things:



        a prohibition on personal loans made or arranged by the issuer to
its directors and executive officers (except for loans made by a
bank subject to Regulation O);
        independence requirements for audit committee members;
        independence requirements for outside auditors;
        certification of financial statements and reports on Forms 10-K,
10-KSB, 10-Q, and 10-QSB by the chief executive officer and the
chief financial officer;
        the forfeiture of bonuses or other incentive-based compensation and
profits from the sale of an issuer's securities by directors and
senior officers in the twelve month period following initial
publication of any financial statements that later require
restatement due to corporate misconduct;
        disclosure of off-balance sheet transactions;
7



        two-business day filing requirements for insiders filing Forms 4;
        disclosure of a code of ethics for financial officers and filing a
Form 8-K for a change or waiver of such code;
        "real time" filing of periodic reports;
        posting of certain SEC filings and other information on the company
website;
        the reporting of securities violations "up the ladder" by both
in-house and outside attorneys;
        restrictions on the use of non-GAAP financial measures;
        the formation of a public accounting oversight board; and
        various increased criminal penalties for violations of securities
laws.Each of the national stock exchanges, including the Nasdaq Stock
Market where the Company's common stock is listed, have implemented new
corporate governance rules, including rules strengthening director independence
requirements for boards, and the adoption of charters for the nominating,
corporate governance, and audit committees. The rule changes are intended to,
among other things, make the board of directors independent of management and
allow shareholders to more easily and efficiently monitor the performance of
companies and directors. These increased burdens have increased the Company's
legal and accounting fees and the amount of time that the Board of Directors and
management must devote to corporate governance issues.

Effective August 29, 2002, as directed by Section 302(a) of
Sarbanes-Oxley, the Company's chief executive officer and chief financial
officer are each required to certify that the Company's Quarterly and Annual
Reports do not contain any untrue statement of a material fact. The rules have
several requirements, including having these officers certify that: they are
responsible for establishing, maintaining and regularly evaluating the
effectiveness of the Company's internal controls; they have made certain
disclosures to the Company's auditors and the audit committee of the Board of
Directors about the Company's internal controls; and they have included
information in the Company's Quarterly and Annual Reports about their evaluation
and whether there have been significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the evaluation.

As part of the USA Patriot Act, signed into law on October 26,
2001, Congress adopted the International Money Laundering Abatement and
Financial Anti-Terrorism Act of 2001 (the "Act"). The Act authorizes the
Secretary of the Treasury, in consultation with the heads of other government
agencies, to adopt special measures applicable to financial institutions such as
banks, bank holding companies, broker-dealers and insurance companies. Among its
other provisions, the Act requires each financial institution: (i) to establish
an anti-money laundering program; (ii) to establish due diligence policies,
procedures and controls that are reasonably designed to detect and report
instances of money laundering in United States private banking accounts and
correspondent accounts maintained for non-United States persons or their
representatives; and (iii) to avoid establishing, maintaining, administering, or
managing correspondent accounts in the United States for, or on behalf of, a
foreign shell bank that does not have a physical presence in any country. In
addition, the Act expands the circumstances under which funds in a bank account
may be forfeited and requires covered financial institutions to respond under
certain circumstances to requests for information from federal banking agencies
within 120 hours.
The Department of Treasury has issued regulations implementing
the due diligence requirements. These regulations require minimum standards to
verify customer identity and maintain accurate records, encourages cooperation
among financial institutions, federal banking agencies, and law enforcement
authorities regarding possible money laundering or terrorist activities,
prohibits the anonymous use of "concentration accounts," and requires all
covered financial institutions to have in place an anti-money laundering
compliance program.



8


The Bank, a New Jersey-chartered commercial bank, is subject to
supervision and examination by the New Jersey Department of Banking and
Insurance. The Bank is also subject to regulation by the FDIC, which is its
principal federal bank regulator.

The Bank must comply with various requirements and restrictions
under federal and state law, including the maintenance of reserves against
deposits, restrictions on the types and amounts of loans that may be granted and
the interest that may be charged thereon, limitations on the types of
investments that may be made and the services that may be offered, and
restrictions on dividends as described in the preceding section. Consumer laws
and regulations also affect the operations of the Bank. In addition to the
impact of regulation, commercial banks are affected significantly by the actions
of the Federal Reserve Board which influence the money supply and credit
availability in the national economy.

Community Reinvestment Act

Under the Community Reinvestment Act ("CRA"), as implemented by
FDIC regulations, a bank has a continuing and affirmative obligation, consistent
with its safe and sound operation, to help meet the credit needs of its entire
community, including low- and moderate-income neighborhoods. CRA does not
establish specific lending requirements or programs for financial institutions
nor does it limit an institution's discretion to develop the types of products
and services that it believes are best suited to its particular community,
consistent with CRA. CRA requires the FDIC to assess an institution's record of
meeting the credit needs of its community and to take such record into account
in its evaluation of certain applications by the applicable institution. The CRA
requires public disclosure of an institution's CRA rating and requires that the
FDIC provide a written evaluation of an institution's CRA performance utilizing
a four-tiered descriptive rating system. An institution's CRA rating is
considered in determining whether to grant charters, branches and other deposit
facilities, relocations, mergers, consolidations and acquisitions. Performance
less than satisfactory may be the basis for denying an application. At its last
CRA examination, the Bank was rated "satisfactory" under CRA.

Insurance of Deposits

The Bank's deposits are insured up to a maximum of $100,000 per
depositor under the Bank Insurance Fund ("BIF"). The FDICIA is applicable to
depository institutions and deposit insurance. The FDICIA requires the FDIC to
establish a risk-based assessment system for all insured depository
institutions. Under this legislation, the FDIC is required to establish an
insurance premium assessment system based upon: (i) the probability that the
insurance fund will incur a loss with respect to the institution, (ii) the
likely amount of the loss, and (iii) the revenue needs of the insurance fund. In
compliance with this mandate, the FDIC has developed a matrix that sets the
assessment premium for a particular institution in accordance with its capital
level and overall rating by the primary regulator. Under the matrix as currently
in effect, the assessment rate ranges from 0 to 27 basis points of assessed
deposits. The Bank is also subject to a quarterly FICO assessment.

Employees

The Company has two paid employees. Banking operations are
conducted by the Bank, and as of December 31, 2005, the Bank had 79 full-time
employees and 10 part-time employees. Neither the Bank's nor the Company's
employees are represented by any collective bargaining group. The Bank and the
Company each considers its relations with such employees to be good.

Forward Looking Statements

When used in this and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer of the
Company, the words or phrases "will," "will likely result," "could,"
"anticipates," "believes," "continues," "expects," "plans," "will continue," "is
anticipated," "estimated," "project" or "outlook" or similar expressions
(including confirmations by an authorized executive officer of the Company of
any such expressions made by a third party with respect to the Company) are
intended to identify forward-looking statements. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected.



9


Factors that may cause actual results to differ from those
results expressed or implied, include, but are not limited to, those listed
below under "Risk Factors" 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; and technological
changes. 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 have an adverse effect on
profitability. Such risks and other aspects of the Company's business and
operations are described in "Business", "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation." The
Company has no obligation to publicly release the result of any revisions which
may be made to any forward-looking statements to reflect anticipated or
unanticipated events or circumstances occurring after the date of such
statements.

Item 1A. Risk Factors.

The common stock of the Company is speculative in nature and
involves a significant degree of risk. The risk factors below are not listed in
order of importance.

The Company faces significant competition.

The Company faces significant competition from many other banks,
savings institutions and other financial institutions which have branch offices
or otherwise operate in the Company's market area. Non-bank financial
institutions, such as securities brokerage firms, insurance companies and money
market funds, engage in activities which compete directly with traditional bank
business which has also led to greater competition. Many of these competitors
have substantially greater financial resources than the Company, including
larger capital bases that allow them to attract customers seeking larger loans
than the Company is able to accommodate and the ability to aggressively
advertise their products. There can be no assurance that the Company and the
Bank will be able to successfully compete with these entities in the future. See
"BUSINESS -- Competition."

The Company's Business is Affected by Economic Conditions and Related
Uncertainties.

Commercial banking is affected, directly and indirectly, by
local, domestic, and international economic and political conditions, and by
government monetary and fiscal policies. Conditions such as inflation,
recession, unemployment, volatile interest rates, tight money supply, scarce
natural resources, real estate values, international conflicts and other factors
beyond the control of the Company may adversely affect the potential
profitability of the Company. A downtrend in several areas, such as real estate,
construction and consumer spending, could have a material adverse impact on the
Company's ability to maintain or increase profitability.

The Company Is Subject To Interest Rate Risk.

The Company's earnings are largely dependent upon its net
interest income. Net interest income is the difference between interest income
earned on interest-earning assets such as loans and securities and interest
expense paid on interest-bearing liabilities such as deposits and borrowed
funds. Interest rates are highly sensitive to many factors that are beyond the
Company's control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Board
of Governors of the Federal Reserve System. Changes in monetary policy,
including changes in interest rates, could influence not only the interest the
Company receives on loans and securities and the amount of interest it pays on
deposits and borrowings, but such changes could also affect (i) the Company's
ability to originate loans and obtain deposits, (ii) the fair value of the
Company's financial assets and liabilities, and (iii) the average duration of
the Company's mortgage-backed securities portfolio. If the interest rates paid
on deposits and other borrowings increase at a faster rate than the interest
rates received on loans and other investments, the Company's net interest
income, and therefore earnings, could be adversely affected. Earnings could also
be adversely affected if the interest rates received on loans and other
investments fall more quickly than the interest rates paid on deposits and other
borrowings.



10


Although management believes it has implemented effective asset
and liability management strategies to reduce the potential effects of changes
in interest rates on the Company's results of operations, any substantial,
unexpected, prolonged change in market interest rates could have a material
adverse effect on the Company's financial condition and results of operations.

The Company is subject to risks associated with speculative construction
lending.

The risks associated with speculative construction lending
include the borrower's inability to complete the construction process on time
and within budget, the sale of the project within projected absorption periods,
the economic risks associated with real estate collateral, and the potential of
a rising interest rate environment. Such loans may include financing the
development and/or construction of residential subdivisions. This activity may
involve financing land purchase, infrastructure development (i.e. roads,
utilities, etc.), as well as construction of residences or multi-family
dwellings for subsequent sale by developer/builder. Because the sale of
developed properties is integral to the success of developer business, loan
repayment may be especially subject to the volatility of real estate market
values. Management has established underwriting and monitoring criteria to
minimize the inherent risks of speculative commercial real estate construction
lending. Further, management concentrates lending efforts with developers
demonstrating successful performance on marketable projects within the Bank's
lending areas.

Federal and State Government Regulation Impact the Company's Operations.

The operations of the Company and the Bank are heavily regulated
and will be affected by present and future legislation and by the policies
established from time to time by various federal and state regulatory
authorities. In particular, the monetary policies of the Federal Reserve Board
have had a significant effect on the operating results of banks in the past and
are expected to continue to do so in the future. Among the instruments of
monetary policy used by the Federal Reserve Board to implement its objectives is
changes in the discount rate charged on bank borrowings. It is not possible to
predict what changes, if any, will be made to the monetary policies of the
Federal Reserve Board or to existing federal and state legislation or the effect
that such changes may have on the future business and earnings prospects of the
Company.

The Company and the Bank are subject to examination, supervision
and comprehensive regulation by various federal and state agencies. Compliance
with the rules and regulations of these agencies may be costly and may limit
growth and restrict certain activities, including payment of dividends,
investments, loans and interest rate charges, interest rates paid on deposits,
and locations of offices. The Bank is also subject to capitalization guidelines
set forth in federal legislation. See "BUSINESS -- Supervision and Regulation."

The laws and regulations applicable to the banking industry could
change at any time, and we cannot predict the impact of these changes on our
business and profitability. Because government regulation greatly effects the
business and financial results of all commercial banks and bank holding
companies, the cost of compliance could adversely affect the Company's ability
to operate profitably.

If
economic conditions deteriorate, particularly in the Bank's market area, our
results of operations and financial condition could be adversely affected as
borrowers' ability to repay loans declines and the value of the collateral
securing our loans decreases.

Our financial results may be adversely affected by changes in
prevailing economic conditions, particularly in the Bank's market area,
including decreases in real estate values, changes in interest rates which may
cause a decrease in interest rate spreads, adverse employment conditions, the
monetary and fiscal policies of the federal government and other significant
external events.

Decreases in local real estate values would adversely affect the
value of property used as collateral for our loans. Adverse changes in the
economy also may have a negative effect on the ability of our borrowers to make
timely repayments of their loans, which would have an adverse impact on our
earnings.



11


If
our allowance for loan losses is not sufficient to cover actual loan losses, our
earnings could decrease.

We make various assumptions and judgments about the
collectibility of our loan portfolio, including the creditworthiness of our
borrowers and the value of the real estate and other assets serving as
collateral for the repayment of many of our loans. In determining the amount of
the allowance for loan losses, we review our loans and our loss and delinquency
experience, and we evaluate economic conditions. If our assumptions are
incorrect, our allowance for loan losses may not be sufficient to cover losses
inherent in our loan portfolio, resulting in additions to our allowance.
Material additions to our allowance would materially decrease our net income.

In addition, bank regulators periodically review our allowance
for loan losses and may require us to increase our provision for loan losses or
recognize further loan charge-offs. Any increase in our allowance for loan
losses or loan charge-offs as required by these regulatory authorities might
have a material adverse effect on our financial condition and results of
operations.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties.

General

The Company's and the Bank's principal office in Cranbury, New
Jersey (the "Principal Office"), which it occupies under a lease that expires in
December 2010, provides for an aggregate monthly rental of $16,134, subject to
annual rental increases plus real estate taxes and certain common space charges
allocated by the landlord. This lease grants the Bank two additional five-year
renewal periods. The Bank also has the right of first refusal to purchase the
premises of which the Principal Office is a part on the same terms and
conditions as contained in any bona fide offer for the premises. In 2003, the
Bank entered into a five-year lease for an additional 1,900 square feet of
office space in this building for an aggregate monthly rental of $2,137 per
month, subject to annual rental increases. This lease grants the Bank two
additional five-year renewal periods.

The Bank leases approximately 2,400 square feet for its branch
office in Montgomery Township, New Jersey for an aggregate monthly rental of
$5,050. This lease expires on September 30, 2007.

In September 2005, the Bank exercised its right of first refusal
option granted under the existing lease agreement and purchased the land and
building comprising its branch office in downtown Cranbury, New Jersey. The Bank
had previously leased this 3,780 square feet branch office for an aggregate
monthly rental of $3,819 per month.
In December 2005, the Bank elected to exercise its option for the
early termination of the lease for its branch located in Plainsboro, New Jersey.
The Bank has applied for and received regulatory agency approval to relocate
this branch into the Plainsboro Village Center which is currently in the final
stages of construction. The Bank entered into a 15 year lease for approximately
2,500 square feet with two drive-through lanes in the multi-tenant retail/office
building. The Bank has two five year renewal options for this space. The
aggregate monthly payment for this lease is $7,381, with annual escalations.

The Bank entered into a lease for the branch located in Hamilton
Square, New Jersey in April 1999. This lease expires in July 2014 and provides
for a rental of approximately 4,170 square feet. The Bank has two five-year
renewal options for this space. The aggregate monthly rental payment for this
lease is $9,401, with annual escalations.

In January 2004, the Bank entered into a two-year lease for a new
Loan Production Office in Fort Lee, New Jersey. The lease provides for the
rental of 1,567 square feet with an aggregate monthly rental of $2,873 in the
first year and $2,938 in the second year. In December 2005, the Bank entered
into a lease to house a de novo branch plus the loan production office in Fort
Lee, New Jersey. The Bank has applied for and received regulatory agency
approval to relocate the loan production office and establish a de novo branch.
This lease expires in February 2014 and provides for the rental of 3,100 square
feet on the ground floor plus 800 square feet in the basement. The aggregate
monthly rental payment for this lease is $6,458, with annual escalations.



12


In June 2004, the Bank commenced the lease for the West Windsor,
New Jersey branch. The lease expires in July 2019 and provides for a rental of
approximately 3,000 square feet. The lease provides for three five-year renewal
options for this space. The aggregate monthly rental payment for this lease is
$2,083, with annual escalations.

In August 2004, the Bank commenced the lease for the Perth Amboy,
New Jersey branch. This lease expires in August 2019 and provides for a rental
of approximately 3,000 square feet The lease provides for two seven and one-half
year renewal options for this space. The aggregate monthly rental payment for
this lease is $6,250, with annual escalations.

In June 2004, the Bank completed the construction and renovation
project associated with opening a branch office in Jamesburg, New Jersey. The
Bank purchased the site at 1 Harrison Street in 2002.

Management believes the foregoing facilities are suitable for the
Company's and the Bank's present and projected operations.

Item 3. Legal Proceedings.
None.


Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the fiscal year ended December 31, 2005.

PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and
Issuer Purchases of Equity Securities.

The common stock of the Company trades on the NASDAQ National Market System
under the trading symbol "FCCY". The following are the high and low sales prices
per share for 2005 and 2004, as reported on the Nasdaq National Market System.


2005
        
        2004High
        
        Low
        
        High
        
        LowFirst Quarter
        
        $19.50
        
        $15.14
        (1)
        $15.30
        
        $13.70
        (1)Second Quarter
        
        $19.27
        
        $15.89
        (1)
        15.19
        
        13.87
        (1)Third Quarter
        
        $19.87
        
        $16.69
        (1)
        14.83
        
        13.76
        (1)Fourth Quarter
        
        $19.95
        
        $15.88
        (1)
        16.97
        
        14.58
        (1)

(1) Prices have been retroactively adjusted for the 5% stock
dividend declared December 15, 2005 and paid January 31, 2006 to shareholders of
record on January 17, 2006 and for the two-for-one stock split declared January
20, 2005 and paid February 28, 2005 to shareholders of record on February 10,
2005.

As of March 6, 2006, there were approximately 330 holders of the
Company's common stock.

The Company paid a 5% stock dividend on January 31, 2006 and
January 31, 2005. The Company declared a two-for-one stock split on January 20,
2005, which was paid February 28, 2005 to shareholders of record on February 10,
2005. The Company has never paid a cash dividend and there are no plans to pay a
cash dividend at this time. The Company will retain its earnings in order to
provide capital for growth of the Bank.



13


Issuer Purchases of Equity Securities

On March 12, 2001, the Company announced that the Board of
Directors authorized a stock repurchase program allowing for the repurchase of a
limited number of the Company's shares at management's discretion on the open
market. On July 21, 2005, the Board of Directors terminated the stock repurchase
program and authorized a new common stock repurchase program under which the
Company may purchase in open market or privately negotiated transactions up to
5% of its common shares outstanding on that date. The Company undertook these
repurchase programs in an effort to increase shareholder value. The following
table provides common stock repurchases made by or on behalf of the Company
during the three months ended December 31, 2005.
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
ProgramBeginning
        EndingOctober 1, 2005
        October 31, 2005
        362
        $18.82
        362
        163,909November 1, 2005
        November 30, 2005
        248
        $19.49
        248
        163,661December 1, 2005
        December 31, 2005
        -
        -
        -
        163,661Total
        610
        $19.09
        610
        163,661________________________


(1)
        The Company's common stock repurchase program covers a maximum of
165,350 shares of common stock of the Company, representing 5% of
the outstanding common stock of the Company on July 21, 2005.









14


Item 6. Selected Financial Data.

The following selected financial data should be read in
conjunction with the Company's Consolidated Financial Statements and the
accompanying notes presented elsewhere herein.


For years ended December 31
        2005
        2004
        2003
        2002
        2001
        Five Year
Compounded
Growth RateHighlightsNet income
        $4,560,127
        $3,837,714
        $3,228,500
        $2,687,322
        $2,152,001
        21.4%Return on average assets
        1.31%
        1.22%
        1.18%
        1.06%
        1.03%Return on average equity
        16.49%
        15.54%
        14.85%
        14.09%
        13.17%Net interest margin
        4.78%
        4.25%
        3.94%
        3.87%
        4.04%Income Statement DataNet interest income
        $15,299,893
        $12,470,773
        $10,012,780
        $9,209,044
        $8,054,847
        16.4%Provision for loan losses
        405,000
        240,000
        240,000
        240,000
        300,000Non-interest income
        2,646,861
        2,557,242
        2,401,349
        1,525,526
        1,186,582Non-interest expenses
        10,887,225
        8,989,961
        7,168,722
        6,287,881
        5,552,291Balance Sheet Data at December 31Total Assets
        $372,495,466
        $335,830,440
        $293,483,174
        $273,862,343
        $232,800,734
        15.5%Total Deposits
        305,809,467
        276,887,033
        245,353,724
        224,149,464
        193,882,067
        17.3%Total Gross Loans
        240,014,349
        210,653,051
        163,950,306
        151,049,736
        124,937,483
        16.8%Shareholders' Equity
        29,796,867
        26,790,384
        23,585,256
        20,994,842
        17,432,944
        14.4%Intangible Assets
        -
        -
        -
        -
        -Allowance for Loan Losses
        2,361,375
        2,005,169
        1,786,632
        1,669,882
        1,414,495
        15.8%Share Information (1)Earnings per share - Basic
        $1.32
        $1.11
        $0.94
        $0.79
        $0.63
        21.4%Earnings per share - Diluted
        $1.27
        $1.08
        $0.89
        $0.75
        $0.61
        20.5%Book value per share
        $8.67
        $7.72
        $6.84
        $6.16
        $5.13
        14.9%Average diluted shares
outstanding
        3,588,558
        3,584,217
        3,609,140
        3,592,741
        3,530,552Capital RatiosTotal capital to risk-weighted
assets
        13.30%
        13.99%
        14.94%
        14.75%
        12.82%Tier 1 capital to risk-weighted
assets
        12.47%
        13.17%
        14.06%
        13.84%
        11.86%Tier 1 capital to average assets
        9.76%
        10.16%
        9.74%
        9.64%
        7.57%

(1)All share information has been
restated for the effect of a 5% stock dividend declared on December 15, 2005 and
paid on January 31, 2006 to shareholders of record on January 17, 2006.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.

This discussion should be read in conjunction with the
consolidated financial statements, notes and tables included elsewhere in this
report. Throughout the following sections, the "Company" refers to 1ST
Constitution Bancorp and its wholly owned subsidiaries, 1ST
Constitution Bank and 1ST Constitution Capital Trust I, the "Bank"
refers to 1ST Constitution Bank, and the "Trust" refers to 1ST
Constitution Capital I. The purpose of this discussion and analysis is to assist in the understanding and evaluation of
the Company's financial condition, changes in financial condition and results of
operations.



15


Executive Summary

The Company reported net income for the 12 months ended December
31, 2005 of $4,560,127, an increase of 18.8% from the $3,837,714 reported for
the 12 months ended December 31, 2004. Diluted net income per share was $1.27 in
2005 compared to $1.08 reported in 2004. Basic net income per share in 2005 was
$1.32 as compared to the $1.11 reported in 2004. The Company has achieved a
five-year compounded growth rate for net income of 21.4% over the 2000-2005
period. All share information has been restated for the effect of a 5% stock
dividend declared on December 15, 2005 and paid on January 31, 2006 to
shareholders of record on January 17, 2006.

Key performance ratios continued to improve in 2005 as compared
to the prior year. Return on average assets ("ROA") and return on average equity
("ROE") were 1.31% and 16.49%, respectively, in 2005, compared to 1.22% and
15.54%, respectively, in 2004.

The Company's record earnings for 2005 reflect continuing
momentum across a broad range of product and service offerings. Increased
lending activity, coupled with increases in deposits through branch network
expansion and secondary market loan sales volume, fueled both the record
earnings and balance sheet growth.

The Company's net interest income for 2005 was $15,299,893, an
increase of 22.7% from the $12,470,773 reported for 2004. The net interest
margin for 2005 was 4.78% compared to 4.25% reported for 2004. During 2004, a
rising interest rate environment evolved during the latter half of the year and
continued throughout the year 2005, resulting in lesser levels of loan
prepayments for loans securitizing mortgage backed securities in the Company's
Available for Sale and Held to Maturity portfolios. As a result, net
amortization of premiums expense decreased by $210,661, or 60.2%, to $139,507
for the year ended December 31, 2005 compared to $350,168 for the year ended
December 31, 2004.

The Federal Reserve Bank's Open Market Committee ("FOMC") held
eight meetings in 2004 and held eight meetings in 2005. Beginning with the June
30, 2004 meeting, the FOMC increased short-term interest rates by 25 basis
points and continued with a series of thirteen consecutive 25 basis point
increases in each of the subsequent meetings. The immediate benefit of these
interest rate increases to the Company's investment security purchases and
floating rate assets resulted in an 83 basis point increase in the yield on
total interest-earning assets for 2005. In addition, management's ability to lag
the interest rate increases on deposits coupled with a tight discipline in
deposit pricing resulted in an increase of 53 basis points in the Company's net
interest margin for the year ended December 31, 2005 when compared to the year
ended December 31, 2004. Management expects the FOMC to continue its program of
increasing the targeted Federal Funds rate in early 2006 and has continued to
structure the Company's balance sheet in an asset sensitive positionin
order to continue to benefit from this rising market rate environment.

During 2005, the Company has increased its core deposits base as
a result of the branch expansion program undertaken throughout 2004. In 2004,
the Company increased the number of branch offices in its target markets and
introduced its products and services to an expanded geographic region. In
January 2004, a new loan production office was opened in Fort Lee (Bergen
County), New Jersey. During June 2004, new branch offices were opened in
Jamesburg (Middlesex County) and West Windsor (Mercer County), New Jersey. In
August 2004, the Perth Amboy (Middlesex County), New Jersey branch office was
relocated to its new permanent location. This 2004 expansion program resulted in
significant incremental non-interest expenses as a result of branch leases,
facilities maintenance, and personnel staffing. Non-interest expense increased
by $1,897,264, or 21.1%, to $10,887,225 in 2005 from $8,989,961 in 2004.
Management believes the Company will continue to realize strategic benefits of
this network expansion through increased deposits and new customer
relationships.

Driven by construction loan growth, the Bank's loan portfolio
increased 16.4% in 2005 from 2004. At December 31, 2005, total loans outstanding
(including loans held for sale) reached $256,772,083 compared to $220,580,932 at
December 31, 2004. Asset quality remained strong in 2005, as illustrated by the
ratio of nonperforming loans to total loans of 0.32% in 2005 and 0.50% in 2004.
The allowance for loan losses totaled $2,361,375, or 0.98% of total loans,
covering over 283.36% of the balance of total nonperforming loans. The Bank's
deposit base increased by 10.4% in 2005 from $276,887,033 at December 31, 2004
to $305,809,467 at



16


December 31, 2005. Management strategically priced deposit products
to be competitive with other financial institutions with branch locations in its
market yet still maintain a strong net interest margin to support earnings
growth.

Management believes that the Company has positioned itself for
continued success with the combination of a strong capital base, a commitment to
provide exceptional customer service, and a commitment to maintain the
technology necessary to provide its customers with easy access to the financial
products and services offered by the Bank.

Critical Accounting Policies and Estimates

"Management's Discussion and Analysis of Financial Condition and
Results of Operation" is based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires the Company to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. Note
1 to the Company's Consolidated Financial Statements for the year ended December
31, 2005 contains a summary of the Company's significant accounting policies.
Management believes the Company's policy with respect to the methodology for the
determination of the allowance for loan losses involves a higher degree of
complexity and requires management to make difficult and subjective judgments
which often require assumptions or estimates about highly uncertain matters.
Changes in these judgments, assumptions or estimates could materially impact
results of operations. This critical policy and its application is periodically
reviewed with the Audit Committee and the Board of Directors. The provision for
loan losses is based upon management's evaluation of the adequacy of the
allowance, including an assessment of known and inherent risks in the portfolio,
giving consideration to the size and composition of the loan portfolio, actual
loan loss experience, level of delinquencies, detailed analysis of individual
loans for which full collectibility may not be assured, the existence and
estimated net realizable value of any underlying collateral and guarantees
securing the loans, and current economic and market conditions. Although
management uses the best information available to it, the level of the allowance
for loan losses remains an estimate which is subject to significant judgment and
short-term change. Various regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses. Such agencies may require the Company to make additional provisions for
loan losses based upon information available to them at the time of their
examination. Furthermore, the majority of the Company's loans are secured by
real estate in the State of New Jersey. Accordingly, the collectibility of a
substantial portion of the carrying value of the Company's loan portfolio is
susceptible to changes in local market conditions and may be adversely affected
should real estate values decline or the Central New Jersey area experience an
adverse economic shock. Future adjustments to the allowance for loan losses may
be necessary due to economic, operating, regulatory and other conditions beyond
the Company's control.

Results of Operations

The Company reported record earnings of $4,560,127, or $1.27 per
share (diluted), for the year ended December 31, 2005 compared to $3,837,714, or
$1.08 per share (diluted), in 2004. Net income and diluted earnings per share
grew 18.8% and 17.6%, respectively, in 2005. The Company posted net income of
$3,228,500 or $0.89 per share (diluted) in 2003. All share information ahs been
restated for the effect of a 5% stock dividend declared on December 15, 2005 and
paid on January 31, 2006 to shareholders of record on January 17, 2006.

Net Interest Income

Net interest income, the Company's largest and most significant
component of operating income, is the difference between interest and fees
earned on loans and other earning assets, and interest paid on deposits and
borrowed funds. This component represented 85.2% of the Company's net revenues
in 2005. Net interest income also depends upon the relative amount of interest
earning assets, interest-bearing liabilities, and the interest rate earned or
paid on them.

The following tables set 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 years ended December 31, 2005, 2004 and 2003. The
average rates are derived by dividing interest income and expense by the average
balance of assets and liabilities, respectively.



17



Average Balance Sheets with Resultant Interest and Rates(yields on a tax-equivalent basis)
        
        2005
        
        2004
        
        2003Average
        
        Average
        
        Average
        
        Average
        
        Average
        
        AverageBalance
        Interest
        Rate
        
        Balance
        Interest
        Rate
        
        Balance
        Interest
        RateAssets:Federal Funds Sold/Short-Term
Investments
        
        $850,741
        $27,181
        3.19%
        
        $976,584
        $10,977
        1.12%
        
        $3,044,985
        $29,458
        0.97%Investment Securities:U.S. Treasury Bonds
        
        0
        0
        -
        
        0
        0
        -
        
        0
        0
        -Collateralized Mortgage
Obligations / Mortgage
Backed Securities
        
        75,758,305
        3,017,885
        3.98%
        
        87,636,728
        3,196,936
        3.65%
        
        76,837,624
        2,619,813
        3.41%Obligations of States and
Political Subdivisions (4)
        
        18,975,766
        978,099
        5.15%
        
        10,132,976
        571,410
        5.64%
        
        8,058,436
        461,411
        5.73%Total
        
        94,734,071
        3,995,984
        4.22%
        
        97,769,704
        3,768,346
        3.85%
        
        84,896,060
        3,081,224
        3.63%Loan Portfolio:Commercial
        
        36,519,005
        2,758,112
        7.55%
        
        27,656,123
        2,149,021
        7.75%
        
        38,410,951
        2,768,004
        7.21%Installment
        
        2,394,026
        200,020
        8.35%
        
        3,255,459
        264,074
        8.09%
        
        8,947,398
        675,344
        7.55%Commercial Mortgages and
Construction Wholesale
        
        147,297,238
        10,766,296
        7.31%
        
        125,877,374
        7,644,898
        6.07%
        
        90,701,292
        5,567,060
        6.14%Residential Mortgages and
Construction Retail
        
        13,436,207
        890,510
        6.63%
        
        14,518,615
        945,843
        6.51%
        
        23,133,308
        1,276,368
        5.52%All Other Loans
        
        31,772,196
        3,007,190
        9.46%
        
        27,144,851
        2,418,231
        8.91%
        
        8,998,670
        1,138,986
        12.66%Total (1)
        
        231,418,672
        17,622,128
        7.61%
        
        198,452,422
        13,422,067
        6.76%
        
        170,191,619
        11,425,762
        6.71%Total Interest-Earning Assets
        
        327,003,484
        21,645,293
        6.62%
        
        297,197,710
        17,201,390
        5.79%
        
        258,132,664
        14,536,444
        5.63%Allowance for Loan Losses
        
        (2,177,263)
        
        
        
        (1,909,294)
        
        
        
        (1,769,585)Cash and Due From Banks
        
        9,130,543
        
        
        
        7,853,303
        
        
        
        8,678,793Other Assets
        
        12,893,312
        
        
        
        10,815,249
        
        
        
        8,906,063Total Assets
        
        $346,850,076
        
        
        
        $313,957,968
        
        
        
        $273,947,935Liabilities and Shareholders' Equity:Interest-Bearing Liabilities:Money Market and NOW
Accounts
        
        $101,189,352
        $1,211,901
        1.20%
        
        $96,113,368
        $986,531
        1.02%
        
        $76,435,477
        $752,547
        0.98%Savings Accounts
        
        33,671,684
        409,397
        1.22%
        
        26,890,218
        136,530
        0.51%
        
        21,684,139
        155,221
        0.72%Certificates of Deposit
        
        77,183,169
        2,383,392
        3.09%
        
        74,136,634
        1,917,353
        2.58%
        
        63,182,395
        1,751,582
        2.77%Certificates of Deposit of
$100,000 and Over
        
        9,771,290
        309,159
        3.16%
        
        10,156,576
        260,109
        2.55%
        
        18,287,421
        503,905
        2.76%Other Borrowed Funds
        
        31,143,663
        1,363,507
        4.38%
        
        24,812,983
        981,689
        3.95%
        
        23,985,934
        952,910
        3.97%Trust Preferred Securities
        
        5,000,000
        350,823
        7.02%
        
        5,000,000
        263,083
        5.33%
        
        5,000,000
        257,852
        5.16%Total Interest-Bearing Liabilities
        
        257,959,158
        6,028,179
        2.34%
        
        237,109,779
        4,545,295
        1.91%
        
        208,575,366
        4,374,017
        2.10%Net Interest Spread (2)
        
        
        
        4.28%
        
        
        
        3.86%
        
        
        
        3.53%Non-interest Bearing
Demand Deposits
        
        57,792,902
        
        
        
        49,622,127
        
        
        
        41,318,131Other Liabilities
        
        3,447,534
        
        
        
        2,536,002
        
        
        
        2,310,536Total Liabilities
        
        319,199,594
        
        
        
        289,267,908
        
        
        
        252,204,033Shareholders' Equity
        
        27,650,482
        
        
        
        24,690,060
        
        
        
        21,743,902Total Liabilities and Shareholders' Equity
        
        $346,850,076
        
        
        
        $313,957,968
        
        
        
        $273,947,935Net Interest Margin (3)
        
        
        $15,617,114
        4.78%
        
        
        $12,656,095
        4.25%
        
        
        $10,162,427
        3.94%




(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.(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.



18


Changes in net interest income and margin result from the
interaction between the volume and composition of interest earning assets,
interest bearing liabilities, related yields, and associated funding costs. The
Rate/Volume Table demonstrates the impact on net interest income of changes in
the volume of interest earning assets and interest bearing liabilities and
changes in interest rates earned and paid.

The Company's net interest income increased on a tax equivalent
basis by $2,961,019, or 23.4%, to $15,617,114 in 2005, from the $12,656,095
reported in 2004. As indicated in the Rate/Volume Table, the principal factor
contributing to the 2005 increase in net interest income was an increase in the
interest income of $2,380,579, resulting from increased balances in the loan
portfolio components. This was partially offset by an increase in interest
expense resulting from increases in the rates paid on deposit components.

The Company's net interest income increased by $2,493,669, or
24.5%, to $12,656,095 in 2004, from the $10,162,427 reported in 2003. As
indicated in the Rate/Volume Table, the principal factor contributing to the
2004 increase in net interest income was an increase in the interest income of
$1,963,469, resulting from increased balances in the loan portfolio components.
This was partially offset by an increase in interest expense resulting from
increases in deposits components.


Rate/Volume Table
        
        Amount of Increase (Decrease)Year Ended December 31,
2005 versus 2004
        
        Year Ended December 31,
2004 versus 2003Due to Change in:
        
        Due to Change in:(Tax-equivalent basis)
        
        Volume
        
        Rate
        
        Total
        
        Volume
        
        Rate
        
        TotalInterest Income:Loans:Commercial
        
        $664,403
        
        ($55,312)
        
        $609,091
        
        ($775,423)
        
        $156,440
        
        ($618,983)Installment
        
        (69,690)
        
        5,636
        
        (64,054)
        
        (459,586)
        
        48,316
        
        (411,270)Commercial Mortgages and Construction- Wholesale
        
        1,430,352
        
        1,691,046
        
        3,121,398
        
        2,141,328
        
        (63,491)
        
        2,077,838Residential Mortgages and Construction- Retail
        
        (70,464)
        
        15,131
        
        (55,333)
        
        (559,545)
        
        229,020
        
        (330,525)All Other Loans
        
        425,978
        
        162,981
        
        588,959
        
        1,616,696
        
        (337,450)
        
        1,279,245Total loans
        
        2,380,579
        
        1,819,482
        
        4,200,061
        
        1,963,469
        
        32,836
        
        1,996,304Investment Securities :Collat. Mortg. Obligations / Mortg. Backed Securities
        
        (450,907)
        
        271,856
        
        (179,051)
        
        381,290
        
        195,832
        
        577,123States and political subdivisions
        
        477,537
        
        (70,848)
        
        406,689
        
        117,251
        
        (7,253)
        
        109,999Total Investment Securities
        
        26,630
        
        201,008
        
        227,638
        
        498,542
        
        188,580
        
        687,122Federal Funds Sold / Short-Term Investments
        
        (4,011)
        
        20,215
        
        16,204
        
        (23,048)
        
        4,567
        
        (18,481)Total Interest Income
        
        2,403,198
        
        2,040,705
        
        4,443,903
        
        2,438,963
        
        225,983
        
        2,664,945Interest Expense :Money Market and NOW Accounts
        
        51,775
        
        173,595
        
        $225,370
        
        203,409
        
        30,574
        
        233,984Savings Accounts
        
        58,265
        
        214,602
        
        272,867
        
        37,484
        
        (56,175)
        
        (18,691)Certificates of Deposit
        
        83,271
        
        382,768
        
        466,039
        
        285,817
        
        (120,047)
        
        165,771Certificates of Deposit of $100,000 And Over
        
        (9,825)
        
        58,875
        
        49,050
        
        (205,392)
        
        (38,404)
        
        (243,796)Other Borrowed Funds
        
        262,592
        
        119,226
        
        381,818
        
        33,576
        
        (4,797)
        
        28,779Trust Preferred Securities
        
        -
        
        87,740
        
        87,740
        
        0
        
        5,231
        
        5,231Total interest expense
        
        446,078
        
        1,036,806
        
        1,482,884
        
        354,893
        
        (183,617)
        
        171,277Net Interest Income
        
        $1,957,120
        
        $1,003,900
        
        $2,961,019
        
        $2,084,069
        
        $409,600
        
        $2,493,668

Average interest earning assets increased by $29,805,774, or
10.0%, to $327,003,484 in 2005 from $297,198,710 in 2004, consisting primarily
of an increase in 2005 of $32,966,250 in loans partially offset by a decrease of
$3,035,633 in investment securities compared to 2004. Led by commercial
mortgages and construction loans, the Bank's average loan portfolio grew by
16.6% and loan yields averaged 7.61% in 2005, 85 basis points higher than in
2004. This increase was primarily the result of 2005 loan growth at floating
yields amid the increasing interest rate environment that continued during the
year. The Bank's average investment securities portfolio decreased 3.1%, and the
yield on that portfolio increased 37 basis points in 2005 compared to 2004,
primarily as a result of the reduced level of premium amortization on
mortgage-backed securities due to the rising rate environment that continued
throughout the year 2005. Net premium amortization for 2005 was



19


$139,507 compared to $350,168 for 2004. Overall, the yield on interest
earning assets increased 83 basis points to 6.62% in 2005 from 5.79% in 2004.

Average interest earning assets increased by $39,065,046, or 15.1%, to
$297,197,710 in 2004 from $258,132,644 in 2003, with increases in 2004 of
$28,260,803 in loans and $12,873,644 in investment securities compared to 2003.
Led by commercial mortgages and construction loans, the Bank's average loan
portfolio grew by 16.6%, and loan yields averaged 6.76%, in 2004, 5 basis points
higher than 2003. This increase was primarily the result of 2004 loan growth at
floating yields amid the increasing interest rate environment that evolved
during the latter part of the year. The Bank's average investment securities
portfolio grew 15.2%, and the yield on that portfolio increased 22 basis points,
in 2004 compared to 2003, primarily as a result of the reduced level of premium
amortization on mortgage-backed securities due to the rising rate environment
that evolved during the latter portion of 2004. Net premium amortization for
2004 was $350,168 compared to $1,190,853 for 2003. Overall, the yield on
interest earnings assets increased 16 basis points to 5.79% in 2004 from 5.63%
in 2003.

Interest expense increased by $1,482,884, or 32.6%, to $6,028,179
for 2005, from $4,545,295 for 2004. This increase in interest expense is
principally attributable to higher levels of interest-bearing liabilities priced
at a higher market interest rate level. Savings accounts increased on average by
$6,781,466 in 2005 as compared to 2004, contributing to the funding of loan
portfolio growth. The cost on these deposits increased 71 basis points in 2005
from 2004. Average interest bearing liabilities rose 8.8% in 2005 from 2004. The
cost of total interest-bearing liabilities increased 43 basis points to 2.34% in
2005 from 1.91% in 2004.

Interest expense increased by $171,278, or 3.9%, to $4,545,295 for 2004, from
$4,374,017 for 2003. This increase in interest expense is principally
attributable to higher levels of interest-bearing liabilities priced at a higher
market interest rate level. Money market and NOW accounts increased on average
by $19,677,891 in 2004 as compared to 2003, contributing to the funding of loan
portfolio growth. The cost on these deposits increased 4 basis points in 2004
from 2003. Average interest bearing liabilities rose 13.7% in 2004 from 2003.
The cost of total interest-bearing liabilities decreased 19 basis points to
1.91% in 2004 from 2.10% in 2003.

Average non-interest bearing demand deposits increased by
$8,170,775, or 16.5%, to $57,792,902 in 2005 from $49,622,127 in 2004. Expansion
of the branch network and the resulting new business relationships have
generated most of this increase. Throughout the comparative periods, increases
in average non-interest bearing deposits contributed to the increases in net
interest income.

Non-Interest Income

Non-interest income increased by $89,618, or 3.5%, to $2,646,861
in 2005 from $2,557,242 in 2004. Non-interest income in 2004 increased by
$155,893, or 6.5%, from a total of $2,401,349 for 2003.

Service charges on deposit accounts represent a significant
source of non-interest income. Service charge revenues increased by $175,610, or
34.1%, to $690,104 in 2005 from $514,494 in 2004. Service charge revenue totaled
$559,698 in 2003. This component of non-interest income represented 26.1%,
20.1%, and 23.3% of the total non-interest income in 2005, 2004, and 2003,
respectively. Service charge income increased in 2005 principally due to
management's actions to restructure service charges and fees based on the
results of a comparative study of market fees performed in early 2005. During
2005, new fees were assessed on accounts overdrawn for drawing on uncollected
funds plus a new fee for processing incoming wire transfers was initiated.
Service charge income decreased in 2004 as a result of the Bank waiving service
charges on new accounts during the period of branch expansion, and a decreasing
number of accounts subject to service charges. Management continues to utilize a
strategy of requiring compensating balances from its commercial customers. Those
who meet balance requirements are not assessed service charges.

Gain on sale of loans held for sale increased by $70,861, or
5.2%, to $1,444,521 for 2005, from $1,373,660 for 2004. Gain on sale of loans
held for sale totaled $1,284,913 in 2003. Market interest rates on 30-year fixed
rate mortgages fell consistently during 2004, and into the first half of 2005.
Consumer refinance of home loans, which, along with a strong housing market, led
to the Bank achieving high levels in mortgage origination volumes and mortgage
loan sale gains, as newly-originated loans were sold at higher than normal
spreads due to the consistently lower level of market interest rates. The rising
rate environment that evolved during late 2004 and continued throughout 2005 has not significantly impacted the mortgage market
and resultant secondary loan sales as long term rates have not increased at the
same pace as short term rates.



20



Non-interest income also includes income from bank-owned life
insurance ("BOLI") which amounted to $235,430 for 2005 compared to $312,496 for
2004. The Bank purchased $6.0 million in tax-free BOLI assets in 2002 and $2.0
million in 2005, which partially offset the cost of employee benefit plans and
reduced the overall effective tax rate. The Bank also generates non-interest
income from a variety of fee-based services. These include safe deposit rentals,
wire transfer service fees and Automated Teller Machine fees for non-customers.
Deposit and service fee charges are reviewed and adjusted as needed from time to
time by management to reflect current costs incurred by the Bank to offer the
products or services and prices charged by competitor financial institutions
amid the Bank's competitive market.

The Company recorded net losses on sales of securities available
for sale of $271,871 in 2005 versus net gains on sales of $27,545 in 2004. These
portfolio transactions in 2005 and 2004 were primarily the result of modest
portfolio restructurings. Their purpose was to improve the Company's longer-term
interest rate risk position.

Non-Interest Expenses

Non-interest expenses increased by $1,897,264, or 21.1%, to
$10,887,225 in 2005, from $8,989,961 in 2004. Non-interest expenses in 2004
increased 25.4% to $8,989,961 from $7,168,722 in 2003. The largest increase in
non-interest expenses in 2005 compared to 2004 was in salaries and employees
benefits. To a lesser extent, occupancy, and other non-interest expenses also
reflect increases for the comparable periods. The largest increase in
non-interest expenses in 2004 compared to 2003 was in salaries and employee
benefits and, to a lesser extent, other non-interest expenses, as indicated in
the table below. The following table presents the major components of
non-interest expenses for the years 2003 through 2005.


Non-interest Expenses2005
        2004
        2003Salaries and employee benefits
        $5,894,200
        $4,955,587
        $3,979,655Occupancy expense
        1,365,930
        1,071,463
        818,545Equipment expense
        491,735
        464,928
        434,933Marketing
        292,352
        274,095
        225,860Date processing services
        623,001
        636,076
        498,081Regulatory, professional and other fees
        1,102,691
        542,001
        548,440Office expense
        401,490
        462,586
        312,055All other expenses
        715,826
        583,225
        351,153Total
        $10,887,225
        $8,989,961
        $7,168,722

Salaries and employee benefits, which represent the largest portion of
non-interest expenses, increased by $938,613, or 18.9%, to $5,894,200 in 2005
compared to $4,955,587 in 2004. The 2005 increase is primarily due to (a)
increased staffing levels for all of 2005 as a result of the opening of three
new branch locations plus a new loan production office during 2004 plus (b)
normal employee salary increases. These expenses increased in 2004 by $975,932,
or 24.5%, over the $3,979,655 reported for 2003.      The increase in the level
of salaries and employee benefits for 2004 versus 2003 reflects the increase in
staffing levels due to the branch expansion program plus normal salary
increases. Salaries and employee benefits as a percentage of average assets were
1.70% in 2005, 1.58% in 2004 and 1.45% in 2003. As the result of the adoption by
the Company as of January 1, 2006 of Financial Accounting Standards Board
Statement No. 123(R),Share Based Payment,
management expects the expenses for employees will increase in 2006. See "Recent
Accounting Pronouncements".

For 2005, occupancy expense increased by $294,467, or 27.5%, to
$1,365,930 from $1,071,463 for 2004. The increase in occupancy expense for 2005
compared to 2004 was a result of the 2004 branch expansion program which
included new office space rentals, maintenance, and other related expenses. The
increase in occupancy expense in 2004 compared to 2003 was due primarily to
contractual rent increases at most of the Bank's branch offices.



21



The occupancy expense component of total non-interest expense as a
percentage of average assets was 0.39% in 2005, 0.34% in 2004 and 0.30% in 2003,
respectively.

Regulatory, professional and other fees increased by $560,690, or
103.4%, to $1,102,691 in 2005 compared to $542,001 in 2004 as the Company
incurred increased legal, independent accountant and consultant fees primarily
as a result of new compliance requirements contained in Section 404 of the
Sarbanes - Oxley Act.

The Bank's ratio of non-interest expense to average assets was
3.14% for 2005 compared to 2.86% for 2004 and 2.62% for 2003.

An important industry productivity measure is the efficiency
ratio. The efficiency ratio is calculated by dividing total operating expenses
by net interest income and other income. An increase in the efficiency ratio
indicates that more resources are being utilized to generate the same or greater
volume of income, while a decrease would indicate a more efficient allocation of
resources. The Bank's efficiency ratio increased modestly in 2005 to 60.7%
compared to 59.8% in 2004 and 57.7% in 2003.

Financial Condition

Cash and Cash Equivalents

At December 31, 2005, cash and cash equivalents totaled
$12,137,750 compared to $7,924,409 at December 31, 2004. Cash and cash
equivalents at December 31, 2005 consisted of cash and due from banks of
$9,394,929 and federal funds sold/short-term investments of $2,742,821. The
corresponding balances at December 31, 2004 were $7,898,395 and $26,014,
respectively. The higher balances of cash and cash equivalents at December 31,
2005 were primarily due to late December 2005 interest-bearing deposits balances
raised to fund loan growth and manage the Bank's liquidity position.

Securities

The Bank's investment securities portfolio amounted to
$90,995,028, or 24.4% of total assets at December 31, 2005, compared to
$97,755,786, or 29.1% of total assets at December 31, 2004. On an average
balance basis, the investment securities portfolio represented 29.0% and 32.9%
of average interest-earning assets for the years ended December 31, 2005 and
2004, respectively. The average yield earned on the portfolio was 4.22% in 2005,
an increase of 37 basis points from 3.85% earned in 2004.

Securities available for sale are investments that may be sold in
response to changing market and interest rate conditions or for other business
purposes. Securities available for sale consist primarily of U.S. Government and
Federal agency securities as well as mortgage-backed securities. Activity in
this portfolio is undertaken primarily to manage liquidity and interest rate
risk and to take advantage of market conditions that create economically more
attractive returns. At December 31, 2005, available-for-sale securities amounted
to $69,236,658, a decrease of $16,351,991 from December 31, 2004. The Company
recorded net losses on sales of securities available for sale of $271,871 in
2005 versus net gains on sales of $27,545 in 2004.

Proceeds from maturities and prepayments of securities available
for sale amounted to $17,074,576 in 2005 and $29,011,317 in 2004. At December
31, 2005, the portfolio had net unrealized losses of $1,274,157, compared to net
unrealized losses of $170,875 at December 31, 2004. These unrealized gains and
losses are reflected net of tax in shareholders' equity as other comprehensive
income (loss).

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. The held-to-maturity portfolio consists primarily
of obligations of states and political subdivisions. At December 31, 2005,
securities held to maturity were $21,758,370, an increase of $9,591,233 from
$12,167,137 at December 31, 2004. The market value of the held-to-maturity
portfolio at December 31, 2005 was $21,521,026, resulting in a net unrealized
loss of $237,344.



22



The amortized cost, estimated market value and weighted average
yield of debt securities at December 31, 2005, 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. Federal Home Loan Bank stock is included in "Held to
maturity - Due in one year or less."


Amortized
Cost
        
        Estimated
Market
Value
        
        Weighted
Average
Yield*Available for sale-Due in one year or less
        
        $4,620,617
        
        $4,611,487
        
        2.56%Due after one year through five years
        
        14,657,111
        
        14,359,729
        
        3.91%Due after five years through ten years
        
        15,131,245
        
        14,905,727
        
        4.73%Due after ten years
        
        36,101,843
        
        35,359,715
        
        4.95%Total
        
        $70,510,816
        
        $69,236,658
        
        4.53%Held to maturity-Due in one year or less
        
        $4,180,681
        
        $4,168,393
        
        2.24%Due after one year through five years
        
        3,067,600
        
        3,087,895
        
        5.52%Due after five years through ten years
        
        3,248,929
        
        3,215,590
        
        5.38%Due after ten years
        
        11,261,161
        
        11,049,148
        
        5.62%Total
        
        $21,758,371
        
        $21,521,026
        
        4.92%

*computed on a tax equivalent basis.

Loans

The loan portfolio, which represents the Bank's 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 construction loans, commercial
loans, owner-occupied commercial mortgage loans and tenanted commercial real
estate loans. Total loans averaged $231,418,672 during 2005, an increase of
$32,966,250, or 16.6%, compared to an average of $198,452,422 in 2004. Growth in
the average loan portfolio balance was generated primarily by an increase of
$21,419,864, or 17.0%, in commercial mortgage and construction wholesale loans.
At December 31, 2005, total loans amounted to $240,014,349 compared to
$210,653,051 at December 31, 2004, an increase of $29,361,298, or 13.9%. The
average yield earned on the loan portfolio was 7.61% in 2005 compared to 6.76%
in 2004, an increase of 85 basis points. This increase is primarily due to the
rising interest rate environment that evolved during the last half of 2004 and
continued throughout 2005.

The following table represents the components of the loan portfolio for the
dates indicated.


December 31,2005
        2004
        2003
        2002
        2001Amount
        %
        Amount
        %
        Amount
        %
        Amount
        %
        Amount
        %Construction loans
        $109,862,614
        46%
        $88,027,024
        42%
        $56,971,265
        35%
        $32,342,880
        21%
        $29,385,096
        24%Residential real estate loans
        8,602,975
        4%
        9,815,366
        5%
        8,059,032
        5%
        9,032,228
        6%
        11,634,097
        9%Commercial and commercial real estate loans
        104,448,196
        43%
        96,021,077
        46%
        83,840,831
        51%
        89,415,759
        59%
        62,442,753
        50%Loans to individuals
        16,441,994
        7%
        16,002,619
        7%
        13,236,895
        8%
        14,851,742
        10%
        15,587,772
        12%Lease financing
        21,073
        0%
        74,543
        0%
        1,054,198
        1%
        4,773,528
        4%
        5,717,826
        5%All other loans
        637,497
        0%
        712,422
        0%
        788,085
        0%
        642,599
        0%
        169,939
        0%Total
        $240,014,349
        100%
        $210,653,051
        100%
        $163,950,306
        100%
        $151,049,736
        100%
        $124,937,483
        100%

The rising interest rate environment that existed throughout
2005, especially the rising average prime rate, and competitive loan pricing
resulted in the increased portfolio components discussed in the following
paragraphs.


23


Commercial loans averaged $36,519,005 for 2005, an increase of
$8,861,882, or 32.0%, compared to $27,656,123 for 2004. 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 average yield on the commercial loan portfolio decreased 20 basis points to
7.55% in 2005 from 7.75% in 2004.

Commercial mortgages and construction wholesale loans averaged
$147,297,238 for 2005, an increase of $21,419,864, or 17.0%, compared to
$125,877,374 for 2004. Generally, these loans represent owner-occupied or
investment properties and usually complement a broader commercial relationship
between the bank and the borrower. Construction loans are structured to provide
for advances only after work is completed and inspected by qualified
professionals. The average yield on the commercial mortgages and construction
wholesale loan portfolio increased 124 basis points to 7.31% for 2005 from 6.07%
for 2004.

Residential mortgages and construction retail loans averaged
$13,436,207 for 2005, a decrease of $1,082,408, or 7.5%, compared to $14,518,615
for 2004. These loans consist primarily of residential mortgage loans, home
equity loans and business loans secured by residential real estate. The average
yield on this portfolio increased 12 basis points to 6.63% for 2005 from 6.51%
for 2004.

The following table provides information concerning the interest
rate sensitivity of the Bank's commercial and commercial real estate loans and
construction loans at December 31, 2005.

Maturity RangeType
        Within
OneYear
        
        After One But
Within
Five Years
        
        After
Five
Years
        
        TotalCommercial & Commercial real estate
        $20,314,514
        
        $25,946,870
        
        $58,186,812
        
        $104,448,196Construction Loans
        87,006,197
        
        22,856,417
        
        -
        
        109,862,614Total
        $107,320,711
        
        $48,803,287
        
        $58,186,812
        
        $214,310,810Fixed rate loans
        $2,793,963
        
        $18,190,392
        
        $6,074,785
        
        $27,059,139Floating rate loans
        104,526,748
        
        30,612,895
        
        52,112,028
        
        187,251,671Total
        $107,320,711
        
        $48,803,287
        
        $58,186,812
        
        $214,310,810

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, (2) loans which are contractually past due 90 days or more as
to interest and principal payments but have not been classified as non-accrual,
and (3) loans whose terms have been restructured to provide a reduction or
deferral of interest on principal because of a deterioration in the financial
position of the borrower.

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.



24




Non-performing loans decreased by $279,182, or 25.1%, to $833,359
at December 31, 2005, from $1,112,541 at December 31, 2004. This decrease is
primarily due to a decrease of $216,261 in non-accrual loans to $833,150 at
December 31, 2005 compared to $1,049,411 at December 31, 2004. Management
believes that the borrowing relationships representing the balance of
non-performing loans at December 31, 2005 are well collateralized and present
minor risk of financial loss to the Company. The table below sets forth
non-performing assets and risk elements in the Bank's portfolio by type for the
years indicated. As the table demonstrates, loan quality and ratios remain
strong. This was accomplished through quality loan underwriting, a proactive
approach to loan monitoring and aggressive workout strategies.

Non-performing assets decreased by $279,182, or 25.1%, to
$833,359 at December 31, 2005 from $1,112,541 at December 31, 2004.
Non-performing assets represented 0.22% of total assets at December 31, 2005 and
0.33% at December 31, 2004. Non-performing loans as a percentage of total loans
were 0.32% at December 31, 2005, compared to 0.50% at December 31, 2004.

The Bank had no loans classified as restructured loans or
potential problem loans at December 31, 2005 and 2004.

At December 31, 2005, the Bank had $209 in loans that were 90
days or more past due but still accruing interest income compared to $63,130 of
loans in this category of non-performing loans at December 31, 2004.
Management's decision to accrue income on these loans was based on the level of
collateral and the status of collection efforts.


Non-Performing Assets and Loans2005
        2004
        2003
        2002
        2001Non-Performing loans:Loans 90 days or more past due and still accruing
        $209
        $63,130
        $0
        $2,156
        $0Non-accrual loans
        833,150
        1,049,411
        330,783
        156,156
        618,102Total non-performing loans
        833,359
        1,112,541
        330,783
        158,312
        618,102Other real estate owned
        0
        0
        8,971
        9,492
        0Total non-performing assets
        $833,359
        $1,112,541
        $339,754
        $167,804
        $618,102Non-performing loans to total loans
        0.32%
        0.50%
        0.20%
        0.10%
        0.49%Non-performing assets to total assets
        0.22%
        0.33%
        0.12%
        0.06%
        0.28%



Management takes a proactive approach in addressing delinquent
loans. The Company's President meets weekly with all loan officers to review the
status of credits past-due ten days or more. An action plan is discussed for
each of the 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
fifteen days past-due.

In most cases, the Company's collateral is real estate and when
the collateral is foreclosed upon, the real estate is carried at the lower of
fair market value less estimated selling costs, or at cost. The amount, if any,
by which the recorded amount of the loan exceeds the fair market value of the
asset 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 collection action cannot be
continued unless the Company first obtains relief from the automatic stay
provided by the bankruptcy code.



Allowance for Loan Losses and Related Provision

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



25


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

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

Management reviews the adequacy of the allowance on at least a
quarterly basis to ensure that the provision for loan and lease 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 and lease losses consists of several key elements. These elements
include a specific reserve for doubtful or high risk loans, an allocated
reserve, and an unallocated portion. The Company consistently applies the
following comprehensive methodology.

During the quarterly review of the allowance for loan and lease
losses, the Company considers a variety of factors that include:
General economic conditions.
Trends in charge-offs.
Trends and levels of delinquent loans.
Trends and levels of non-performing loans, including loans over 90
days delinquent.
Trends in volume and terms of loans.
Levels of allowance for specific classified loans.
Credit concentrations.The specific reserve for high risk loans is established for
specific commercial loans, commercial real estate loans, and construction loans
which have been identified by management as being high risk loan assets. These
high risk loans are assigned a doubtful risk rating grade because the loan has
not performed according to payment terms and there is reason to believe that
repayment of the loan principal in whole, or part, is unlikely. The specific
portion of the allowance is the total amount of potential unconfirmed losses for
these individual doubtful loans. To assist in determining the fair value of loan
collateral, the Company often utilizes independent third party qualified
appraisal firms which in turn employ their own criteria and assumptions that may
include occupancy rates, rental rates, and property expenses, among others.

The second category of reserves consists of the allocated portion
of the allowance. The allocated portion of the allowance is determined by taking
pools of loans outstanding that have similar characteristics and applying
historical loss experience for each pool. This estimate represents the potential
unconfirmed losses within the portfolio. Individual loan pools are created for
commercial and commercial real estate loans, construction loans, and for the
various types of loans to individuals. The historical estimation for each loan
pool is then adjusted to account for current conditions, current loan portfolio
performance, loan policy or management changes, or any other factor which may
cause future losses to deviate from historical levels.
The Company also maintains an unallocated allowance. The
unallocated allowance is used to cover any factors or conditions which may cause
a potential loan loss but are not specifically identifiable. It is prudent to
maintain an unallocated portion of the allowance because no matter how detailed
an analysis of potential loan losses is performed, these estimates by definition
lack precision. Management must make estimates using assumptions and information
which is often subjective and changing rapidly. At December 31, 2005, management
believed that the allowance for loan losses and nonperforming loans was
adequate.



26


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


Allowance for Loan Losses2005
        
        2004
        
        2003
        
        2002
        
        2001Balance, beginning of period
        
        $2,005,169
        
        $1,786,632
        
        $1,669,882
        
        $1,414,495
        
        $1,132,555Provision charged to operating expenses
        
        405,000
        
        240,000
        
        240,000
        
        240,000
        
        300,000Loans charged off:Construction loans
        
        -
        
        -
        
        -
        
        -
        
        -Residential real estate loans
        
        -
        
        -
        
        -
        
        -
        
        -Commercial and commercial real estate loans
        
        (39,150)
        
        (17,070)
        
        (115,698)
        
        (7,034)
        
        (20,297)Loans to individuals
        
        (13,653)
        
        (5,203)
        
        (7,968)
        
        (1,148)
        
        (676)Lease financing
        
        -
        
        -
        
        -
        
        -
        
        -All other loans
        
        -
        
        -
        
        -
        
        -
        
        -(52,803)
        
        (22,273)
        
        (123,666)
        
        (8,182)
        
        (20,973)Recoveries:Construction loans
        
        -
        
        -
        
        -
        
        -
        
        -Residential real estate loans
        
        -
        
        -
        
        -
        
        -
        
        -Commercial and commercial real estate loans
        
        1,498
        
        750
        
        
        
        20,296Loans to individuals
        
        2,511
        
        60
        
        416
        
        3,273
        
        2,913Lease financing
        
        -
        
        -
        
        -
        
        -
        
        -All other loans
        
        -
        
        -
        
        -
        
        -
        
        -4,009
        
        810
        
        416
        
        23,569
        
        2,913Net (charge offs) / recoveries
        
        (48,794)
        
        (21,463)
        
        (123,250)
        
        15,387
        
        (18,060)Balance, end of period
        
        $2,361,375
        
        $2,005,169
        
        $1,786,632
        
        $1,669,882
        
        $1,414,495Loans:At year end
        
        $256,772,083
        
        $220,580,932
        
        $163,950,306
        
        $151,049,736
        
        $124,937,483Average during the year
        
        231,418,672
        
        198,452,422
        
        170,191,619
        
        145,159,286
        
        123,944,552Net (charge offs) recoveries to average loans outstanding
        
        (0.02%)
        
        (0.01%)
        
        (0.07%)
        
        0.01%
        
        (0.01%)Allowance for loan losses to:Total loans at year end
        
        0.92%
        
        0.91%
        
        1.09%
        
        1.11%
        
        1.13%Non-performing loans
        
        283.36%
        
        180.23%
        
        540.12%
        
        270.16%
        
        228.84%

At December 31, 2005, the allowance for loan losses was
$2,361,375 compared to $2,005,169 at December 31, 2004, an increase of $356,206,
or 17.8%. The ratio of the allowance for loan losses to total loans at December
31, 2005 and 2004 was 0.92% and 0.91%, respectively. The allowance for loan
losses as a percentage of non-performing loans was 283.36% at December 31, 2005,
compared to 180.23% at December 31, 2004. Management believes the quality of the
loan portfolio remains strong and that the allowance for loan losses is adequate
in relation to credit risk exposure levels.

The provision for loan losses was $405,000 and $240,000,
respectively, for the years ended December 31, 2005 and 2004. Management
considers a complete review of the following specific factors in determining the
provision for loan losses: historical losses by loan category, non-accrual
loans, problem loans as identified through internal classifications, collateral
values, and the growth and size of the portfolio. In addition to these factors,
management takes into consideration current economic conditions and local real
estate market conditions. The increase in the provision for the year ended
December 31, 2005 was primarily due growth of the loan portfolio and increased
watch list loans. Management believes the quality of the loan portfolio remains
sound, the determination of the provision for loan losses amount was primarily
due to the manageable balances in non-accrual loans and management's assessment of economic conditions in the Bank's
marketplace. Net charge offs/recoveries amounted to a net charge off of $48,794
in 2005 compared to a net charge off of $21,463 in 2004.



27


The following table describes the allocation of the allowance for
loan losses among the various categories of loans and certain other information
as of the dates indicated. 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.


Allocation of the Allowance for Loan LossesDecember 31, 2005
        December 31, 2004
        December 31, 2003
        December 31, 2002
        December 31, 2001Amount
        % of loans in each category to total loans
        Amount
        % of loans in each category to total loans
        Amount
        % of loans in each category to total loans
        Amount
        % of loans in each category to total loans
        Amount
        % of loans in each category to total loansBalance at end of period applicable to:Domestic:Commercial and commercial real estate
        $1,393,211
        43%
        $1,183,050
        46%
        $1,054,113
        52%
        $985,230
        60%
        $707,248
        51%Construction
        578,537
        46%
        491,266
        41%
        375,193
        34%
        350,675
        21%
        325,334
        23%Residential real estate
        141,683
        4%
        120,310
        5%
        107,198
        5%
        100,193
        6%
        127,305
        9%Loans to individuals
        236,138
        7%
        200,517
        8%
        178,663
        8%
        166,988
        10%
        169,739
        12%Lease financing
        4,723
        0%
        4,010
        0%
        53,599
        1%
        50,096
        3%
        70,725
        5%Unallocated
        7,084
        0%
        6,016
        0%
        17,866
        0%
        16,699
        0%
        14,144
        0%$2,361,375
        100%
        $2,005,169
        100%
        $1,786,632
        100%
        $1,669,882
        100%
        $1,414,495
        100%

Deposits

Deposits, which include demand deposits (interest bearing and
non-interest bearing), savings and time deposits, are a fundamental and
cost-effective source of funding. The Bank offers a variety of products designed
to attract and retain customers, with the Bank's primary focus being on building
and expanding long-term relationships. Deposits in 2005 averaged $279,608,397,
an increase of $22,689,474, or 8.8%, compared to $256,918,923 for 2004. At
December 31, 2005, total deposits were $305,809,467, an increase of $28,922,434,
or 10.4%, from $276,887,033 at December 31, 2004. The average rate paid on the
Bank's interest-bearing deposit balances for 2005 was 1.94%, increasing from the
1.59% average rate for 2004.

The significant contributor to the level of deposit growth in the
year ended December 31, 2005 were non-interest bearing demand deposits, which
increased by $11,892,221, or 23.4%, to $62,686,802 at December 31, 2005 from
$50,794,581 at December 31, 2004. Interest bearing demand deposits, which
include interest-bearing checking, money market and the Bank's premier money
market product, 1STChoice accounts, also increased by $5,075,984, or
5.3%, to an average of $101,189,352 in 2005 from an average of $96,113,368 in
2004. The average cost of interest bearing demand deposits increased 18 basis
points to 1.20% in 2005 compared to 1.02% in 2004.

Savings accounts increased by $22,236,528, or 81.4%, to
$49,547,438 at December 31, 2005 from $27,310,910 at December 31, 2004. The
average balance of savings accounts for 2005 increased by $6,781,466 to
$33,671,684 compared to an average balance of $26,890,218 for 2004. During April
2005, the Bank introduced 1ST Choice Super Savings, a new high yield
savings account. By the end of the year 2005, this product had attracted over
$18.0 million in new deposit balances.

Average non-interest bearing demand deposits increased by
$8,170,775, or 16.5%, to $57,792,902 for 2005 from $49,622,127 for 2004. At
December 31, 2005, non-interest bearing demand deposits totaled $62,686,802, an
increase of 23.4% compared to $50,794,581 at December 31, 2004. Non-interest
bearing demand deposits represent a stable, interest-free source of funds.
Growth in business and personal checking accounts through the Bank's marketing
programs generated most of the current year increase.

Time deposits consists primarily of retail certificates of
deposit and certificates of deposit of $100,000 and over. Time deposits at
December 31, 2005 were $91,095,333, an increase of $2,395,876, or 2.7%, from
$88,699,457 at December 31, 2004. The retail certificates of deposit component
of time deposits increased by $3,046,535, or 4.1%, to an average of $77,183,169
for 2005 from an average of $74,136,634 for 2004. The average cost of these
deposits increased by 51 basis points to 3.09% for 2005 from 2.58% for 2004.



28


Certificates of deposit of $100,000 and over decreased by
$385,286, or 3.8%, to an average of $9,771,290 for 2005 from an average of
$10,156,576 for 2004. The average cost for these deposits increased by 61 basis
points to 3.16% for 2005 compared to 2.55% for 2004. Certificates of deposit of
$100,000 and over are a less stable funding source and are used primarily as an
alternative to other sources of borrowed funds.

The following table illustrates the components of average total
deposits for the past three years.


Average Deposit Balances2005
        
        2004
        
        2003Average
Balance
        Percentage
of Total
        
        Average
Balance
        Percentage of Total
        
        Average
Balance
        Percentage of TotalNon-interest bearing demand
deposits
        
        $57,792,902
        20.67%
        
        $49,622,127
        19.31%
        
        $41,318,131
        18.70%Money market and NOW accounts
        
        101,189,352
        36.19%
        
        96,113,368
        37.41%
        
        76,435,477
        34.60%Savings deposits
        
        33,671,684
        12.04%
        
        26,890,218
        10.46%
        
        21,684,139
        9.82%Certificates of deposit of $100,000
or more
        
        9,771,290
        3.49%
        
        10,156,576
        3.95%
        
        18,287,421
        8.28%Other time deposits
        
        77,183,169
        27.60%
        
        74,136,634
        28.87%
        
        63,182,395
        28.60%Total
        
        $279,608,397
        100.00%
        
        $256,918,923
        100.00%
        
        $220,907,563
        100.00%

Other Borrowings

Other 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
average balance of other borrowed funds increased by $6,330,680, or 25.5%, to
$31,143,663 for 2005 from the average balance of $24,812,983 for 2004. This
increase is primarily due to the fact that loan portfolio growth exceeded
deposit growth. The average cost of other borrowed funds increased 43 basis
points to 4.38% for 2005 compared to 3.95% for 2004.

The balance of other borrowings was $28,500,000 at December 31,
2005, consisting of long-term FHLB borrowings of $23,500,000 and overnight funds
purchased of $5,000,000. The balance of other borrowings at December 31, 2004
consisted of FHLB borrowings of $15,500,000 and overnight funds purchased of
$9,700,000. The average cost of other borrowed funds decreased 2 basis points to
3.95% for 2004 compared with 3.97% for 2003.

During 2000, the Bank purchased three ten-year fixed rate
convertible advances from the FHLB. These advances, in the amounts of
$2,500,000, $5,000,000, and $5,000,000 bear interest at the rates of 5.50%,
5.34%, and 5.06%, respectively. These advances are convertible quarterly at the
option of the FHLB.

These advances are fully secured by marketable securities and
qualifying one-to-four family mortgage loans.

Securities sold under agreements to repurchase are summarized as
follows:



2005
        2004
        2003Balance outstanding at year end
        -
        -
        $1,921,015Weighted average interest rate at year end
        -
        1.27%
        1.15%Average daily balance outstanding during year
        -
        $1,674,172
        $2,290,866Weighted average interest rate during year
        -
        1.28%
        1.46%Highest month-end outstanding balance
        -
        $1,941,042
        $2,562,549



29


Shareholders' Equity and Dividends

Shareholders' equity increased by $3,006,483, or 11.2%, to
$29,796,867 at December 31, 2005, from $26,790,384 at December 31, 2004. Book
value per common share increased by $0.95, or 12.3%, to $8.67 at December 31,
2005 from $7.72 at December 31, 2004. The increase in shareholders' equity and
book value per share resulted primarily from net income of $4,560,127, less the
effect of stock buybacks and the unrealized holding loss on securities held for
resale.

During the period January 1, 2000 - December 31, 2005, the
Company achieved a five year compounded growth rate for shareholders' equity of
14.4%. The Company's book value per share has also increased over this period at
a compounded growth rate of 14.9%. In lieu of cash dividends, the Company (and
its predecessor the Bank) has declared a stock dividend every year since 1992
and has paid such dividends every year since 1993. A 5% stock dividend was
declared in each of the years 2005, 2004 and 2003. The Company also declared a
two-for-one stock split on January 20, 2005 and paid February 28, 2005 to
shareholders of record on February 10, 2005.

The Company's common stock is quoted on the NASDAQ National
Market System under the symbol "FCCY".

The Company and the Bank are subject to various regulatory
capital requirements administered by the Federal Reserve Board and the Federal
Deposit Insurance Corporation. For information on regulatory capital, see Note
15 of the Notes to Consolidated Financial Statements.

Off-Balance Sheet Arrangements and Contractual Obligations

Off-Balance Sheet Arrangements

The following table shows the amounts and expected maturities of
significant commitments as of December 31, 2005. Further discussion of these
commitments is included in Note 13 to the Consolidated Financial Statements.


One Year
or Less
        One to
Three Years
        Three to
Five Years
        Over Five
Years
        TotalStandby letters of credit
        $3,848,473
        $0
        $0
        $0
        $3,848,473Commitments to sell residential loans
        $16,757,734
        $0
        $0
        $0
        $16,757,734

Contractual Obligations

The following table shows the significant contractual obligations
of the Company by expected payment period as of December 31, 2005. Further
discussion of these commitments is included in Note 13 to the Consolidated
Financial Statements.




Contractual Obligation
        Total
        Less Than One Year
        One to Three Years
        Three to Five Years
        Over Five YearsLong-term debt obligations
        $15,500,000
        $0
        $0
        $3,000,000
        $12,500,000Operating lease obligation
        $6,320,296
        $676,981
        $1,881,677
        $618,811
        $3,052,827Purchase obligations
        $820,000
        $605,000
        $215,000
        $0
        $0Certificates of deposit
        $91,095,333
        $66,082,431
        $17,215,316
        $7,797,586
        $0

Long-term debt obligations includes fixed term borrowings from
the Federal Home Loan Bank. The borrowings have defined terms and under certain
circumstances are callable at the option of the lender. Operating leases
represent obligations entered into by the Company for the use of land and
premises. The leases generally have escalation terms based upon certain defined
indices. Purchase obligations represent legally binding and enforceable
agreements to purchase goods and services from third parties and consists
primarily of contractual obligations under data processing service agreements.


30


The Company also has commitments and obligations under its
employee benefit plans as described in Note 11 to the Consolidated Financial
Statements.

Liquidity

Liquidity measures the ability to satisfy current and future cash
flow needs as they become due.

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 earnings assets.

The Bank has established a borrowing relationship with the FHLB
and its correspondent banks which further supports and enhances liquidity.

The Consolidated Statements of Cash Flows present the changes in
cash from operating, investing and financing activities. At December 31, 2005,
the balance of cash and cash equivalents was $12,137,750.

Net cash provided by operating activities decreased by
$9,512,080, or 98.6%, to $133,562 for 2005 from $9,645,642 for 2004. The primary
source of funds is net income from operations adjusted for provision for loan
losses, depreciation expenses, and net amortization of premiums on securities.
During 2005, a lower sales volume of loans held for sale resulted in less cash
proceeds realized from this operating activity.

Net cash used in investing activities decreased by $28,454,689,
or 51.4%, to $26,910,068 for 2005 from $55,364,757 for 2004. The decrease in
cash usage for 2005 compared to 2004 resulted from decreases in loans and
purchases of securities.

Net cash provided by financing activities increased by
$7,950,791, or 20.4%, to $30,989,847 for 2005 from $38,940,638 for 2004. The
cash provided in 2005 resulted primarily from the increase in total deposits.

The securities portfolios are also a source of liquidity,
providing cash flows from maturities and periodic repayments of principal.
During 2005, prepayments and maturities of investment securities totaled
$17,434,749. Another source of liquidity is the loan portfolio, which provides a
flow of payments and maturities.

Interest Rate Sensitivity Analysis

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



31

The following tables set forth certain information relating to
the Bank's financial instruments that are sensitive to changes in interest
rates, categorized by expected maturity or repricing and the fair value of such
instruments at December 31, 2005.


Interest Rate Sensitivity Analysis At December 31, 2005
        Total Within One Year
        One Year To
Two Years
        Non-interest
Sensitive and
Over Two Years
        Total($ in thousands)
        Interest Sensitivity Period30 Day
        90 Day
        180 Day
        365 DayEarning Assets:Total Investment Securities
        $740
        $9,199
        $1,804
        $4,671
        $16,414
        $13,325
        $61,256
        $90,995Loans
        154,085
        4,826
        5,050
        8,393
        172,354
        16,740
        50,920
        240,014Other Interest-earning assets
        19,747
        -
        -
        -
        19,747
        -
        21,739
        41,486174,572
        14,025
        6,854
        13,064
        208,515
        30,065
        133,915
        372,495Source of Funds:Savings and time deposits
        32,338
        15,126
        17,657
        29,475
        94,596
        28,345
        29,551
        152,492Other interest-bearing liabilities
        76,067
        -
        5,000
        -
        81,067
        2,640
        48,424
        124,131Non-interest-bearing sources
        -
        -
        -
        -
        -
        -
        95,872
        95,872108,405
        15,126
        22,657
        29,475
        175,663
        30,985
        173,847
        372,495Asset (Liability Sensitivity Gap:Period Gap
        $67,167
        ($1,101)
        ($15,803)
        ($16,411)
        $32,852
        ($920)
        ($31,932)
        $0Cumulative Gap
        $67,167
        $65,066
        $49,263
        $32,852
        $32,852
        $31,932Cumulative Gap to Total Assets
        17.8%
        17.5%
        13.2%
        8.8%
        8.8%
        8.6%

The Bank 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-costing retail deposits.

In addition to utilizing the gap ratio for interest rate risk
assessment, management utilizes simulation analysis whereby the model estimates
the variance in net income with a change in interest rates of plus or minus 200
basis points over 12 and 24 month periods. Given recent simulations, net
interest income would be within policy guidelines regardless of the direction of
market rates.

Recent Accounting Pronouncements

FASB Statement No. 123 (revised 2004), Share-Based Payment.
Statement 123(R) addresses the accounting for share-based payment transactions
in which an enterprise receives employee services in exchange for (a) equity
instruments of the enterprise or (b) liabilities that are based on the fair
value of the enterprise's equity instruments or that may be settled by the
issuance of such equity instruments. Statement 123(R) requires an entity to
recognize the grant-date fair-value of stock options and other equity-based
compensation issued to employees in the income statement. The revised Statement
generally requires that an entity account for those transactions using the
fair-value-based method; and eliminates an entity's ability to account for
share-based compensation transactions using the intrinsic value method of
accounting in APB Opinion No. 25, Accounting for Stock Issued to Employees,
which was permitted under Statement 123, as originally issued. The revised
Statement requires entities to disclose information about the nature of the
share-based payment transactions and the effects of those transactions on the financial statements. Statement 123(R) is effective for the Company
beginning January 1, 2006. The Company anticipates using the modified prospective
transition method with the adoption of this standard. The Company is assessing
the impact of adopting the new pronouncement and is currently unable to estimate
its impact on its consolidated financial statements.
In March 2005, the SEC issued Staff Accounting Bulletin No. 107
("SAB 107"), which provides guidance on the interaction between Statement 123(R)
and certain SEC rules and regulations. SAB 107 was issued to assist issuers in
their initial implementation of Statement 123(R) and to enhance the information
received by investors and other users of the financial statements.



32


In March 2005 the FASB issued Interpretation No. 47, "Accounting
for Conditional Asset Retirement Obligations" (FIN 47). FIN 47 requires an
entity to recognize a liability for the fair value of a legal obligation to
perform asset-retirement activities that are conditional on a future event if
the amount can be reasonably estimated. The Interpretation provides guidance to
evaluate whether fair value is reasonably estimable. FIN 47 is effective no
later than the end of fiscal years ending after December 15, 2005. FIN 47 is not
expected to have a material impact on the Company's financial position or
results of operations.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes
and Error Corrections," which replaces APB Opinion No. 20, "Accounting Changes,"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements,"
and changes the requirements for the accounting for and reporting of a change in
accounting principle. SFAS No. 154 applies to all voluntary changes in
accounting principle and to changes required by an accounting pronouncement when
the pronouncement does not include specific transition provisions. SFAS No. 154
requires retrospective application of changes in accounting principle to prior
periods' financial statements unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. APB Opinion No.
20 previously required that most voluntary changes in accounting principle be
recognized by including the cumulative effect of the change in net income for
the period of the change in accounting principle. SFAS No. 154 carries forward
without change the guidance contained in APB Opinion No. 20 for reporting the
correction of an error in previously issued financial statements and a change in
accounting estimate. SFAS No. 154 also carries forward the guidance in APB
Opinion No. 20 requiring justification of a change in accounting principle on
the basis of preferability. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005,
with early adoption permitted. Our adoption of SFAS No. 154 will not have an
impact on our financial condition or results of operations.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS 115-1 and FAS
124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments." This FSP provides guidance on determining if an investment
is considered to be impaired, if the impairment is other-than-temporary and the
measurement of an impairment loss. It also includes accounting considerations
subsequent to the recognition of an other-than-temporary impairment and requires
certain disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. The guidance in this FSP amends Statement 115,Accounting for Certain Investments in Debt and Equity Securities,
and is effective for reporting periods beginning after December 15,
2005.  The Company is currently accounting for investments in
accordance with this guidance, and therefore, the adoption of this FSP will not
have a material impact on the Company's results of operations or financial
position.

In July 2005, the FASB issued an Exposure Draft of a proposed
Interpretation, "Accounting for Uncertain Tax Positions". The proposed
Interpretation clarifies the accounting for uncertain tax positions in
accordance with FASB Statement No. 109, "Accounting for Income Taxes". The
proposed Interpretation requires that a tax position meet a "probable
recognition threshold" for the benefit of the uncertain tax position to be
recognized in the financial statements. A tax position that fails to meet the
probable recognition threshold will result in either a reduction of a current or
deferred tax asset or receivable, or recording a current or deferred tax
liability. The proposed Interpretation also provides guidance on measurement,
de-recognition of tax benefits, classification, interim period accounting
disclosure, and transition requirements in accounting for uncertain tax
positions. The proposed Interpretation has a 60-day comment period and is
scheduled to be effective for all companies as of the first fiscal year ending
after December 15, 2005. The Company is assessing the impact of adopting the new
pronouncement and is currently unable to estimate its impact on its consolidated
financial statements.



33


Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.

Market Risk Analysis

To measure the impacts of longer-term asset and liability
mismatches beyond two years, the Company utilizes Modified Duration of Equity
and Economic Value of Portfolio Equity ("EVPE") models. The modified duration of
equity measures the potential price risk of equity to changes in interest rates.
A longer modified duration of equity indicates a greater degree of risk to
rising interest rates. Because of balance sheet optionality, an EVPE analysis is
also used to dynamically model the present value of asset and liability cash
flows, with rates ranging up or down 200 basis points. The economic value of
equity is likely to be different as interest rates change. Results falling
outside prescribed ranges require action by Management. At December 31, 2005 and
2004, the Company's variance in the economic value equity as a percentage of
assets with an instantaneous and sustained parallel shift of 200 basis points is
within the negative 3% guideline, as shown in the tables below.

The market capitalization of the Company should not be equated to
the EVPE, which only deals with the valuation of balance sheet cash flows using
conservative assumptions. Calculated core deposit premiums may be less than what
is available in an outright sale. The model does not consider potential premiums
on floating rate loan sales, the impact of overhead expense, non-interest
income, taxes, industry market price multiples and other factors reflected in
the market capitalization of a company.

Market Risk Analysis

December 31, 2005


Change in Interest Rates
        Flat
        -200bp
        +200bpEconomic
Value of Portfolio Equity
        $44,923,000
        $43,305,000
        $42,049,000Change
        
        ($1,617,000)
        ($2,873,000)Change as a
% of assets
        
        (-0.43%)
        (-0.77%)

December 31, 2004


Change in Interest Rates
        Flat
        -200bp
        +200bpEconomic Value of Portfolio Equity
        $38,221,000
        $34,681,000
        $35,641,000Change
        
        ($3,540,000)
        ($2,580,000)Change as a % of assets
        
        (-1.05%)
        (-0.77%)

Item 8. Financial Statements and Supplementary Data.

Reference is made to Item 15(a)(1) and (2) to page F-1 for a list
of financial statements and supplementary data required to be filed pursuant to
this Item 8. The information required by this Item 8 is provided on pages F-1
through F-23 hereof.

Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.

Not applicable.



34



Item 9A. Controls and Procedures.

The Company's Chief Executive Officer and Chief 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 of the end of the period covered by this Annual Report on Form 10-K. Based on
such evaluation, the Company's Chief Executive Officer and Chief Financial
Officers have concluded that the Company's disclosure controls and procedures
are effective.

The Company's Chief Executive Officer and Chief Financial Officer
have also concluded that there have not been any changes in the Company's
internal control over financial reporting during the quarter ended December 31,
2005 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

Because the Company is not an "Accelerated Filer" as defined in Rule 12b-2 of
the Exchange Act, the Company is not required to fileManagement's annual report on internal control over financial reportingand theAttestation report of the registered public
accounting firmrequired by Item 308(a) and (b) of
Regulation S-K promulgated under the Securities Act of 1933, as amended, until
the Company's first fiscal year ending on or after July 15, 2007.       The
Company currently expects to file these reports pursuant to Items 308(a) and (b)
at such time as the Company is required to do so.

Item 9B. Other Information.
None.


PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required by this item is incorporated by
reference to the Company's Proxy Statement for its 2006 Annual Meeting of
Shareholders under the caption "Directors and Executive Officers."

Item 11. Executive Compensation.

The information required by this item is incorporated by
reference to the Company's Proxy Statement for its 2006 Annual Meeting of
Shareholders under the caption "Executive Compensation."

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters.

The information required by this item is incorporated by
reference from the Company's Proxy Statement for its 2006 Annual Meeting of
Shareholders under the captions "Stock Ownership of Management and Principal
Shareholders" and "Equity Compensation Plan Information."

Item 13. Certain Relationships and Related Transactions.

This information required by this item is incorporated by
reference from the Company's Proxy Statement for its 2006 Annual Meeting of
Shareholders under the caption "Certain Transactions With Management."

Item 14. Principal Accountant Fees and Services.

The information regarding principal accounting fees and services
and the Company's pre-approval policies and procedures for audit and non-audit
services provided by the Company's independent accountants is incorporated by
reference to the Company's Proxy Statement for its 2006 Annual Meeting of
Shareholders under the caption "Principal Accountant Fees and Services."



35


PART IV

Item 15. Exhibits and Financial Statement Schedules.


(a)
        Financial Statements and Financial Statement SchedulesThe following documents are filed as part of this report:


1.
        Financial Statements of 1st Constitution Bancorp.Consolidated Balance Sheet - December 31, 2005 and 2004.Consolidated Statements of Income - Years Ended December 31, 2005, 2004 and
2003.


Consolidated Statements of Changes in Shareholders' Equity -
Years Ended December 31, 2005, 2004 and 2003.Consolidated Statements of Cash Flows - years Ended December 31, 2005, 2004, and
2003.


Notes to Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm - Grant
Thornton LLPReport of Independent Registered Public Accounting Firm - KPMG LLPThese statements are incorporated by reference to the Company's
Annual Report to Shareholders for the year ended December 31, 2005.


2.
        All schedules are omitted because either they are inapplicable or
not required, or because the information required therein is
included in the Consolidated Financial Statements and Notes thereto.3.
        ExhibitsExhibit No.
        
        Description3
        (i)
        
        Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3(i) to the Company's Form 10-K filed with the
SEC on March 24, 2005).3
        (ii)
        
        Bylaws of the Company (incorporated by reference to Exhibit 3(ii) to
the Company's Form 10-QSB filed with the SEC on May 14, 2003)4.1
        
        
        Specimen Share of Common Stock (incorporated by reference to the
Company's Form 10-KSB filed with the SEC on March 22, 2002)4.2
        
        
        Amended and Restated Declaration of Trust of 1st
Constitution Capital Trust I dated as of April 10, 2002 among the
Registrant, as sponsor, Wilmington Trust Company, as Delaware and
institutional trustee, and the Administrators named therein
(incorporated by reference to the Company's Form 10-QSB filed with
the SEC on May 8, 2002)4.3
        
        
        Indenture dated as of April 10, 2002 between the Registrant, as
issuer, and Wilmington Trust Company, as trustee, relating to the
Floating Rate Junior Subordinated Debt Securities due 2032
(incorporated by reference to the Company's Form 10-QSB filed with
the SEC on May 8, 2002)



36


Exhibit No.
        
        Description4.4
        
        
        Guarantee Agreement dated as of April 10, 2002 between the
Registrant and the Wilmington Trust Company, as guarantee trustee
(incorporated by reference to the Company's Form 10-QSB filed with
the SEC on May 8, 2002)4.5
        
        
        Rights Agreement, dated as of March 18, 2004, between 1stConstitution Bancorp and Registrar and Transfer Company, as Rights
Agent, including the form of Certificate of Amendment to the
Company's Certificate of Incorporation as Exhibit A thereto, the
form of Rights Certificates as Exhibit B thereto, and the Summary of
Rights as Exhibit C thereto. Pursuant to the Rights Agreement,
printed Rights Certificates will not be mailed until after the
Distribution Date (as such term is defined in the Rights Agreement)
(incorporated by reference to the Company's Form 8-A12G filed with
the SEC on March 18, 2004).10.1
        
        #
        1st Constitution Bancorp Supplemental Executive Retirement Plan,
dated as of October 1, 2002 (Incorporated by reference to the
Company's Form 10-QSB filed with the SEC on November 13, 2002)10.2
        
        #
        1st Constitution Bancorp Directors' Deferral Plan, dated as of
October 1, 2002 (Incorporated by reference to the Company's Form
10-QSB filed with the SEC on November 13, 2002)10.3
        
        #
        1st Constitution Bancorp Directors Insurance Plan, dated as of
October 1, 2002 (Incorporated by reference to the Company's Form
10-QSB filed with the SEC on November 13, 2002)10.4
        
        #
        1st Constitution Bancorp Form of Executive Life Insurance Agreement
(Incorporated by reference to the Company's Form 10-QSB filed with
the SEC on November 13, 2002)10.5
        
        #
        Amended and Restated 1990 Stock Option Plan for Key Employees, as
amended (incorporated by reference to Exhibit No. 10.1 to the
Company's Form 10-QSB filed with the SEC on August 9, 2002)10.6
        
        #
        1996 Employee Stock Option Plan, as amended (incorporated by
reference to Exhibit No. 10.2 to the Company's Form 10-QSB filed
with the SEC on August 9, 2002)10.7
        
        #
        2000 Employee Stock Option and Restricted Stock Plan (incorporated
by reference to Exhibit No. 6.3 to the Company's Form 10-SB filed
with the SEC on June 15, 2001)10.8
        
        #
        Directors Stock Option and Restricted Stock Plan (incorporated by
reference to Exhibit No. 6.4 to the Company's Form 10-SB filed with
the SEC on June 15, 2001)10.9
        
        #
        Employment Agreement between the Company and Robert F. Mangano dated
April 22, 1999 (incorporated by reference to Exhibit No. 6.5 to the
Company's Form 10-SB filed with the SEC on June 15, 2001)



37


Exhibit No.
        
        Description10.10
        
        #
        Agreement for Consulting Services between the Company and Edward D.
Knapp (incorporated by reference to Exhibit 10.10 to the Company's
Form 10-KSB filed with the SEC on March 20, 2003)10.11
        
        #
        Amendment to 1st Constitution Bancorp Directors Insurance Plan,
dated as of February 19, 2004 (incorporated by reference to Exhibit
10.11 to the Company's Form 10-K filed with the SEC on March 25,
2004)10.12
        
        #
        Amendment No. 1 to 1st Constitution Bancorp Supplemental Executive
Retirement Plan, effective January 1, 2004 (incorporated by
reference to Exhibit 10.12 to the Company's Form 10-Q filed with the
SEC on August 11, 2004)10.13
        
        #
        Change of Control Agreement, effective as of April 1, 2004, by and
between the Company and Joseph M. Reardon (incorporated by reference
to Exhibit 10.13 to the Company's Form 10-Q filed with the SEC on
August 11, 2004)10.14
        
        #
        Form of Stock Option Agreement under the 1st Constitution
Bancorp Employee Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 10.14 to the Company's Form
8-K filed with the SEC on December 22, 2004)10.15
        
        #
        Form of Restricted Stock Agreement under the 1st
Constitution Bancorp Employee Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 10.15 to the Company's Form
8-K filed with the SEC on December 22, 2004)10.16
        
        #
        Employment Agreement between the Company and Robert F. Mangano dated
February 22, 2005 (incorporated by reference to Exhibit No. 10.16 to
the Company's Form 8-K filed with the SEC on February 24, 2005)10.17
        
        #
        The 1st Constitution Bancorp 2005 Equity Incentive Plan
(incorporated by reference to Appendix A of the Company's proxy
statement filed on April 15, 2005).10.18
        
        #
        Form of Restricted Stock Agreement under the 1st Constitution
Bancorp 2005 Equity Incentive Plan (incorporated by reference to
Exhibit 10.18 to the Company's Form 10-Q filed with the SEC on
August 8, 2005).10.19
        
        #
        Form of Nonqualified Stock Option Agreement under the 1st
Constitution Bancorp 2005 Equity Incentive Plan (incorporated by
reference to Exhibit 10.19 to the Company's Form 10-Q filed with the
SEC on August 8, 2005).10.20
        
        #
        Form of Incentive Stock Option Agreement under the 1st Constitution
Bancorp 2005 Equity Incentive Plan (incorporated by reference to
Exhibit 10.20 to the Company's Form 10-Q filed with the SEC on
August 8, 2005).21
        
        *
        Subsidiaries of the Company23.1
        
        *
        Consent of Independent Registered Public Accounting Firm - Grant
Thornton LLP



38


Exhibit No.
        
        Description23.2
        
        *
        Consent of Independent Registered Public Accounting Firm - KPMG LLP31.1
        
        *
        Certification of Robert F. Mangano, Chief Executive Officer of the
Company, pursuant to Securities Exchange Act Rule 13a-14(a).31.2
        
        *
        Certification of Joseph M. Reardon, Chief 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, Chief Executive Officer of the Company, and
Joseph M. Reardon, Chief Financial Officer of the Company.


*
#
        Filed herewith.
A management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 15(c) of Form 10-K.(b)
        Exhibits.Exhibits required by Section 601 of Regulation S-K (see (a)
above)


(c)
        Financial Statement SchedulesSee the notes to the Consolidated Financial Statements included
in this report.










39


1ST CONSTITUTION BANCORP

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PageReport of Independent Registered Public Accounting Firm  Grant Thornton LLP

F-2Report of Independent Registered Public Accounting Firm  KPMG LLP

F-3Consolidated Balance Sheet  December 31, 2005 and 2004

F-4Consolidated Statements of Income  Years Ended December 31, 2005, 2004 and 2003

F-5Consolidated Statements of Changes in Shareholders Equity for the Years EndedDecember 31, 2005, 2004 and 2003

F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003

F-7Notes to Consolidated Financial Statements

F-8
























F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Shareholders
1st
Constitution Bancorp:


We have audited the consolidated balance sheet of 1st Constitution
Bancorp and subsidiaries as of December 31, 2005 and 2004 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of 1st
Constitution Bancorp and subsidiaries as of December 31, 2005 and 2004 and the
consolidated results of their operations and their consolidated cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.


/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania
March 8, 2006

















F-2


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Shareholders
1st
Constitution Bancorp:

We
have audited the accompanying consolidated statements of income, changes in
shareholders' equity, and cash flows of 1st Constitution Bancorp and
subsidiaries for the year ended December 31, 2003. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of 1st
Constitution Bancorp and subsidiaries for the year ended December 31, 2003, in
conformity with U.S. generally accepted accounting principles.


/s/ KPMG LLP

Short Hills, New Jersey
February 6, 2004

















F-3



1STCONSTITUTION BANCORP
CONSOLIDATED BALANCE SHEETS
December 31, 2005 and 2004


ASSETS

2005

2004CASH AND DUE FROM BANKS

$9,394,929

$7,898,395FEDERAL FUNDS SOLD / SHORT TERM INVESTMENTS

2,742,821

26,014Total cash and cash equivalents

12,137,750

7,924,409SECURITIESAvailable for sale, at fair value

69,236,658

85,588,649Held to maturity (fair value of $21,521,026 and $12,292,250in 2005 and 2004, respectively)

21,758,370

12,167,137Total securities

90,995,028

97,755,786LOANS HELD FOR SALE

16,757,734

9,927,881LOANS

240,014,349

210,653,051Less- Allowance for loan losses

(2,361,375)

(2,005,169)Net loans

237,652,974

208,647,882PREMISES AND EQUIPMENT, net

2,596,852

2,324,219ACCRUED INTEREST RECEIVABLE

1,234,523

1,444,493BANK-OWNED LIFE INSURANCE

8,828,932

6,643,502OTHER ASSETS

2,291,673

1,162,268Total assets

$372,495,466

$335,830,440LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIES:DepositsNon-interest bearing

$62,686,802

$50,794,581Interest bearing

243,122,665

226,092,452Total deposits

305,809,467

276,887,033OTHER BORROWINGS

28,500,000

25,200,000REDEEMABLE SUBORDINATED DEBENTURES

5,155,000

5,155,000ACCRUED INTEREST PAYABLE

1,288,040

982,020ACCRUED EXPENSES AND OTHER LIABILITIES

1,946,092

816,003Total liabilities

342,698,599

309,040,056COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITYCommon stock, no par value; 30,000,000
shares authorized; 3,490,806 and 3,477,202 shares issued
and 3,437,266 and 3,471,743 shares outstanding
as of December 31, 2005 and 2004, respectively

25,589,320

22,255,402Retained earnings

5,981,803

4,725,257Treasury Stock, at cost, 53,540 shares and 5,458 shares
at December 31, 2005 and 2004, respectively

(1,008,998)

(86,896)Accumulated other comprehensive income (loss)

(765,258)

(103,379)Total shareholders equity

29,796,867

26,790,384Total liabilities and shareholders equity

$372,495,466

$335,830,440

F-4


1ST CONSTITUTION BANCORP
CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2005, 2004 and 2003


2005

2004

2003INTEREST INCOME:Interest and fees on loans
$17,622,128

$13,422,067

$11,425,762Interest on securities:Taxable
3,017,885

3,196,936

2,619,813Tax-exempt
660,878

386,088

311,764Interest on Federal funds sold andshort-term investments
27,181

10,977

29,458Total interest income
21,328,072

17,016,068

14,386,797INTEREST EXPENSE:Interest on deposits
4,313,849

3,300,523

3,163,255Interest on securities sold underagreements to repurchase
and other borrowed funds
1,363,507

981,689

952,910Interest on redeemable subordinated debentures
350,823

263,083

257,852Total interest expense
6,028,179

4,545,295

4,374,017Net interest income
15,299,893

12,470,773

10,012,780PROVISION FOR LOAN LOSSES
405,000

240,000

240,000Net interest income after provisionfor loan losses
14,894,893

12,230,773

9,772,780NON-INTEREST INCOME:Service charges on deposit accounts
690,104

514,494

559,698Gain on sale of loans held for sale
1,444,521

1,373,660

1,284,913(Loss)/gain on sale of securities available for sale
(271,871)

27,545

-Income on Bank-owned life insurance
235,430

312,496

261,301Other income
548,677

329,047

295,437Total other income
2,646,861

2,557,242

2,401,349NON-INTEREST EXPENSES:Salaries and employee benefits
5,894,200

4,955,587

3,979,655Occupancy expense
1,365,930

1,071,463

818,545Other operating expenses
3,627,095

2,962,911

2,370,522Total other expenses
10,887,225

8,989,961

7,168,722Income before income taxes
6,654,529

5,798,054

5,005,407INCOME TAXES
2,094,402

1,960,340

1,776,907Net income
$4,560,127

$3,837,714

$3,228,500NET INCOME PER SHAREBasic
$1.32

$1.11

$0.94Diluted
$1.27

$1.08

$0.89WEIGHTED AVERAGE SHARESOUTSTANDINGBasic
3,452,317

3,448,548

3,441,125Diluted
3,588,558

3,584,217

3,609,140

F-5


1STCONSTITUTION BANCORP CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

For the Years
Ended December 31, 2005, 2004 and 2003


CommonStock

Retained 
Earnings

TreasuryStock

Accumulated
Other
Comprehensive(Loss) Income

Total 
ShareholdersEquityBALANCE, December 31, 2002
$17,320,091

$2,978,873

($119,844)

$815,722

$20,994,842Exercise of stock options, net
188,822

(275,674)

114,327



27,4755% stock dividend declared December 2003,
     including fractional share cash payments 
(74,541 shares)
2,185,915

(2,185,915)Comprehensive Income:Net income  2003


3,228,500





3,228,500Unrealized gain on securities available 
for sale, net of tax (benefit) of ($335,754)






(665,561)

(665,561)Comprehensive Income








2,562,939BALANCE, December 31, 2003
$19,694,828

$3,745,784

($5,517)

$150,161

$23,585,256Exercise of stock options, net and issuance of vested 
shares under employee benefit programs
(290,277)



468,176



177,899Treasury Stock, 16,661 shares at cost




(549,555)



(549,555)5% stock dividend declared December 2004, 

    including fractional share cash payments
2,850,851

(2,858,241)





(7,390)Comprehensive Income:Net income  2004


3,837,714





3,837,714Unrealized loss on securities available for sale 
      net of tax (benefit) of ($151,962)






(253,540)

(253,540)Comprehensive Income








3,584,174BALANCE, December 31, 2004
$22,255,402

$4,725,257

($86,896)

($103,379)

$26,790,384Exercise of stock options, net and issuance of vested
30,336



338,837



369,173shares under employee benefit programsTreasury Stock, 66,699 shares at cost




(1,260,939)



(1,260,939)5% stock dividend declared December 2005, 

    including fractional share cash payments
3,303,582

(3,303,582)





0Comprehensive Income:Net income  2005


4,560,127





4,560,127Unrealized loss on securities available for sale 

    net of tax benefit of $503,290






(662,631)

(662,631)Comprehensive Income








3,897,496BALANCE, December 31, 2005
$25,589,320

$5,981,803

($1,008,998)

($765,258)

$29,796,867
F-6


1ST CONSTITUTION BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2005, 2004 and 2003




2005

2004

2003OPERATING ACTIVITIES:Net income
$4,560,127

$3,837,714

$3,228,500Adjustments to reconcile net incometo net cash provided by operating activities-Provision for loan losses
405,000

240,000

240,000Depreciation and amortization
523,441

385,106

327,446Net amortization of premiums on securities
139,507

350,168

1,190,853Gain on sale of loans held for sale
(1,444,521)

(1,373,660)

(1,284,913)Loss (gain) on sale of securities available for sale
271,871

(27,545)

-Originations of loans held for sale
(73,491,347)

(75,514,197)

(91,972,465)Income on Bank-owned life insurance
(235,430)

(312,496)

(261,301)Proceeds from sales of loans held for sale
68,106,015

82,365,958

94,150,868Deferred tax benefit
(233,589)

(149,400)

(122,557)Decrease (increase) in accruedinterest receivable
209,970

(275,478)

93,988(Increase) decrease in other assets
(113,591)

289,628

78,600Increase (decrease) increase in accrued interest payable
306,020

75,444

(305,326)Decrease (increase) increase in accruedexpenses and other liabilities
1,130,089

(245,600)

(734,717)Net cash provided by operating activities
133,562

9,645,642

4,628,976INVESTING ACTIVITIES:Purchases of securities -Available for sale
(15,511,405)

(34,116,716)

(62,222,441)Held to maturity
(9,969,659)

(6,883,726)

(198,102)Proceeds from maturities and prepaymentsof securities -Available for sale
17,074,576

29,011,317

57,073,223Held to maturity
360,173

894,985

1,164,762Proceeds from sales of securities availablefor sale
13,292,413

3,801,399

-Purchase of Bank owned life insurance
(1,950,000)

-

-Net increase in loans
(29,410,092)

(46,724,208)

(13,023,820)Capital expenditures
(796,074)

(1,347,808)

(412,021)Net cash used in investing activities
(26,910,068)

(55,364,757)

(17,618,399)FINANCING ACTIVITIES:Issuance of common stock, net
28,352

177,899

27,475Purchase of Treasury Stock
(1,260,939)

(549,555)

-Net increase in demand, savings and time deposits
28,922,434

31,533,309

21,204,260Net decrease in securities sold under agreements to repurchase
-

(1,921,015)

(633,800)Net advances (repayments) in other borrowings
3,300,000

9,700,000

(2,500,000)Net cash provided by financing activities
30,989,847

38,940,638

18,097,935Increase
	(decrease) in cash and
cash equivalents
4,213,341

(6,778,477)

5,108,512CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR
7,924,409

14,702,886

9,594,374CASH AND CASH EQUIVALENTSAT END OF YEAR
$12,137,750

$7,924,409

$14,702,886SUPPLEMENTAL DISCLOSURESOF CASH FLOW INFORMATION:Cash paid during the year for -Interest
$5,722,159

$4,469,851

$4,679,343Income taxes
2,040,016

2,429,565

1,909,578
F-7

1ST CONSTITUTION BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 AND 2003

1. Summary of Significant Accounting Policies

1ST Constitution Bancorp (the "Company") is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, and was organized under the laws of the State of New Jersey. The
Company is parent to 1st Constitution Bank (the "Bank"), a state chartered
commercial bank. The Bank provides community banking services to a broad range
of customers, including corporations, individuals, partnerships and other
community organizations in the central New Jersey area. The Bank conducts its
operations through its main office located in Cranbury, New Jersey, and operates
eight additional branch offices in downtown Cranbury, Hamilton Square,
Jamesburg, Montgomery, Perth Amboy, Plainsboro, West Windsor, and Princeton, New
Jersey and a loan production office in Fort Lee, New Jersey.

Principles Of Consolidation

The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, 1ST
Constitution Capital Trust I (the "Trust") (for periods prior to December 31,
2003) and the Bank and the Bank's wholly-owned subsidiaries, 1ST
Constitution Investment Company of Delaware, Inc. and FCB Assets Holdings, Inc.
All significant inter-company accounts and transactions have been eliminated. In
accordance with the Company's adoption of Financial Accounting Interpretation
No. 46, Consolidation of Variable Interest Entities, as revised December 2003,
the Company de-consolidated the accounts and related activity of 1st
Constitution Capital Trust I as of December 31, 2003.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Investment Securities

Investment Securities which the Bank has the intent and ability
to hold until maturity are classified as held to maturity and are recorded at
cost, adjusted for amortization of premiums and accretion of discounts using the
interest method.

Investment Securities which are held for indefinite periods of
time, which management intends to use as part of its asset/liability management
strategy, or that may be sold in response to changes in interest rates, changes
in prepayment risk, increased capital requirements or other similar factors, are
classified as available for sale and are carried at estimated market value,
except for Federal Home Loan Bank stock, which is carried at cost. Unrealized
gains and losses on such securities are recorded as a separate component of
shareholders' equity. Realized gains and losses, which are computed using the
specific identification method, are recognized on a trade date basis.

In November 2005, the FASB issued FASB Staff Position (FSP) FAS
115-1 and FAS 124-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments." This FSP provides guidance on determining
if an investment is considered to be impaired, if the impairment is
other-than-temporary and the measurement of an impairment loss. It also includes
accounting considerations subsequent to the recognition of an
other-than-temporary impairment and requires certain disclosures about
unrealized losses that have not been recognized as other-than-temporary
impairments. The guidance in this FSP amends Statement 115, Accounting for
Certain Investments in Debt and Equity Securities, and is effective for
reporting periods beginning after December 15, 2005. The Company is currently
accounting for investments in accordance with this guidance, and therefore, the
adoption of this FSP will not have a material impact on the Company's results of
operations or financial position.

Bank-Owned Life Insurance

The Company invests in bank-owned life insurance (BOLI). BOLI
involves the purchasing of life insurance by the Company on a chosen group of
employees. The Company is the owner and beneficiary of the policies. This pool
of insurance, due to the advantages of the Bank, is profitable to the Company.
This profitability is used to offset a portion of future benefit cost increases.
The Bank's deposits fund BOLI and the earnings from BOLI are recognized as
noninterest income.



F-8


Loans And Loans Held For Sale

Loans that management intended to hold to maturity are stated at
the principal amount outstanding, net of unearned income. Unearned income is
recognized over the lives of the respective loans, principally using the
effective interest method. Income from direct financing leases is recorded over
the life of the lease under the financing method of accounting. The investment
includes the sum of aggregate rentals receivable and the estimated residual
value of leased equipment, less deferred income. Interest income is generally
not accrued on loans, including impaired loans, where interest or principal is
90 days or more past due, unless the loans are adequately secured and in the
process of collection, or on loans where management has determined that the
borrowers may be unable to meet contractual principal and/or interest
obligations. When it is probable that, based upon current information, the Bank
will not collect all amounts due under the contractual terms of the loan, the
loan is reported as impaired. Smaller balance homogenous type loans, such as
residential loans and loans to individuals, which are collectively evaluated,
are excluded from consideration for impairment. Loan impairment is measured
based upon the present value of the expected future cash flows discounted at the
loan's effective interest rate or the underlying value of collateral for
collateral dependent loans. When a loan, including an impaired loan, is placed
on non-accrual, interest accruals cease and uncollected accrued interest is
reversed and charged against current income. Non-accrual loans are generally not
returned to accruing status until principal and interest payments have been
brought current and full collectibility is reasonably assured. Cash receipts on
non-accrual and impaired loans are applied to principal, unless the loan is
deemed fully collectible. Loans held for sale are carried at the aggregate lower
of cost or market value. Realized gains and losses on loans held for sale are
recognized at settlement date and are determined based on the cost, including
deferred net loan origination fees and the costs of the specific loans sold.

The Bank accounts for its transfers and servicing financial
assets in accordance with SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." The Bank originates
mortgages under a definitive plan to sell or securitize those loans and service
the loans owned by the investor. Upon the transfer of the mortgage loans in a
sale or a securitization, the Bank records the servicing assets retained in
accordance with SFAS No. 140. The Bank records mortgage servicing rights and the
loans based on relative fair values at the date of origination.

Mortgage loans originated and intended for sale in the secondary
market are carried at the lower aggregate cost or estimated fair value. Gains
and losses on sales are also accounted for in accordance with SFAS No. 134,
"Accounting for Mortgage Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise". This statement
requires that an entity engage in mortgage banking activities classify the
retained mortgage-backed security or other interest, which resulted from the
securitizations of a mortgage loan held for sale, based upon its ability and
intent to sell or hold these investments.

The Bank adopted SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," on July 1, 2003. Implementation
issue C13, "When a Loan Commitment Is Included in the Scope of Statement 133."
is included in SFAS No. 149. SFAS No. 149 amends SFAS No. 133 to add a scope
exception for borrowers (all commitments) and lenders (all commitments except
those relating to mortgage loans that will be held for sale). Statement 149 also
amends SFAS No. 133 to require a lender to account for loan commitments related
to mortgage loans that will be held for sale as derivatives. The Bank
periodically enters into commitments with the customers, which it intends to
sell in the future.

The Bank adopted FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others" (FIN 45), on January 1, 2003. FIN 45
requires a guarantor entity, at the inception of a guarantee covered by the
measurement provisions of the interpretation, to record a liability for the fair
value of the obligation undertaken in issuing the guarantee.

Allowance for Loan Losses

The allowance for loan losses is a valuation reserve available
for losses or expected on extensions of credit. Management maintains the
allowance for loan losses at a level that is considered adequate to absorb
losses on existing loans that may become uncollectible based upon an evaluation
of known and inherent risks in the portfolio. Additions to the allowance are
made by charges to the provision for loan losses. The evaluation considers a
complete review of the following specific factors: historical losses by loan
category, non-accrual loans, problem loans as identified through internal
classifications, collateral values, and the growth and size of the portfolio.
Additionally, current economic conditions and local real estate market
conditions are considered.

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 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 delinquency status, loan type, and
industry historical losses. These loan groups are then internally risk rated.



F-9


The watch list includes loans that are assigned a rating of
special mention, substandard, doubtful and loss. Loans criticized 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 worth and paying capacity
of the obligor or of the collateral pledged, if any. Loans classified doubtful
have all the weaknesses inherent in loans classified substandard with the added
characteristic that collection or liquidation in full, on the basis of current
conditions and facts, is highly improbable. Loans rated as doubtful in whole, or
in part, are placed in nonaccrual status. Loans classified as a loss are
considered uncollectible and are charged to the allowance for loan losses.

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

Loans are placed in a nonaccrual status when the ultimate
collectibility of principal or interest in whole, or part, is in doubt. Past-due
loans contractually past-due 90 days or more for either principal or interest
are also placed in nonaccrual status unless they are both well secured and in
the process of collection. Impaired loans, in accordance with SFAS 114, are
evaluated individually.

All, or part, of the principal balance of commercial and
commercial real estate loans, and construction loans are charged off to the
allowance as soon as it is determined that the repayment of all, or part, of the
principal balance is highly unlikely. Consumer loans are generally charged off
no later than 120 days past due on a contractual basis, earlier in the event of
bankruptcy, or if there is an amount deemed uncollectible.

Premises and Equipment

Premises and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed primarily on the
straight-line method over the estimated useful lives of the assets. Building,
furniture and fixtures, equipment and leasehold improvements are depreciated or
amortized over the estimated useful lives of the assets or lease terms, as
applicable. Estimated useful lives of building is forty years, furniture and
fixtures and equipment are three to fifteen years, and three to ten years for
leasehold improvements. Maintenance and repairs are charged to expense as
incurred.

Income Taxes

Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Other Real Estate

Other real estate is carried at the lower of fair value of the
related property, as determined by current appraisals less estimated costs to
sell, or the recorded investment in the property. Write-downs on these
properties, which occur after the initial transfer from the loan portfolio, are
recorded as operating expenses. Costs of holding such properties are charged to
expense in the current period. Gains, to the extent allowable, and losses on the
disposition of these properties are reflected in current operations.

Share-Based Compensation

Stock-based compensation is accounted for under the intrinsic
value based method as prescribed by Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees." Included below are the pro
forma disclosures required by SFAS No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation-Transaction and Disclosure" which assumes the fair value based
method of accounting had been adopted.



F-10
2005
        
        2004
        
        2003Net income -As reported
        
        $4,560,127
        
        $3,837,714
        
        $3,228,500Deduct: Stock-based
employee compensation
determined under fair
value based method for
stock options, net
of related tax effects
        
        40,277
        
        25,538
        
        17,548Pro forma
        
        $4,519,850
        
        $3,812,175
        
        $3,210,952Net income per share -As reported -Basic
        
        $1.32
        
        $1.11
        
        $0.94Diluted
        
        $1.27
        
        $1.08
        
        $0.89Pro forma -Basic
        
        $1.31
        
        $1.10
        
        $0.93Diluted
        
        $1.26
        
        $1.07
        
        $0.89

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 2005, 2004 and 2003; dividend yield of
0%; expected volatility of 35% in 2005, 2004 and 2003; risk-free interest rates
of 4.39%, 3.60% and 3.27%, respectively; and expected lives of 5 years.

FASB Statement No. 123 (revised 2004), Share-Based Payment.
Statement 123(R) addresses the accounting for share-based payment transactions
in which an enterprise receives employee services in exchange for (a) equity
instruments of the enterprise or (b) liabilities that are based on the fair
value of the enterprise's equity instruments or that may be settled by the
issuance of such equity instruments. Statement 123(R) requires an entity to
recognize the grant-date fair-value of stock options and other equity-based
compensation issued to employees in the income statement. The revised Statement
generally requires that an entity account for those transactions using the
fair-value-based method; and eliminates an entity's ability to account for
share-based compensation transactions using the intrinsic value method of
accounting in APB Opinion No. 25, Accounting for Stock Issued to Employees,
which was permitted under Statement 123, as originally issued. The revised
Statement requires entities to disclose information about the nature of the
share-based payment transactions and the effects of those transactions on the
financial statements. Statement 123(R) is effective for the Company beginning
January 1, 2006. The Company anticipates using the modified prospective transition
method with the adoption of this standard. The Company is assessing the impact
of adopting the new pronouncement and is currently unable to estimate its impact
on its consolidated financial statements.

Benefit Plans

The Company provides certain retirement benefits to employees
under a 401(k) plan. The Company's contributions to the 401(k) plan are expensed
as incurred. The Company also provides retirement benefits to certain employees
under a supplemental executive retirement plan. The plan is unfunded and the
Company accrues actuarial determined benefit costs over the estimated service
period of the employees in the plan.

Cash And Cash Equivalents

Cash and cash equivalents includes cash on hand, interest and
non-interest bearing amounts due from banks, Federal funds sold and short-term
investments. Generally, Federal funds are sold and short-term investments are
made for a one or two-day period.

Reclassifications

Certain reclassifications have been made to the prior period
amounts to conform with the current period presentation.

Net Income Per Share

Basic net income per share is calculated by dividing net income
by the weighted-average number of common shares outstanding during the period.
Diluted net income per share is calculated by dividing net income by the
weighted-average number of common shares outstanding plus the weighted-average
number of net shares that would be issued upon exercise of dilutive stock
options and grants pursuant to the treasury stock method. Weighted average
shares for the basic net income per share computation for the years ended
December 31, 2005, 2004 and 2003 were 3,452,317 3,448,548 and 3,441,125,
respectively. For the diluted net income per share computation, common stock
equivalents of 136,241, 135,669 and 168,015 are included for the years



F-11

ended December 31, 2005, 2004 and 2003, respectively. All share
information reported in the statements of income reflects a 5% stock dividend
declared December 15, 2005 paid on January 31, 2006 to shareholders of record on
January 17, 2006.

Comprehensive Income

The Company follows SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes standards to provide prominent disclosure of comprehensive income
items . Comprehensive income is the charge in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources .
The income tax effects allocated to comprehensive loss are as
follows :



December 31, 2005
        
        December 31, 2004Before Tax
        
        Tax Benefit
        
        Net of Tax
        
        Before Tax
        
        Tax Benefit
        
        Net of TaxAmount
        
        (Expense)
        
        Amount
        
        Amount
        
        (Expense)
        
        AmountUnrealized losses during the period
        ($1,375,153)
        
        $549,399
        
        ($825,754)
        
        ($377,957)
        
        $141,696
        
        ($236,261)Reclassification adjustment
        (271,871)
        
        108,748
        
        (163,123)
        
        27,545
        
        (10,266)
        
        17,279Other comprehensive loss
        ($1,103,282)
        
        $440,651
        
        ($662,631)
        
        ($405,502)
        
        $152,962
        
        ($253,540)

Comprehensive income consists of net income and net unrealized
gains (losses) on securities available for sale and is presented in the
consolidated statements of changes in shareholders' equity.

Variable Interest Entities

Management has determined that the 1st Constitution
Capital Trust I (the "Trust") qualifies as a variable interest entity under FASB
Interpretation 46 ("FIN 46"). The Trust issued mandatorily redeemable preferred
stock to investors and loaned the proceeds to the Company. The Trust holds, as
its sole asset, subordinated debentures issued by the Company in 2002. Prior to
December 31, 2003, the Trust was included in the Company's consolidated balance
sheet and statements of income. Subsequent to the issuance of FIN 46, the FASB
issued a revised interpretation, FIN 46(R), the provisions of which were
required to be applied to certain variable interest entities, including the
Trust, by March 31, 2004. The Company adopted the provisions under FIN 46 and
accordingly deconsolidated the Trust as of December 31, 2003.

In March 2005, the Federal Reserve Board adopted a final rule
that would continue to allow the inclusion of trust preferred securities in Tier
1 capital, but with stricter quantitative limits. Under the final rule, after a
five-year transition period, the aggregate amount of trust preferred securities
and certain other capital elements would be limited to 25% of Tier 1 capital
elements, net of goodwill. The amount of trust preferred securities and certain
other elements in excess of the limit could be included in Tier 2 capital,
subject to restrictions. Based on the final rule, the Company expects to include
all of its $5.2 million in trust preferred securities in Tier 1 capital.

Segment Information

SFAS No. 131, Segment Reporting, establishes standards for
public business enterprises to report information about operating segments in
their annual financial statements and requires that those enterprises report
selected information about operating segments in subsequent interim financial
reports issued to shareholders. It also established standards for related
disclosure about products and services, geographic areas, and major customers.
Operating segments are components of an enterprise, which are evaluated
regularly by the chief operating decision-maker in deciding how to allocate and
assess resources and performance. The Company's chief operating decision-maker
is the President and Chief Executive Officer. The Company has applied the
aggregation criteria set forth in SFAS No. 131 for its operating segments to
create one reportable segment, "Community Banking."

The Company's community banking segment consists of construction,
commercial, retail and mortgage banking. The community banking segment is
managed as a single strategic unit, which generates revenue from a variety of
products and services provided by the Company. For example, construction and
commercial lending is dependent upon the ability of the Company to fund itself
with retail deposits and other borrowings and to manage interest rate and credit
risk. This situation is also similar for consumer and residential real estate
lending.



F-12


2. Investment Securities

Amortized cost, gross unrealized gains and losses, and the
estimated fair value by security type as of December 31, 2005 and December 31,
2004 are as follows:


Gross

GrossAmortized

Unrealized

Unrealized

Fair2005

Cost

Gains

Losses

ValueAvailable for sale-U. S. Treasury securities andobligations of U.S. Governmentsponsored corporations and agencies

$34,032,814

$7,198

$977,560

$33,062,452Mortgage backed securities

29,250,341

90,286

302,193

29,038,434Obligations of State andPolitical subdivisions

3,855,988

1,332

65,063

3,792,257FHLB stock and other securities

3,371,673

0

28,158

3,343,515$70,510,815

$98,817

$1,372,974

$69,236,658Held to maturity-Mortgage backed securities

$5,807,730

$7,233

$206,275

$5,608,688Obligations of State andPolitical subdivisions

15,950,641

108,524

146,827

15,912,337$21,758,370

$115,757

$353,102

$21,521,026Gross

GrossAmortized

Unrealized

Unrealized

Fair2004

Cost

Gains

Losses

ValueAvailable for sale-U. S. Treasury securities andobligations of U.S. Governmentsponsored corporations and agencies

$57,848,615

$85,649

$538,057

$57,396,206Mortgage backed securities

20,877,821

412,179

53,848

21,236,152Obligations of State andPolitical subdivisions

3,883,354

3,070

47,662

3,838,762FHLB stock and other securities

3,149,734

0

32,205

3,117,529$85,759,524

$500,897

$671,772

$85,588,649Held to maturity-Mortgage backed securities

$604,705

$24,174

$0

$628,879Obligations of State andPolitical subdivisions

11,562,432

164,247

63,308

11,553,371$12,167,137

$188,421

$63,308

$12,292,250The amortized cost, estimated market value and weighted average
yield of debt securities at December 31, 2005, 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. Federal Home Loan Bank stock is included in "Held to
maturity - Due in one year or less."





F-13


Amortized
Cost
        
        Estimated
Market
Value
        
        Weighted
Average
Yield*Available for sale-Due in one year or less
        
        $4,620,617
        
        $4,611,487
        
        2.56%Due after one year through five years
        
        14,657,111
        
        14,359,729
        
        3.91%Due after five years through ten years
        
        15,131,245
        
        14,905,727
        
        4.73%Due after ten years
        
        36,101,843
        
        35,359,715
        
        4.95%Total
        
        $70,510,816
        
        $69,236,658
        
        4.53%Held to maturity-Due in one year or less
        
        $4,180,681
        
        $4,168,393
        
        2.24%Due after one year through five years
        
        3,067,600
        
        3,087,895
        
        5.52%Due after five years through ten years
        
        3,248,929
        
        3,215,590
        
        5.38%Due after ten years
        
        11,261,161
        
        11,049,148
        
        5.62%Total
        
        $21,758,371
        
        $21,521,026
        
        4.92%*computed on a tax equivalent basis.

Gross unrealized losses on securities and the estimated market
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 December 31, 2005 and December 31, 2004 are as follows:


2005
        
        Less than 12 months
        
        12 months or longer
        
        TotalFair
        
        Unrealized
        
        Fair
        
        Unrealized
        
        Fair
        
        UnrealizedValue
        
        Losses
        
        Value
        
        Losses
        
        Value
        
        LossesU.S. Treasury securities and obligationsof U.S. Government sponsoredcorporations
and agencies
        
        $16,355,981
        
        ($335,803)
        
        $13,395,221
        
        ($641,757)
        
        $29,751,202
        
        ($977,560)Mortgage backed securities
        
        25,099,031
        
        (333,369)
        
        3,905,417
        
        (175,099)
        
        29,004,448
        
        (508,468)Obligations of State and PoliticalSubdivisions
        
        9,849,588
        
        (88,838)
        
        4,597,019
        
        (123,052)
        
        14,446,607
        
        (211,890)FHLB stock and other securities
        
        0
        
        0
        
        1,435,715
        
        (28,158)
        
        1,435,715
        
        (28,158)Total temporarily impaired securities
        
        $51,304,600
        
        ($758,010)
        
        $23,333,372
        
        ($968,066)
        
        $74,637,972
        
        ($1,726,076)2004
        
        Less than 12 months
        
        12 months or longer
        
        TotalFair
        
        Unrealized
        
        Fair
        
        Unrealized
        
        Fair
        
        UnrealizedValue
        
        Losses
        
        Value
        
        Losses
        
        Value
        
        LossesU.S. Treasury securities and obligationsof U.S. Government sponsoredcorporations
and agencies
        
        $22,717,689
        
        ($181,022)
        
        $9,408,192
        
        ($357,035)
        
        $32,125,881
        
        ($538,057)Mortgage backed securities
        
        3,992,374
        
        (35,020)
        
        1,480,487
        
        (18,828)
        
        5,472,861
        
        (53,848)Obligations of State and Politicalsubdivisions
        
        8,988,653
        
        (110,970)
        
        0
        
        0
        
        8,988,653
        
        (110,970)FHLB stock and other securities
        
        0
        
        0
        
        1,428,345
        
        (32,205)
        
        1,428,345
        
        (32,205)Total temporarily impaired securities
        
        $35,698,716
        
        ($327,012)
        
        $12,317,024
        
        ($408,068)
        
        $48,015,740
        
        ($735,080)

U.S. Treasury obligations and direct obligations of U.S.
Government agencies: The unrealized losses on
investments in these securities were caused by interest rate increases. The
contractual terms of these investments do not permit the issuer to settle the
securities at a price less than the amortized cost of the investment. Because
the Company has the ability and intent to hold these investments until a market
price recovery or maturity, these investments are not considered other-than
temporarily impaired.



F-14



Mortgage-backed securities: The
unrealized losses on investments in mortgage-backed securities were caused by
interest rate increases. The contractual cash flows of these securities are
guaranteed by the issuer, 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. Because the decline in fair value is
attributable to changes in interest rates and not credit quality, and because
the Company has the ability and intent to hold these investments until a market
price recovery or maturity, these investments are not considered
other-than-temporarily impaired.

FHLB stock and other securities: The
investments in these securities with unrealized losses are comprised of
corporate trust preferred securities that mature in 2027. The unrealized losses
on these securities were caused by interest rate increases. The contractual
terms of the bonds do not allow the issuer to settle the securities at a price
less than the face value of the bonds, which is greater than the amortized cost
of the bonds. Because the decline in fair value is attributable to changes in
interest rates and not credit quality, and because the Company has the intent
and ability to hold these investments until a market price recovery or maturity,
these investments are not considered other-than-temporarily impaired.

The Company recorded net losses on sales of securities available
for sale of $271,871 in 2005 and net gains on sales of $27,545 in 2004. These
portfolio transactions in 2005 and 2004 were primarily the result of modest
portfolio restructurings. Their purpose was to improve the Company's longer-term
interest rate risk position. There were no sales of securities in 2003.

As of December 31, 2005 and 2004, securities having a book value
of $32,388,166 and $17,367,486, respectively, were pledged to secure public
deposits, other borrowings and for other purposes required by law.

3. Loans and Loans Held for Sale

Loans are as follows:

2005

2004Construction loans
$109,862,614

$88,027,024Residential real estate loans
8,602,975

9,815,366Commercial and commercial real estate
104,448,196

96,021,077Loans to individuals
16,441,994

16,002,619Lease financing
21,073

74,543All other
637,497

712,422$240,014,349

$210,653,051The Bank's business is concentrated in New Jersey, particularly
Middlesex, Mercer and Somerset counties. A significant portion of the total loan
portfolio is secured by real estate or other collateral located in these areas.

The Bank had residential mortgage loans held for sale of
$16,757,734 at December 31, 2005 and $9,927,769 at December 31, 2004. The Bank
sells residential mortgage loans in the secondary market on a non-recourse
basis. The related loan servicing rights are generally released to the
purchaser. Loans held for sale at December 31, 2005 and 2004 are residential
mortgage loans that the Bank intends to sell under forward contracts providing
for delivery to purchasers generally within a two month period. Changes in fair
value of the forward sales contracts, and the related loan origination
commitments and closed loans, were not significant at December 31, 2005 and
2004.

4. Allowance for Loan Losses

A summary of the allowance for loan losses is as follows:



2005

2004

2003Balance, beginning of year
$2,005,169

$1,786,632

$1,669,882Provision charged to operations
405,000

240,000

240,000Loans charged off
(52,803)

(22,273)

(123,666)Recoveries of loans charged off
4,009

810

416Balance, end of year
$2,361,375

$2,005,169

$1,786,632The amount of loans which were not accruing interest amounted to
$833,150 and $1,049,411 at December 31, 2005 and 2004, respectively. Impaired
loans totaled $833,150 and $1,049,411 at December 31, 2005 and 2004,
respectively. There was no valuation allowance on impaired loans at December 31, 2005 and
December 31, 2004. Loans 90 days or more past due and still accruing totaled
$209 at December 31, 2005, $63,130 at December 31, 2004 and zero at December 31,
2003.



F-15
Additional income before taxes amounting to $111,340, $80,698 and
$16,993 would have been recognized in 2005, 2004 and 2003, respectively, if
interest on all loans had been recorded based upon original contract terms. No
interest was recognized on non-accrual loans in 2005, 2004 or 2003. The average
recorded investment in impaired loans for the years ended December 31, 2005,
2004 and 2003, was approximately $941,280, $690,097, and $240,949, respectively.

5. Loans to Related Parties

Activity related to loans to directors, executive officers and
their affiliated interests during 2005 is as follows:

Balance, beginning of year

$4,491,192Loans granted

1,201,426Repayments of loans

(3,060,456)Balance, end of year

$2,632,162All such loans were made under customary terms and conditions and were current
as to principal and interest payments as of December 31, 2005 and 2004.

6. Premises And Equipment

Premises and equipment consist of the following:



Estimated
Useful Lives
        
        2005
        
        2004Land
        
        
        $241,784
        
        $ -Building
        40 Years
        
        735,579
        
        417,928Leasehold improvements
        10 Years
        
        1,379,023
        
        1,242,504Furniture and equipment
        3 - 15 Years
        
        2,845,959
        
        2,751,7495,202,345
        
        4,412,181Less Accumulated depreciation
        
        
        (2,605,493)
        
        (2,087,962)$2,596,852
        
        $2,324,219

7. Deposits

Deposits consist
of the following:
2005

2004DemandNon-interestbearing

$62,686,802

$50,794,581Interestbearing

102,479,894

110,082,085Savings

49,547,438

27,310,910Time

91,095,333

88,699,457$305,809,467

$276,887,033Individual time deposits $100,000 or greater amounted to
$3,385,000 and $13,178,791 at December 31, 2005 and 2004, respectively. As of
December 31, 2005, time deposits mature as follows: $66,082,431 in 2006;
$12,865,872 in 2007; $4,349,444 in 2008; $6,098,419 in 2009; and $1,699,167 in
2010.

8. Other Borrowings

The balance of other borrowings was $28,500,000 at December 31,
2005, consisting of long-term FHLB borrowings of $23,500,000 and overnight funds
purchased of $5,000,000. The balance of other borrowings at December 31, 2004
consisted of FHLB borrowings of $15,500,000 and overnight funds purchased of
$9,700,000.



F-16


During 2000, the Bank purchased three ten-year fixed rate
convertible advances from the FHLB. These advances, in the amounts of
$2,500,000, $5,000,000, and $5,000,000 bear interest at the rates of 5.50%,
5.34%, and 5.06%, respectively. These advances are convertible quarterly at the
option of the FHLB.

These advances are fully secured by marketable securities and
qualifying one-to-four family mortgage loans.

The FHLB advances as of December 31, 2005 mature as follows:



2005Within one year
        $ 8,000,000Over two to three years
        -Over three to four years
        3,000,000Over four to five years
        12,500,000Over five years
        -Total
        $23,500,000

These callable advances have original maturity dates of five to
ten years and call dates of one year to five years. After the original call
period expires, the borrowings are callable quarterly. Due to the call
provisions, expected maturities could differ from contractual maturities.

Securities sold under agreements to repurchase are summarized as
follows:



2005
        2004
        2003Balance outstanding at year end
        -
        -
        $1,921,015Weighted average interest rate at year end
        -
        1.27%
        1.15%Average daily balance outstanding during year
        -
        $1,674,172
        $2,290,866Weighted average interest rate during year
        -
        1.28%
        1.46%Highest month-end outstanding balance
        -
        $1,941,042
        $2,562,549

9. Redeemable Subordinated Debentures

On April 10, 2002, 1ST Constitution Capital Trust I
(the "Trust"), a statutory business trust and a wholly owned subsidiary of the
Company, issued $5.0 million of variable rate Trust Preferred Securities in a
pooled institutional placement transaction maturing April 22, 2032. The Trust
utilized the $5.0 million proceeds along with $155,000 invested in the Trust by
the Company to purchase $5,155,000 of subordinated debentures issued by the
Company. The Subordinated Debentures have terms that mirror the Trust Preferred
Securities. The Trust exists for the sole purpose of issuing Trust Preferred
Securities. These Subordinated Debentures constitute the sole assets of the
Trust. These Subordinated Debentures are redeemable in whole or part prior to
maturity after April 22, 2007. The Trust is obligated to distribute all proceeds
of a redemption of these Subordinated Debentures, whether voluntary or upon
maturity, to holders of the Trust Preferred Securities. The Company's obligation
with respect to the Trust Preferred Securities and the Subordinated Debentures,
when taken together, provides a full and unconditional guarantee on a
subordinated basis by the Company of the obligations of the Trust to pay amounts
when due on the Trust Preferred Securities.

Management has determined that the 1st Constitution
Capital Trust I (the "Trust") qualifies as a variable interest entity under FASB
Interpretation 46 ("FIN 46"). The Trust issued mandatorily redeemable preferred
stock to investors and loaned the proceeds to the Company. The Trust holds, as
its sole asset, subordinated debentures issued by the Company in 2002. Prior to
December 31, 2003, the Trust was included in the Company's consolidated balance
sheet and statements of income. Subsequent to the issuance of FIN 46, the FASB
issued a revised interpretation, FIN 46(R), the provisions of which were
required to be applied to certain variable interest entities, including the
Trust, by March 31, 2004. The Company adopted the provisions under FIN 46 and
accordingly deconsolidated the Trust as of December 31, 2003.



F-17



10. Income Taxes

The components of income tax expense (benefit) are summarized as
follows:


2005

2004

2003Federal-Current

$1,955,941

$1,836,439

$1,537,053Deferred

(198,849)

(127,181)

(104,330)1,757,887

1,709,258

1,432,723StateCurrent

372,050

273,301

362,411Deferred

(34,740)

(22,219)

(18,227)337,310

251,082

344,184$2,094,402

$1,960,340

$1,776,907A comparison of income tax expense at the Federal statutory rate in 2005, 2004
and 2003 to the Company's provision for income taxes is as follows:
2005

2004

2003Federal income tax

$2,262,540

$1,971,338

$1,701,838Add (deduct) effect of:State income taxes net of federal income tax effect

213,276

165,714

227,161Tax-exempt interest income

(224,699)

(131,270)

(106,000)Bank-owned life insurance

(80,046)

(106,249)

(88,842)Other items, net

(76,669)

60,807

42,750Provision for income taxes

$2,094,402

$1,960,340

$1,776,907The tax effects of existing temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are as follows:
2005

2004Deferred tax assets-Allowance for loan losses

$943,133

$800,864Employee Benefits

327,718

168,116Unrealized loss on securities available for sale

508,899

95,106Other

8,221

13,126Total deferred tax assets

1,787,971

1,077,212Deferred tax liabilities-Unrealized gain on securities available for sale

-

26,858Other

86,971

23,593Total deferred tax liabilities

86,971

50,451Net deferred tax asset

$1,701,000

$1,026,761Based upon the current facts, management has determined that it is more likely
than not that there will be sufficient taxable income in future years to realize
the deferred tax assets. However, there can be no assurances about the level of
future earnings.

11. Benefit Plans

Retirement Savings Plan

The Bank has a 401(K) plan which covers substantially all
employees with six months or more of service. The plan permits all eligible
employees to make basic contributions to the plan up to 12% of base
compensation. Under the plan, the Bank provided a matching contribution of 50%
in 2005, 2004 and 2003 up to 6% of base compensation. Employer contributions to
the plan amounted to $78,899 in 2005, $67,864 in 2004, and $57,830 in 2003.



F-18


Benefit Plans

The Bank maintains a salary continuation plan for key executives
and a director deferred compensation plan for its board members. The plans
provide for yearly retirement benefits to be paid over a specified period. In
addition, there is an officer group term replacement plan for divisional
officers. The present value of the benefits accrued under these plans as of
December 31, 2005 and 2004 is approximately $820,527 and $420,921, respectively,
and is included in other liabilities in the accompanying consolidated statements
of condition. Compensation expense of approximately $399,606, $420,921 and
$233,845 is included in the accompanying consolidated statement of income for
the years ended December 31, 2005, 2004 and 2003, respectively.

In connection with the benefit plans, the Bank purchased $6.0
million in life insurance policies on the lives of its executives, directors and
divisional officers. During 2005, the Bank purchased an additional $2.0 million.
The Bank is the owner and beneficiary of the policies. The cash surrender values
of the policies are approximately $8.8 million and $6.6 million as of December
31, 2005 and 2004, respectively.

12. Share Based Compensation

The Company's shareholders have approved stock option plans and
stock grant plans for directors and key employees. The Company has also entered
into an employment agreement pursuant to which additional options and stock
grants were awarded to its President. The Bank accounts for the award of stock
options in accordance with Accounting Principles Board Opinion No. 25, under
which no compensation cost has been recognized.

A summary of the status of the Company's stock options at
December 31, 2005, 2004 and 2003 and changes during the years then ended is
presented below:


2005
        
        2004
        
        2003Shares
        
        Weighted Avg. Price
        
        Shares
        
        Weighted Avg. Price
        
        Shares
        
        Weighted Avg. PriceOutstanding, at beginning of year
        198,833
        
        $5.99
        
        264,384
        
        $5.07
        
        299,066
        
        $4.59Granted
        18,690
        
        18.97
        
        12,128
        
        16.51
        
        8,567
        
        12.70Exercised
        (22,540)
        
        8.08
        
        (75,795)
        
        4.62
        
        (43,248)
        
        3.16Forfeited
        -
        
        -
        
        (1,883)
        
        10.25
        
        -
        
        -Outstanding, at end of year
        194,983
        
        $5.50
        
        198,833
        
        $5.99
        
        264,385
        
        $5.07Weighted average fair value of options granted during the year
        
        
        $7.55
        
        
        
        $12.76
        
        
        
        $10.65

The following table summarizes information about options outstanding at December
31, 2005:



Options outstanding
        
        Options exercisableWeightedNumber
        
        Average
        
        Weighted
        
        Number
        
        WeightedOutstanding at
        
        Remaining
        
        average
        
        Outstanding at
        
        AverageRange of
        
        December 31,
        
        Contractual
        
        exercise
        
        December 31,
        
        Exerciseexercise prices
        
        2005
        
        life in years
        
        price
        
        2005
        
        Price$3.01 - $4.45
        
        76,442
        
        0.9
        
        $3.07
        
        76,442
        
        $3.07$5.02 - $5.46
        
        49,793
        
        3.5
        
        5.45
        
        49,793
        
        5.45$7.58 - $10.90
        
        20,785
        
        4.5
        
        7.65
        
        20,444
        
        7.64$11.42 - $16.51
        
        29,273
        
        8.1
        
        13.90
        
        16,860
        
        13.27$16.95 - $19.76
        
        18,690
        
        9.8
        
        18.97
        
        3,738
        
        18.97$3.01 - $19.76
        
        194,983
        
        3.9
        
        $5.50
        
        167,277
        
        $5.30




F-19


13. Commitments and Contingencies

As of December 31, 2005, future approximate minimum rental
payments under non-cancelable operating leases are as follows:



2006
$676,9812007
656,3322008
614,5262009
610,8192010
618,811Thereafter
3,052,827$6,230,296

Rent expense aggregated $762,725, $694,997 and $557,592 for the
years ended December 31, 2005, 2004 and 2003, respectively.
Commitments With Off-Balance Sheet Risk

The statement of condition does not reflect various commitments
relating to financial instruments which are used in the normal course of
business. Management does not anticipate that the settlement of those financial
instruments will have a material adverse effect on the Company's financial
position. These instruments include commitments to extend credit and letters of
credit. These financial instruments carry various degrees of credit risk, which
is defined as the possibility that a loss may occur from the failure of another
party to perform according to the terms of the contract. As these off-balance
sheet financial instruments have essentially the same credit risk involved in
extending loans, the Bank generally uses the same credit and collateral policies
in making these commitments and conditional obligations as it does for
on-balance sheet investments. Additionally, as some commitments and conditional
obligations are expected to expire without being drawn or returned, the
contractual amounts do not necessarily represent future cash requirements.

Commitments to extend credit are legally binding loan commitments
with set expiration dates. They are intended to be disbursed, subject to certain
conditions, upon request of the borrower. The Bank receives a fee for providing
a commitment. The Bank was committed to advance $124,136,000 to its borrowers as
of December 31, 2005.

The Bank issues financial standby letters of credit that are
within the scope of FASB Interpretation No. 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. These are irrevocable undertakings by the Bank to
guarantee payment of a specified financial obligation. Most of the Bank's
financial standby letters of credit arise in connection with lending
relationships and have terms of one year or less. The maximum potential future
payments the Bank could be required to make equals the contract amount of the
standby letters of credit and amounted to $3,848,473 at December 31, 2005. The
Bank's recognized liability for financial standby letters of credit was $875,467
at December 31, 2004.

The Bank also enters into forward contracts to sell residential
mortgage loans it has closed (loans held for sale) or that it expects to close
(commitments to originate loans held for sale). These contracts are used to
reduce the Bank's market price risk during the period from the commitment date
to the sale date. The notional amount of the Bank's forward sales contracts was
approximately $16.8 million at December 31, 2005 and $9.9 million at December
31, 2004. Changes in fair value of the forward sales contracts, and the related
loan origination commitments and closed loans, were not significant at December
31, 2005 and 2004.

Litigation

The Company may, in the ordinary course of business, become a
party to litigation involving collection matters, contract claims and other
legal proceedings relating to the conduct of its business. The Company may also
have various commitments and contingent liabilities which are not reflected in
the accompanying consolidated statement of condition. Management is not aware of
any present legal proceedings or contingent liabilities and commitments that
would have a material impact on the Company's financial position or results of
operations.



F-20


14. Other Operating Expenses

The components of other operating expenses for the years ended
December 31, 2005, 2004 and 2003 are as follows:

2005

2004

2003Equipment expense
$491,735

$464,928

$434,933Marketing
292,352

274,095

225,860Computer services
623,001

636,076

498,081Regulatory, professional and other fees
1,102,691

542,001

548,440Office expense
401,490

462,586

312,055All other expenses
715,826

583,225

351,153$3,627,095

$2,962,911

$2,370,522

15. Regulatory Requirements

The Bank is subject to various regulatory capital requirements
administered by the Federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Bank's and the Company's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Bank's capital amounts
and classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios of Total and
Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital to average assets (as defined). As of December
31, 2005, the Bank met all capital adequacy requirements to which it is subject.

To be categorized as adequately capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. As of December 31, 2005, the most recent notification
from the Bank's primary regulator categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. There are no conditions
or events since that notification that management believes have changed the
Bank's category. Certain bank regulatory limitations exist on the availability
of Bank assets available for the payment of dividends without prior approval of
bank regulatory authorities.

Actual capital amounts and ratios for the Company and the Bank as
of December 31, 2005 and 2004 are as follows:


Actual

For CapitalAdequacy Purposes

To Be Well Capitalized 
Under PromptCorrective 
Action ProvisionsAmount

Ratio

Amount

Ratio

Amount

RatioAs of December 31, 2005 -CompanyTotal capital (to Risk Weighted Assets)
$37,923,500

13.30%

$22,817,040

8%

$28,521,300

≥10%Tier I Capital (to Risk Weighted Assets)
35,562,125

12.47%

11,408,520

≥4%

17,112,780

≥6%Tier I Capital (to Average Assets)
35,562,125

9.76%

14,580,112

≥4%

18,225,140

≥5%BankTotal capital (to Risk Weighted Assets)
$37,493,600

13.15%

$22,817,040

≥8%

$28,521,300

≥10%Tier I Capital (to Risk Weighted Assets)
35,132,225

12.32%

11,408,520

≥4%

17,112,780

≥6%Tier I Capital (to Average Assets)
35,132,225

9.64%

14,578,280

≥4%

18,222,850

≥5%As of December 31, 2004 -CompanyTotal capital (to Risk Weighted Assets)
$33,898,932

13.99%

$19,379,760

≥8%

$24,224,700

≥10%Tier I Capital (to Risk Weighted Assets)
31,893,763

13.17%

9,689,880

≥4%

14,534,820

≥6%Tier I Capital (to Average Assets)
31,893,763

10.16%

13,311,362

≥4%

16,639,203

≥5%BankTotal capital (to Risk Weighted Assets)
$33,566,803

13.86%

$19,374,000

≥8%

$24,217,500

≥10%Tier I Capital (to Risk Weighted Assets)
31,561,634

13.03%

9,687,000

≥4%

14,530,500

≥6%Tier I Capital (to Average Assets)
31,561,634

9.49%

13,308,440

≥4%

16,635,550

≥5%

The primary source of dividends paid to the Company's
shareholders is dividends paid to the Company by the Bank. Dividend payments by
the Bank to the Company are subject to the New Jersey Banking Act of 1948 (the
"Banking Act") and the Federal Deposit Insurance Act (the "FDIA"). Under the
Banking Act and the FDIA, the Bank may not pay any dividends if after paying the
dividend, it would be undercapitalized under applicable


F-21

capital requirements. In
addition to these explicit limitations, the federal regulatory agencies are
authorized to prohibit a banking subsidiary or bank holding company from
engaging in an unsafe or unsound banking practice. Depending upon the
circumstances, the agencies could take the position that paying a dividend would
constitute an unsafe or unsound banking practice.

16. Estimated Fair Value Of Financial Instruments

The following is a summary of fair value versus the carrying
value of the Bank's financial instruments. For the Bank, as for most financial
institutions, the bulk of its assets and liabilities are considered financial
instruments. Many of the Bank's 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 by the Bank for the purpose of this note. Changes in
assumptions could significantly affect these estimates.

Estimated fair values have been determined by the Bank using the
best available data and an estimation methodology suitable for each category of
financial instruments. Financial instruments, such as securities available for
sale and securities held to maturity, actively traded in the secondary market
have been valued using available market prices. Carrying values of cash and cash
equivalents and securities sold under agreements to repurchase approximate fair
value due to the short-term nature of these instruments. Other borrowings are
valued on a discounted cash flow method utilizing current discount rates for
instruments of similar remaining terms.

Financial instruments with stated maturities have been valued using a present
value discounted cash flow with a discount rate approximating current market for
similar assets and liabilities. For those loans and deposits with floating
interest rates, it is assumed that estimated fair values generally approximate
the recorded book balances.
The estimated fair values, and the recorded book balances, were as
follows:



December 31, 2005

December 31, 2004Carrying



CarryingValue

Fair Value

Value

Fair ValueSecurities available for sale
$69,236,658

$69,236,658

85,588,649

85,588,649Securities held to maturity
21,758,370

21,521,026

12,167,137

12,292,250Loans held for sale
16,757,734

16,757,734

9,927,881

9,927,881Gross loans
240,014,349

241,109,000

210,653,051

211,588,000Deposits
305,809,467

304,865,000

276,887,033

276,586,000Other borrowings
28,500,000

28,584,000

25,200,000

25,968,000

Loan commitments and standby letters of credit as of December 31,
2005 and 2004 are based on fees charged for similar agreements; accordingly, the
estimated fair value of loan commitments and standby letters of credit is
nominal.

17. Condensed Financial Statements of 1st Constitution
Bancorp (Parent Company Only)

The following financial statements of the Company should be read in conjunction
with the notes to the consolidated financial statements.



CONDENSED STATEMENTS OF CONDITION


December 31,
2005
        December 31,
2004Assets:Cash
        
        $31,328
        $21,021Investment securities available for sale
        
        155,000
        155,000Investment in subsidiaries
        
        34,361,360
        31,458,256Other assets
        
        404,179
        311,107Total Assets
        
        $34,951,867
        $31,945,384Liabilities And Shareholders' EquitySubordinated debentures
        
        $5,155,000
        $5,155,000Shareholders' equity
        
        29,796,867
        26,790,384Total Liabilities and Shareholder's Equity
        
        $34,951,867
        $31,945,384

F-22


CONDENSED STATEMENTS OF INCOME


Year ended December 31,2005
        2004
        2003Operating Income:Interest Income
        $10,875
        $8,156
        $7,994Total Operating Income
        10,875
        8,156
        7,994Operating Expense:Interest Expense
        361,699
        271,239
        265,845Other Expense
        32,004
        32,004
        32,004Total Operating Expense
        393,703
        303,243
        297,849Loss before income taxes and equity in undistributed income of
Subsidiaries
        (382,828)
        (295,087)
        (289,855)Federal income tax benefit
        (137,819)
        (106,231)
        (104,419)Loss before equity in undistributed income of subsidiaries
        (245,009)
        (188,856)
        (185,436)Equity in undistributed income of subsidiaries
        4,805,136
        4,026,569
        3,413,936Net Income
        $4,560,127
        $3,837,714
        $3,228,500

CONDENSED STATEMENTS OF CASH FLOWS


Year ended December 31,2005
        2004
        2003Cash Flows From Operating Activities:Net Income
        $4,560,127
        $3,837,714
        $3,228,500Adjustments:Increase in other assets
        (87,465)
        (65,057)
        (75,837)Equity in undistributed income of subsidiaries
        (4,805,136)
        (4,026,569)
        (3,413,936)Net cash used In Operating Activities
        (332,474)
        (253,912)
        (261,273)Cash Flows from Investing Activities:Repayment of investments in subsidiaries
        342,781
        261,693
        269,373Net cash provided by Investing Activities
        342,781
        261,693
        269,373Net increase in cash
        10,307
        7,781
        8,100Cash as of beginning of year
        21,021
        13,150
        5,050Cash as of end of year
        $31,328
        $21,021
        $13,150
18.
Unaudited Quarterly Financial Data



2005Dec. 31
        
        Sept. 30
        
        June 30
        
        March 31Summary of OperationsInterest income
        
        
        $5,952,682
        
        $5,518,301
        
        $5,036,307
        
        $4,820,782Interest expense
        
        
        1,750,817
        
        1,591,652
        
        1,405,594
        
        1,280,116Net interest income
        
        
        4,201,865
        
        3,926,649
        
        3,630,713
        
        3,540,666Provision for loan losses
        
        125,000
        
        85,000
        
        135,000
        
        60,000Net interest income after provisionfor loan losses
        
        
        4,076,865
        
        3,841,649
        
        3,495,713
        
        3,480,666Non-interest income
        
        
        445,694
        
        769,751
        
        809,614
        
        621,802Non-interest expense
        
        
        2,840,482
        
        2,855,005
        
        2,621,529
        
        2,570,209Income before income taxes
        
        1,682,077
        
        1,756,395
        
        1,683,798
        
        1,532,259Income taxes
        
        
        487,721
        
        567,529
        
        552,424
        
        486,728Net income
        
        
        $1,194,356
        
        $1,188,866
        
        $1,131,374
        
        $1,045,531Net income per share :Basic
        
        
        
        $0.36
        
        $0.34
        
        $0.32
        
        $0.30Diluted
        
        
        
        $0.34
        
        $0.33
        
        $0.31
        
        $0.29



F-23


2004Dec. 31
        
        Sept. 30
        
        June 30
        
        March 31Summary of OperationsInterest income
        
        
        $4,580,274
        
        $4,403,646
        
        $4,043,826
        
        $3,988,322Interest expense
        
        
        1,230,950
        
        1,211,334
        
        1,069,777
        
        1,033,234Net interest income
        
        
        3,349,324
        
        3,192,312
        
        2,974,049
        
        2,955,088Provision for loan losses
        
        60,000
        
        60,000
        
        60,000
        
        60,000Net interest income after provisionfor loan losses
        
        
        3,289,324
        
        3,132,312
        
        2,914,049
        
        2,895,088Non-interest income
        
        
        703,031
        
        647,897
        
        694,355
        
        511,959Non-interest expense
        
        
        2,278,380
        
        2,355,577
        
        2,236,092
        
        2,119,912Income before income taxes
        
        1,713,975
        
        1,424,632
        
        1,372,312
        
        1,287,135Income taxes
        
        
        638,864
        
        468,537
        
        441,611
        
        411,328Net income
        
        
        $1,075,111
        
        $956,095
        
        $930,701
        
        $875,807Net income per share :Basic
        
        
        
        $0.29
        
        $0.28
        
        $0.28
        
        $0.26Diluted
        
        
        
        $0.28
        
        $0.28
        
        $0.27
        
        $0.25












F-24


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 BANCORPDate: March 10, 2006
        By:
        /s/ ROBERT F. MANGANORobert F. ManganoPresident and Chief Executive Officer
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.


Signature
        Capacity
        Date/s/ ROBERT F. MANGANO
        President, Chief Executive Officer and Director
        March 10, 2006Robert F. Mangano
        (Principal Executive Officer)/s/ CHARLES S. CROW, III
        Chairman of the Board
        March 10, 2006Charles S. Crow, III/s/ DAVID C. REED
        Director
        March 10, 2006David C. ReedDirector
        March 10, 2006William M. Rue/s/ FRANK E. WALSH, III
        Director
        March 10, 2006Frank E. Walsh, III/s/ JOSEPH M. REARDON
        Senior Vice President and Treasurer
(Principal
        March 10, 2006Joseph M. Reardon
        Accounting Officer)




40


1ST CONSTITUTION BANCORP
INDEX TO EXHIBITS



Exhibit No.
        
        Description3
        (i)
        
        Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3(i) to the Company's Form 10-K filed with the
SEC on March 24, 2005).3
        (ii)
        
        Bylaws of the Company (incorporated by reference to Exhibit 3(ii) to
the Company's Form 10-QSB filed with the SEC on May 14, 2003)4.1
        
        
        Specimen Share of Common Stock (incorporated by reference to the
Company's Form 10-KSB filed with the SEC on March 22, 2002)4.2
        
        
        Amended and Restated Declaration of Trust of 1st
Constitution Capital Trust I dated as of April 10, 2002 among the
Registrant, as sponsor, Wilmington Trust Company, as Delaware and
institutional trustee, and the Administrators named therein
(incorporated by reference to the Company's Form 10-QSB filed with
the SEC on May 8, 2002)4.3
        
        
        Indenture dated as of April 10, 2002 between the Registrant, as
issuer, and Wilmington Trust Company, as trustee, relating to the
Floating Rate Junior Subordinated Debt Securities due 2032
(incorporated by reference to the Company's Form 10-QSB filed with
the SEC on May 8, 2002)4.4
        
        
        Guarantee Agreement dated as of April 10, 2002 between the
Registrant and the Wilmington Trust Company, as guarantee trustee
(incorporated by reference to the Company's Form 10-QSB filed with
the SEC on May 8, 2002)4.5
        
        
        Rights Agreement, dated as of March 18, 2004, between 1st
Constitution Bancorp and Registrar and Transfer Company, as Rights
Agent, including the form of Certificate of Amendment to the
Company's Certificate of Incorporation as Exhibit A thereto, the
form of Rights Certificates as Exhibit B thereto, and the Summary of
Rights as Exhibit C thereto. Pursuant to the Rights Agreement,
printed Rights Certificates will not be mailed until after the
Distribution Date (as such term is defined in the Rights Agreement)
(incorporated by reference to the Company's Form 8-A12G filed with
the SEC on March 18, 2004).10.1
        
        #
        1st Constitution Bancorp Supplemental Executive Retirement Plan,
dated as of October 1, 2002 (Incorporated by reference to the
Company's Form 10-QSB filed with the SEC on November 13, 2002)10.2
        
        #
        1st Constitution Bancorp Directors' Deferral Plan, dated as of
October 1, 2002 (Incorporated by reference to the Company's Form
10-QSB filed with the SEC on November 13, 2002)10.3
        
        #
        1st Constitution Bancorp Directors Insurance Plan, dated as of
October 1, 2002 (Incorporated by reference to the Company's Form
10-QSB filed with the SEC on November 13, 2002)10.4
        
        #
        1st Constitution Bancorp Form of Executive Life Insurance Agreement
(Incorporated by reference to the Company's Form 10-QSB filed with
the SEC on November 13, 2002)




Exhibit No.
        
        Description10.5
        
        #
        Amended and Restated 1990 Stock Option Plan for Key Employees, as
amended (incorporated by reference to Exhibit No. 10.1 to the
Company's Form 10-QSB filed with the SEC on August 9, 2002)10.6
        
        #
        1996 Employee Stock Option Plan, as amended (incorporated by
reference to Exhibit No. 10.2 to the Company's Form 10-QSB filed
with the SEC on August 9, 2002)10.7
        
        #
        2000 Employee Stock Option and Restricted Stock Plan (incorporated
by reference to Exhibit No. 6.3 to the Company's Form 10-SB filed
with the SEC on June 15, 2001)10.8
        
        #
        Directors Stock Option and Restricted Stock Plan (incorporated by
reference to Exhibit No. 6.4 to the Company's Form 10-SB filed with
the SEC on June 15, 2001)10.9
        
        #
        Employment Agreement between the Company and Robert F. Mangano dated
April 22, 1999 (incorporated by reference to Exhibit No. 6.5 to the
Company's Form 10-SB filed with the SEC on June 15, 2001)10.10
        
        #
        Agreement for Consulting Services between the Company and Edward D.
Knapp (incorporated by reference to Exhibit 10.10 to the Company's
Form 10-KSB filed with the SEC on March 20, 2003)10.11
        
        #
        Amendment to 1st Constitution Bancorp Directors Insurance Plan,
dated as of February 19, 2004 (incorporated by reference to Exhibit
10.11 to the Company's Form 10-K filed with the SEC on March 25,
2004)10.12
        
        #
        Amendment No. 1 to 1st Constitution Bancorp Supplemental Executive
Retirement Plan, effective January 1, 2004 (incorporated by
reference to Exhibit 10.12 to the Company's Form 10-Q filed with the
SEC on August 11, 2004)10.13
        
        #
        Change of Control Agreement, effective as of April 1, 2004, by and
between the Company and Joseph M. Reardon (incorporated by reference
to Exhibit 10.13 to the Company's Form 10-Q filed with the SEC on
August 11, 2004)10.14
        
        #
        Form of Stock Option Agreement under the 1st Constitution
Bancorp Employee Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 10.14 to the Company's Form
8-K filed with the SEC on December 22, 2004)10.15
        
        #
        Form of Restricted Stock Agreement under the 1st
Constitution Bancorp Employee Stock Option and Restricted Stock Plan
(incorporated by reference to Exhibit 10.15 to the Company's Form
8-K filed with the SEC on December 22, 2004)10.16
        
        #
        Employment Agreement between the Company and Robert F. Mangano dated
February 22, 2005 (incorporated by reference to Exhibit No. 10.16 to
the Company's Form 8-K filed with the SEC on February 24, 2005)10.17
        
        #
        The 1st Constitution Bancorp 2005 Equity Incentive Plan
(incorporated by reference to Appendix A of the Company's proxy
statement filed on April 15, 2005).




Exhibit No.
        
        Description10.18
        
        #
        Form of Restricted Stock Agreement under the 1st Constitution
Bancorp 2005 Equity Incentive Plan (incorporated by reference to
Exhibit 10.18 to the Company's Form 10-Q filed with the SEC on
August 8, 2005).10.19
        
        #
        Form of Nonqualified Stock Option Agreement under the 1st
Constitution Bancorp 2005 Equity Incentive Plan (incorporated by
reference to Exhibit 10.19 to the Company's Form 10-Q filed with the
SEC on August 8, 2005).10.20
        
        #
        Form of Incentive Stock Option Agreement under the 1st Constitution
Bancorp 2005 Equity Incentive Plan (incorporated by reference to
Exhibit 10.20 to the Company's Form 10-Q filed with the SEC on
August 8, 2005).21
        
        *
        Subsidiaries of the Company23.1
        
        *
        Consent of Independent Registered Public Accounting Firm - Grant
Thornton LLP23.2
        
        *
        Consent of Independent Registered Public Accounting Firm - KPMG LLP31.1
        
        *
        Certification of Robert F. Mangano, Chief Executive Officer of the
Company, pursuant to Securities Exchange Act Rule 13a-14(a).31.2
        
        *
        Certification of Joseph M. Reardon, Chief 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, Chief Executive Officer of the Company, and
Joseph M. Reardon, Chief Financial Officer of the Company.


*
#
        Filed herewith.
A management contract or compensatory plan or arrangement required
to be filed as an exhibit pursuant to Item 15(c) of Form 10-K.