UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q  (Mark One) x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2006 or o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
 SECURITIES EXCHANGE ACT OF 1934 For the transition period from  to Commission file Number: 
000-32891 1ST CONSTITUTION BANCORP (Exact Name of Registrant as Specified in Its Charter) New Jersey
    
    22-3665653(State of Other Jurisdiction 
of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)2650 Route 130, P.O. Box 634,
Cranbury, NJ
    
    08512(Address of Principal Executive Offices)
    
    (Zip Code)  (609) 655-4500 (Issuer's Telephone Number, Including Area Code)  (Former name, former address, and former fiscal year, if changed since last
report) Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    Yes x
No o Indicate by check mark whether the registrant 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 filerx Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).     Yes o
No x As of August 2, 2006, there were 3,453,674 shares of the
registrants common stock, no par value, outstanding.
  1ST CONSTITUTION BANCORP



FORM 10-Q



INDEX




PagePART I.
        FINANCIAL INFORMATIONItem 1.
        Financial Statements
        1Consolidated Balance Sheets
as of June 30, 2006
(unaudited)
and December 31, 2005
        1Consolidated Statements of Income
for the Three Months
and Six Months Ended 
June 30, 2006 (unaudited) and June 30, 2005
(unaudited)
        2Consolidated Statements of Cash Flows
for the Six
Months Ended
June 30, 2006 (unaudited) and June 30, 2005 (unaudited)
        3Notes to Consolidated Financial Statements (unaudited)
        4Item 2.
        Managements Discussion and Analysis of Financial
Condition
and Results of Operations
        9Item 3.
        Quantitative and Qualitative Disclosures About Market
Risk
        27Item 4.
        Controls and Procedures
        28PART II
        OTHER INFORMATIONItem 2.
        Unregistered Sales of Equity Securities and Use of
Proceeds
        29Item 4.
        Submission of Matters to a Vote of Security Holders
        30Item 6.
        Exhibits
        31SIGNATURES
        32
Table of Contents


PART I. FINANCIAL INFORMATION




Item 1.
        Financial Statements

1st Constitution Bancorp and Subsidiaries

Consolidated Balance Sheets


June 30, 2006
        December 31, 2005ASSETS
        (unaudited)CASH AND DUE FROM BANKS
        $7,997,038
        $9,394,929FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS
        1,020,804
        2,742,821Total cash and cash equivalents
        9,017,842
        12,137,750INVESTMENT SECURITIES:Available for sale, at fair value
        64,660,336
        69,236,658Held to maturity (fair value of $16,892,486 and $21,521,026 in 2006
and 2005, respectively)
        17,436,619
        21,758,370Total investment securities
        82,096,955
        90,995,028LOANS HELD FOR SALE
        12,950,636
        16,757,734LOANS
        264,520,397
        240,014,349Less- Allowance for loan losses
        (2,692,737)
        (2,361,375)Net loans
        261,827,660
        237,652,974PREMISES AND EQUIPMENT, net
        2,687,439
        2,596,852ACCRUED INTEREST RECEIVABLE
        1,992,167
        1,234,523BANK OWNED LIFE INSURANCE
        8,992,466
        8,828,932OTHER ASSETS
        2,060,566
        2,291,673Total assets
        $381,625,731
        $372,495,466LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIES:DepositsNon-interest bearing
        $64,384,645
        $62,686,802Interest bearing
        229,540,724
        243,122,665Total deposits
        293,925,369
        305,809,467OTHER BORROWINGS
        28,400,000
        28,500,000REDEEMABLE  SUBORDINATED DEBENTURES
        23,712,000
        5,155,000ACCRUED INTEREST PAYABLE
        1,628,711
        1,288,040ACCRUED EXPENSES AND OTHER LIABILITIES
        2,251,791
        1,946,092Total liabilities
        349,917,871
        342,698,599SHAREHOLDERS EQUITY:Common stock, no par value; 30,000,000 shares authorized; 3,490,535 shares issued and 3,443,240 and 3,436,995 outstanding as of June 30, 2006 and December 31, 2005, respectively
        25,526,412
        25,589,320Retained earnings
        8,593,824
        5,981,803Treasury Stock, shares at cost 47,295 shares and 53,540 at June 30, 2006
and December 31, 2005, respectively
        (890,522)
        (1,008,998)Accumulated other comprehensive loss
        (1,521,854)
        (765,258)Total shareholders equity
        31,707,860
        29,796,867Total liabilities and shareholders equity
        381,625,731
        $372,495,466

See accompanying notes to consolidated financial
statements


1


Table of Contents


1st Constitution Bancorp and SubsidiariesConsolidated Statements of Income(Unaudited)Three months ended June 30,
        
        Six months ended June 30,INTEREST INCOME
        
        2006
        
        2005
        
        2006
        
        2005Interest and fees on loans
        
        $5,822,356
        
        $4,126,583
        
        $10,999,172
        
        $8,038,521Interest on securitiesTaxable
        
        795,540
        
        734,494
        
        1,601,906
        
        1,482,753Tax-exempt
        
        147,052
        
        168,304
        
        307,843
        
        323,675Interest on Federal funds sold andshort-term investments
        
        24,674
        
        6,926
        
        33,338
        
        12,140Total interest income
        
        6,789,622
        
        5,036,307
        
        12,942,259
        
        9,857,089INTEREST EXPENSEInterest on deposits
        
        1,524,009
        
        968,462
        
        2,874,339
        
        1,921,652Interest on securities sold under agreement to
      repurchase and other borrowed funds
        
        490,796
        
        351,863
        
        957,133
        
        603,789Interest on redeemable subordinated debentures
        
        165,708
        
        85,269
        
        267,552
        
        160,269Total interest expense
        
        2,180,513
        
        1,405,594
        
        4,099,024
        
        2,685,710Net interest income
        
        4,609,109
        
        3,630,713
        
        8,843,235
        
        7,171,379Provision for loan losses
        
        170,000
        
        135,000
        
        340,000
        
        195,000Net interest income after provision for 
    loan losses
        
        4,439,109
        
        3,495,713
        
        8,503,235
        
        6,976,379NON-INTEREST INCOMEService charges on deposit accounts
        
        167,042
        
        170,385
        
        353,601
        
        329,245Gain on sale of loans held for sale
        
        174,930
        
        460,303
        
        493,619
        
        750,266Loss on sale of securities available for sale
        
        (99,714)
        
        -
        
        (99,714)
        
        -Income on bank-owned life insurance
        
        82,934
        
        55,496
        
        163,534
        
        121,610Other income
        
        149,517
        
        123,430
        
        293,255
        
        230,295Total other income
        
        474,709
        
        809,614
        
        1,204,295
        
        1,431,416NON-INTEREST EXPENSESalaries and employee benefits
        
        1,712,959
        
        1,412,547
        
        3,397,981
        
        2,766,543Occupancy expense
        
        378,143
        
        221,681
        
        697,127
        
        690,101Other operating expenses
        
        1,017,201
        
        987,301
        
        2,103,223
        
        1,735,094Total other expense
        
        3,108,303
        
        2,621,529
        
        6,198,331
        
        5,191,738Income before income taxes
        
        1,805,515
        
        1,683,798
        
        3,509,199
        
        3,216,057Income taxes
        
        448,251
        
        552,424
        
        897,177
        
        1,039,152Net income
        
        $1,357,264
        
        $1,131,374
        
        $2,612,022
        
        $2,176,905NET INCOME PER SHAREBasic
        
        $0.39
        
        $0.32
        
        $0.76
        
        $0.63Diluted
        
        $0.38
        
        $0.31
        
        $0.73
        
        $0.60

See accompanying notes to consolidated financial
statements



2
Table of Contents
1st Constitution Bancorp and Subsidiaries
Consolidated Statements Of Cash Flows

(Unaudited)





Six months ended June 30,2006
        
        2005OPERATING ACTIVITIES:Net income
        $2,612,022
        
        $2,176,905Adjustments to reconcile net income to
net cash provided by  operating activities-Provision for loan losses
        340,000
        
        195,000Depreciation and amortization
        288,413
        
        257,556Net amortization of premiums on securities
        29,515
        
        81,640Share-based compensation expense
        46,084
        
        -Gain on sale of loans held for sale
        (493,619)
        
        (750,266)Loss on sale of securities available for sale
        99,714
        
        -Originations of loans held for sale
        (26,714,241)
        
        (29,439,737)Income on Bank-owned life insurance
        (163,534)
        
        (121,610)Proceeds from sales of loans held for sale
        31,014,958
        
        29,689,236Decrease (increase) in accrued interest receivable
        (757,644)
        
        (129,819)(Increase) decrease in other assets
        411,674
        
        278,644Increase in accrued interest payable
        340,671
        
        148,148Increase (decrease) in accrued expenses and other
liabilities
        305,699
        
        773,310Net cash
provided by operating activities
        7,359,712
        
        3,159,007INVESTING ACTIVITIES:Purchases of securities -Available for sale
        (6,958,616)
        
        -Held to maturity
        -
        
        (4,169,000)Proceeds from maturities and prepayments of securities
-Available for sale
        7,479,257
        
        11,875,495Held to maturity
        4,311,655
        
        102,787Proceeds from sales of securities available for sale
        2,899,385
        
        -Net increase in loans
        (24,514,687)
        
        (15,158,952)Capital expenditures
        (279,000)
        
        (137,939)Net cash
used in investing activities
        (17,062,006)
        
        (7,487,609)FINANCING ACTIVITIES:Issuance of common stock, net
        44,956
        
        69,070Purchase of treasury stock
        (35,472)
        
        (1,184,528)Net increase in demand, savings and time deposits
        (11,884,098)
        
        1,964,933Proceeds from issuance of redeemable subordinated
debentures
        18,557,000
        
        -Net advances (repayments) in other borrowings
        (100,000)
        
        7,600,000Net cash
provided by financing activities
        6,582,386
        
        8,449,475Increase
(decrease) in cash and cash equivalents
        (3,119,908)
        
        4,120,873CASH AND CASH EQUIVALENTSAT BEGINNING OF PERIOD
        12,137,750
        
        7,924,409CASH AND CASH EQUIVALENTSAT END OF PERIOD
        $9,017,842
        
        $12,045,282SUPPLEMENTAL DISCLOSURESOF CASH FLOW INFORMATION:Cash paid during the period for -Interest
        $3,758,353
        
        $2,537,562Income taxes
        $0
        
        $590,000
See
accompanying notes to consolidated financial statements




3
Table of Contents

1st Constitution Bancorp and Subsidiaries

Notes To Consolidated Financial Statements

June 30, 2006 (Unaudited)



Summary of Significant Accounting Policies



The
accompanying unaudited Consolidated Financial Statements herein have been
prepared by 1st Constitution Bancorp (the Company), in accordance with
accounting principles generally accepted in the United States of America and
pursuant to the rules and regulations of the Securities and Exchange Commission
(the SEC). Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations. These Consolidated Financial Statements should be read in
conjunction with the audited financial statements and the notes thereto included
in the Companys Form 10-K for the year ended December 31, 2005, filed with the
SEC on March 10, 2006.



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



Net Income Per Common Share



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



Diluted net income per common share is calculated by dividing net income by the
weighted average number of shares outstanding, as adjusted for the assumed
exercise of potential common stock options, using the treasury stock method. 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.



The
following (unaudited) tables illustrate the reconciliation of the numerators and
denominators of the basic and diluted earnings per share (EPS) calculations.




Three Months Ended June 30, 2006Income
        
        Weighted-
average
shares
        
        Per share
amountBasic EPSNet income available to common  stockholders
        
        $1,357,264
        
        3,443,419
        
        $0.39Effect of dilutive securitiesOptions and Grants
        
        -
        
        118,013
        
        (.01)Diluted EPSNet income available to common stockholders plus
assumed conversion
        
        $1,357,264
        
        3,561,432
        
        $0.38All options have been included in the computation of
diluted earnings per share.



4
Table of Contents






Three Months Ended June 30, 2005Income
        
        Weighted-
average
shares
        
        Per share
AmountBasic EPSNet income available to common stockholders
        
        $1,131,374
        
        3,443,530
        
        $0.32Effect of dilutive securitiesOptions and Grants
        
        -
        
        177,264
        
        (0.01)Diluted EPSNet income available to common stockholders plus
assumed conversion
        
        $1,131,374
        
        3,620,794
        
        $0.31All options have been included in the computation of
diluted earnings per share.



Six Months Ended June 30, 2006Income
        
        Weighted-
average
shares
        
        Per share
AmountBasic EPSNet income available to common stockholders
        
        $2,612,022
        
        3,440,625
        
        $0.76Effect of dilutive securitiesOptions and Grants
        
        -
        
        118,162
        
        (.03)Diluted EPSNet income available to common stockholders plus
assumed conversion
        
        $2,612,022
        
        3,558,787
        
        $0.73All options have been included in the computation of
diluted earnings per share.



Six Months Ended June 30, 2005Income
        
        Weighted-
average
shares
        
        Per share
AmountBasic EPSNet income available to common stockholders
        
        $2,176,905
        
        3,447,042
        
        $0.63Effect of dilutive securitiesOptions and Grants
        
        -
        
        178,340
        
        (0.03)Diluted EPSNet income available to common stockholders plus
assumed conversion
        
        $2,176,905
        
        3,625,382
        
        $0.60All options have been included in the computation of
diluted earnings per share.



5Table of Contents





Share-based Compensation

Effective January 1, 2006, the Company has adopted FASB Statement No. 123 (R),
Share-Based Payment. Statement 123 (R) requires that compensation cost
relating to share-based payment transactions be recognized in financial
statements. The cost is measured based on the fair value of the equity or
liability instruments issued.

Statement 123 (R) covers a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans.

In
addition to the accounting standard that sets forth the financial reporting
objectives and related accounting principles, Statement 123 (R) includes an
appendix of implementation guidance that provides expanded guidance on measuring
the fair value of share-based payment awards.

Statement 123 (R) replaces FASB Statement No. 123, Accounting for Stock-Based
Compensation and supersedes APB Opinion No. 25, Accounting For Stock Issued to
Employees. Statement 123, as originally issued in 1995, established as
preferable a fair-value-based method of accounting for share-based payment
transactions with employees. However, that Statement permitted entities the
option of continuing to apply the guidance in Opinion 25, as long as the
footnotes to financial statements disclosed what net income would have been had
the preferable fair-value-based method been used. The impact of Statement 123
(R), if it had been in effect, on the net earnings and related per share amounts
for the years ended December 31, 2005, 2004 and 2003 was disclosed in the
Companys Form 10-K for the fiscal year ended December 31, 2005.

Because the Company adopted Statement 123 (R) using the modified prospective
transition method, prior periods have not been restated. Under this method, the
Company is required to record compensation expense for all awards granted after
the date of adoption and for the unvested portion of previously granted awards
that remain outstanding as of the beginning of the period of adoption. The
Company measured share-based compensation cost using the Black-Scholes option
pricing model for stock option grants prior to January 1, 2006 and anticipates
using this pricing mode for future grants. The Company did not grant options in
the first quarter of 2006. Forfeitures did not affect the calculated expense
based upon historical activities of option grantees.

At
June 30, 2006, the Company has four stock-based employee compensation plans.
Share-based compensation of $46,084 was recognized for the six months ended June
30, 2006, which related to the unvested portion of options to acquire shares of
Company common stock granted prior to January 1, 2006. Reported net income,
adjusting for share-based compensation that would have been recognized in the
three month and six-month periods ended June 30, 2005 if Statement 123 (R) had
been followed in that quarter, is presented in the following table:



6
Table of Contents








Three months ended
June 30, 2005
        
        Six months ended
June 30, 2005Net income -As reported
        $1,131,374
        
        $2,176,905Deduct: Share-based employee compensation
determined under fair value based method
for stock options, net of related tax effects
        (6,385)
        
        (12,770)Pro forma
        $1,124,989
        
        $2,164,135Net income per share -As reported -Basic
        $0.32
        
        $0.63Diluted
        $0.31
        
        $0.60Pro forma -Basic
        $0.32
        
        $0.63Diluted
        $0.31
        
        $0.60

The
adoption of Statement 123 (R) did not change the way that the Company has
accounted for stock awards in prior periods and therefore no such change is
reflected in the pro forma table above. The Company expenses the fair value of
stock awards determined at the grant date on a straight-line basis over the
vesting period of the award.

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.

On
May 30, 2006, 1ST Constitution Bancorp established 1ST
Constitution Capital Trust II, a Delaware business trust subsidiary (the Trust
II), for the sole purpose of issuing $18 million of trust preferred securities
(the Capital Securities). The Capital Securities were issued in connection
with a pooled offering involving approximately 50 other financial institution
holding companies. All of the Capital Securities were sold to a single pooling
vehicle.

The
proceeds from the sale of the Capital Securities were loaned to the Company
under 30-year floating rate junior subordinated debentures issued to Trust II by
the Company. The debentures are the only asset of Trust II. Interest payments on
the debentures flow through Trust II to the pooling vehicle. Payments of
distributions by Trust II to the pooling vehicle are guaranteed by the Company.



7
Table of Contents





Variable Interest Entities

Management has determined that the 1ST Constitution Capital Trust I
and the 1ST Constitution Capital Trust II (the Trusts) qualify as
variable interest entities under FASB Interpretation 46 (FIN 46). The Trusts
issued mandatorily redeemable preferred stock to investors and loaned the
proceeds to the Company. Each of the Trusts holds, as its sole asset,
subordinated debentures issued by the Company. Subsequent to the issuance of FIN
46 and prior to the establishment of Trust II, the FASB issued a revised
interpretation, FIN 46(R), the provisions of which were required to be applied
to certain variable interest entities, including Trust I, by March 31, 2004, at
which time Trust I was deconsolidated.

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 includes all of its $23.7
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.

Shareholders Equity

During the six months ended June 30, 2006 and 2005, the Company acquired 1,922
and 70,007 shares of its common stock for an aggregate purchase price of $35,472
and $1,184,528, respectively. All shares were acquired under the Companys
authorized common stock repurchase programs. The Company also issued 8,167 and
8,017 shares of common stock in conjunction with stock option exercises during
the six months ended June 30, 2006 and 2005, respectively. Additionally, during
the six months ended June 30, 2006 and 2005, net unrealized losses on the
Companys investment portfolio increased by $756,596 and $249,302, respectively.



8
Table of Contents



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

The
purpose of this discussion and analysis of the operating results and financial
condition at June 30, 2006 is intended to help readers analyze the accompanying
financial statements, notes and other supplemental information contained in this
document. Results of operations for the three and six month periods ended June
30, 2006 are not necessarily indicative of results to be attained for any other
period.

This discussion and analysis should be read in conjunction with the Consolidated
Financial Statements, notes and tables included elsewhere in this report and
Part II, Item 7 of the Companys Form 10-K (Managements Discussion and Analysis
of Financial Condition and Results of Operations) for the year ended December
31, 2005, as filed with the SEC on March 10, 2006.

General

Throughout the following sections, the Company refers to 1st
Constitution Bancorp and, as the context requires, its subsidiaries, 1st
Constitution Bank, 1st Constitution Capital Trust I, and 1st
Constitution Capital Trust II, the Bank refers to 1st Constitution
Bank, and the Trusts refers to 1st Constitution Capital Trust I and
1st Constitution Capital Trust II, collectively.

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

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

The
Trusts, subsidiaries of the Company, were created to issue trust preferred
securities to assist the Company to raise additional regulatory capital.

Forward-Looking Statements

When used in this and in future filings by the Company with the SEC, in the
Companys press releases and in oral statements made with the approval of an
authorized executive officer of the Company, the words or phrases will, will
likely result, could, anticipates, believes, continues, expects,
plans, will continue, is anticipated, estimated, project or outlook
or similar expressions (including confirmations by an authorized executive
officer of the Company of any such expressions made by a third party with
respect to the Company) are intended to identify forward-looking statements. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, each of which speak only as of the date made.

9
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Such statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected.

Factors that may cause actual results to differ from those results expressed or
implied, include, but are not limited to, those listed under Business, Risk
Factors and Managements Discussion and Analysis of Financial Condition and
Results of Operations in the Companys Annual Report on Form 10-K filed with
the SEC on March 10, 2006, such as the overall economy and the interest rate
environment; the ability of customers to repay their obligations; the adequacy
of the allowance for loan losses; competition; significant changes in
accounting, tax or regulatory practices and requirements; certain interest rate
risks; and risks associated with speculative construction lending. Although
management has taken certain steps to mitigate any negative effect of the
aforementioned items, significant unfavorable changes could severely impact the
assumptions used and have an adverse effect on profitability. 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.

Share-based Compensation

The
Company adopted the provisions of SFAS 123 (R) during the first quarter of
fiscal 2006 and accounts for share-based compensation in accordance with this
statement. The Company elected the modified prospective transition method, under
which prior periods are not restated. Under the fair value recognition
provisions of this statement, share-based compensation cost is measured at the
grant date based on the fair value of the award and is recognized as expense on
a straight-line basis over the requisite service period, which is the vesting
period.

The
Company currently uses the Black-Scholes option pricing model to determine the
fair value of stock options and other share-based compensation. The
determination of the fair value of share-based payment awards on the date of
grant using an option-pricing model is affected by the Companys stock price as
well as assumptions regarding a number of complex and subjective variables.
These variables include the price of the underlying stock, the Companys
expected stock price volatility over the expected term of the awards, actual and
projected employee stock option exercise behaviors, risk-free interest rate and
the expected annual dividend yield on the underlying stock.

The
Company anticipates using historical information to estimate expected life and
forfeitures within the valuation model, as permitted by the SECs Staff
Accounting Bulletin No. 107. The risk-free rate for periods within the expected
life of the option is based on the U.S. Treasury yield curve in effect at the
time of grant. All share-based payment awards are amortized on a straight-line
basis over the requisite service periods of the awards, which are generally the
vesting periods. Expected volatility is based on historical volatility of the
price of our common shares over the calculated expected life. The Company does
not anticipate paying any cash dividends in the foreseeable future and therefore
uses an expected dividend yield of zero in the option pricing model. Options
granted to non-employee directors of the Company have been included in the
calculations. The adoption of Statement 123 (R) did not change the way that the
Company has accounted for stock awards in prior periods.

10
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Developing these assumptions requires significant judgment on the part of the
Company and, generally, may involve analyzing all available historical data,
considering whether historical data is relevant to predicting future behavior,
making appropriate adjustments to historical data for future expectations,
supplementing or replacing company-specific historical data with data from other
supportable sources and appropriately weighting each of the inputs. These
assumptions are evaluated at each grant date. If factors change and the Company
employs different assumptions for estimating share-based compensation expense in
future periods or if the Company decides to use a different valuation model, the
future periods may differ significantly from what the Company has recorded in
the current period and could materially affect operating income, net income and
net income per share.

The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable, characteristics not present in the Companys option grants and
other share-based compensation. Existing valuation models, including the Black-Scholes
and lattice binomial models, may not provide reliable measures of the fair
values of the Companys share-based compensation. Consequently, there is a risk
that the Companys estimates of the fair values of share-based compensation
awards on the grant dates may bear little resemblance to the actual values
realized upon the vesting, exercise, expiration, early termination or forfeiture
of those share-based payments in the future. Certain share-based payments, such
as employee stock options, may expire worthless or otherwise result in zero
intrinsic value as compared to the fair values originally estimated on the grant
date and reported in the Companys financial statements. Alternatively, value
may be realized from these instruments that are significantly higher than the
fair values originally estimated on the grant date and reported in the Companys
financial statements. There currently is no market-based mechanism or other
practical application to verify the reliability and accuracy of the estimates
stemming from these valuation models, nor is there a means to compare and adjust
the estimates to actual values.

The
guidance in SFAS 123 (R) and SAB 107 is relatively new. The application of these
principles may be subject to further interpretation and refinement over time.
There are differences among valuation models, and there is a possibility that
the Company will adopt different valuation models in the future. This may result
in a lack of consistency in future periods and materially affect the fair value
estimate of share-based payments. It may also result in a lack of comparability
with other companies that use different models, methods and assumptions.

See
Note 1 of the financial statements for further information regarding the SFAS
123 (R) disclosures.




11
Table of Contents





RESULTS OF OPERATIONS



Three Months Ended June 30, 2006 and June 30, 2005



Summary



The
Company realized net income of $1,357,264 for the three months ended June 30,
2006, an increase of 20.0% from the $1,131,374 reported for the three months
ended June 30, 2005. Diluted net income per share was $0.38 for the three months
ended June 30, 2006 compared to $0.31 per diluted share for the three months
ended June 30, 2005.



Key
performance ratios continued to improve for 2006. Return on average assets and
return on average equity were 1.45% and 17.69% for the three months ended June
30, 2006 compared to 1.34% and 16.75%, respectively, for the three months ended
June 30, 2005.



All
prior year 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.



A
significant factor impacting the Companys net interest income has been the
rising level of market interest rates that evolved during the latter half of
2004 and continued through the second quarter of 2006. The Federal Reserve
Banks Open Market Committee (FOMC) held eight meetings in 2004, eight
meetings in 2005, and four meetings in the first and second quarters of 2006.
Beginning with the June 30, 2004 meeting, the FOMC increased short-term interest
rates by 25 basis points and continued with a series of 25 basis point increases
in each of the next four meetings in 2004, each of the eight meetings in 2005 as
well as in each of the four meetings in 2006. The immediate benefit of these
interest rate increases to the Companys investment security purchases and
floating rate assets resulted in a 117 basis point increase in the yield on
total interest-earning assets. In addition, managements ability to lag the
interest rate increases on deposits coupled with a tight discipline in deposit
pricing resulting in a 52 basis point increase to the Companys net interest
margin. Management expects the FOMC to continue its program of increasing the
targeted Federal Funds rate over the next few months and has structured the
Companys balance sheet to an asset sensitive position in order to continue to
benefit from this rising market rates environment.

In
June 2006, the Company added approximately $18 million in trust preferred
securities, which accounted for the increase in subordinated debt from the
second quarter of 2005.

Earnings Analysis



Interest Income



Interest income for the three months ended June 30, 2006 was $6,789,622,
increasing by 34.8% from the $5,036,307 reported in the three months ended June
30, 2005. This is primarily attributable to the rising interest rate environment
that evolved during the latter half of 2004 and continued through the first half
of 2006. For the three months ended June 30, 2006, average interest earning
assets increased $33,275,950 or 10.4%, to $352,241,613 compared to $318,965,663
for the three months ended June 30, 2005. The increase in interest





12
Table of Contents



income resulting from
increases in earning asset volume was complemented by an increase in the average
yield earned on these assets. For the three months ended June 30, 2006, the
average yield on earning assets increased 138 basis points to 7.81% from 6.43%
for the three months ended June 30, 2005.



Interest Expense



Interest expense for the three months ended June 30, 2006 was $2,180,513, an
increase of $774,919 from $1,405,594 reported for the three months ended June
30, 2005. Total average interest bearing liabilities increased by $23,286,123 to
$274,300,926 for the three months ended June 30, 2006 from $251,014,803 for the
three months ended June 30, 2005. The average cost of interest bearing
liabilities increased 94 basis points to 3.19% for the three months ended June
30, 2006 from 2.25% for the three months ended June 30, 2005, primarily as a
result of an increase in market-driven rates paid on deposits and short-term
borrowed funds.



Net
Interest Income



The
Companys net interest income for the three months ended June 30, 2006 was
$4,609,109, an increase of 26.9% from the $3,630,713 reported for June 30, 2005.
The net interest margin, on a fully taxable equivalent basis, increased 66 basis
points to 5.33% for the three months ended June 30, 2006 from 4.67% for the
three months ended June 30, 2005. The increase in the net interest margin was
primarily the result of interest earning assets repricing faster than interest
bearing liabilities in the rising current rate environment, combined with a
lower level of net amortization of premiums on mortgage-backed investment
securities. Net amortization expense decreased to $14,362 for the three months
ended June 30, 2006 versus $35,025 for the three months ended June 30, 2005.



Provision for Loan Losses



The
provision for loan losses was $170,000 for the three months ended June 30, 2006
and $135,000 for the three months ended June 30, 2005. 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 three months ended June 30,
2006 compared to the provision for the three months ended June 30, 2005 was due
principally to inherent risk related to growth, an increase in the amount of
loans on the watch list from June 30, 2005, the balances in non-accrual loans
and managements assessment of economic conditions in the Banks marketplace.
Net charge offs/recoveries amounted to $8,639 for the three months ended June
30, 2006 compared to no charge offs or recoveries for the three months ended
June 30, 2005. See Allowance for Loan Losses on page 21.





13
Table of Contents





Non-Interest Income



Total non-interest income for the three months ended June 30, 2006 was $474,709,
a decrease of $334,905, or 41.4%, from non-interest income of $809,614 for the
three months ended June 30, 2005.

Service charges on deposit accounts represent a significant source of
non-interest income. Service charge revenues decreased modestly to $167,042 for
the three months ended June 30, 2006 compared to $170,385 for the three months
ended June 30, 2005.

Gain on sale of loans held for sale decreased by $285,373, or 62.0%, to $174,930
for the three months ended June 30, 2006 when compared to $460,303 for the three
months ended June 30, 2005. The rising rate environment that existed throughout
2005 and continued into the second quarter of 2006 has had a negative impact on
the mortgage market and resultant secondary market loan sales.

Non-interest income also includes income from bank-owned life insurance (BOLI)
which amounted to $82,934 for the three months ended June 30, 2006 compared to
$55,496 for the three months ended June 30, 2005. The Bank purchased tax-free
BOLI assets to partially offset the cost of employee benefit plans and reduced
the Companys overall effective tax rate.

The
Bank also generates non-interest income from a variety of fee-based services.
These include safe deposit box rental, wire transfer service fees and Automated
Teller Machine fees for non-Bank customers. Increased customer demand for these
services contributed to the other income component of non-interest income
amounting to $149,517 for the three months ended June 30, 2006, compared to
$123,430 for the three months ended June 30, 2005.

Non-Interest Expense

Non-interest expenses increased by $486,774, or 18.6%, to $3,108,303 for the
three months ended June 30, 2006 from $2,621,529 for the three months ended June
30, 2005. The following table presents the major components of non-interest
expenses for the three months ended June 30, 2006 and 2005.




Non-interest ExpensesThree months ended
June 30,2006
        2005Salaries and employee benefits
        $1,712,959
        $1,412,547Occupancy expenses
        378,143
        221,681Equipment expense
        116,163
        121,913Marketing
        65,100
        82,061Computer services
        175,327
        158,222Regulatory, professional and other fees
        290,178
        269,577Office expense
        105,630
        107,009All other expenses
        264,803
        248,519$3,108,303
        $2,621,529





14

Table of Contents





Salaries and employee benefits, which represent the largest portion of
non-interest expenses, increased by $300,412, or 21.3%, to $1,712,959 for the
three months ended June 30, 2006 compared to $1,412,547 for the three months
ended June 30, 2005. Staffing levels overall increased to 93 full-time
equivalent employees at June 30, 2006 as compared to 89 full-time equivalent
employees at June 30, 2005. 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 continue to increase in 2006. See Share-Based
Compensation.

Occupancy expense increased by $156,462, or 70.6%, to $378,143 for the three
months ended June 30, 2006 compared to $221,681 for the three months ended June
30, 2005. On June 10, 2006, the Bank opened the new Plainsboro branch which is
now relocated in the new Plainsboro Village Center. This expanded location
allows the Bank to offer drive-through banking plus ATM services that were not
available at the previous location. The current period increase in occupancy
costs is primarily attributable to this branch relocation project.

An
important financial services industry productivity measure is the efficiency
ratio. The efficiency ratio is calculated by dividing total operating expenses
by net interest income plus non-interest income. An increase in the efficiency
ratio indicates that more resources are being utilized to generate the same or
greater volume of income, while a decrease would indicate a more efficient
allocation of resources. The Banks efficiency ratio increased modestly to 61.1%
for the three months ended June 30, 2006, compared to 59.1% for the three months
ended June 30, 2005.



Six Months Ended June 30, 2006 and June 30, 2005

Summary

The Company realized net income of $2,612,022 for the six months ended June 30,
2006, an increase of $435,117, or 20.0%, over the $2,176,905 realized for the
six months ended June 30, 2005. Net income per diluted share was $0.73 for the
six months ended June 30, 2006 compared to $0.60 per diluted share for the six
months ended June 30, 2005.

Key performance ratios continued to improve during the six months ended June 30,
2006. Return on average assets and return on average equity were 1.42% and
17.31%, respectively, for the six months ended June 30, 2006 compared to 1.31%
and 16.24%, respectively, for the six months ended June 30, 2005.

In June 2006, the Company added approximately $18 million in trust preferred
securities, which accounted for the increase in subordinated debt from the first
six months of 2005.

Earnings Analysis



Interest Income



For the six months ended June 30, 2006, total interest income was $12,942,259 an
increase of $3,085,170 or 31.3%, compared to total interest income of $9,857,089
for the six months ended June 30, 2005. The following table sets forth the
Companys consolidated average balances of
assets,
liabilities and shareholders equity as well as interest income and expense on
related items, and the Companys average rate for the six month periods ended
June 30, 2006 and 2005.



15
Table of Contents








Average Balance Sheets with Resultant Interest and
Rates(yields on a tax-equivalent basis)
        Six months ended June 30, 2006
        Six months ended June 30, 2005AverageBalance
        Interest
        AverageRate
        AverageBalance
        Interest
        AverageRateAssets:Federal Funds Sold/Short-Term Investments
        $882,764
        $33,338
        4.88%
        $822,842
        $12,140
        2.98%Securities:Collateralized Mortgage Obligations/
Mortgage Backed Securities
        67,267,461
        1,601,907
        4.76%
        78,188,981
        1,482,753
        3.82%States and Political Subdivisions
        16,826,536
        455,607
        5.42%
        18,342,690
        479,038
        5.27%Total
        84,093,998
        2,057,514
        4.89%
        96,531,671
        1,961,791
        4.10%Loan Portfolio:Commercial
        33,751,881
        1,463,592
        8.75%
        34,715,326
        1,233,274
        7.16%Installment
        2,212,513
        92,273
        8.41%
        2,378,152
        99,508
        8.44%Commercial Mortgage
        61,807,372
        2,113,402
        6.90%
        55,856,858
        1,945,530
        7.02%Construction  Wholesale
        118,763,546
        5,162,332
        8.77%
        84,589,968
        2,898,209
        6.91%Residential Mortgages
        8,373,845
        281,883
        6.79%
        9,322,166
        292,390
        6.32%Construction  Retail
        3,312,979
        145,893
        8.88%
        5,044,203
        173,425
        6.93%Home Equity
        14,349,464
        510,640
        7.18%
        13,190,545
        393,108
        6.01%SBA Loans
        9,289,579
        422,552
        9.17%
        5,407,559
        208,565
        7.78%All Other Loans
        13,071,426
        806,606
        12.44%
        9,142,206
        794,512
        17.53%Total
        264,896,605
        10,999,171
        8.37%
        219,646,984
        8,038,521
        7.38%Total Interest-Earning Assets
        349,873,367
        13,090,023
        7.54%
        317,001,497
        10,012,452
        6.37%Allowance for Loan Losses
        (2,521,830)
        
        
        (2,089,823)Cash and Due From Bank
        9,192,148
        
        
        8,589,865Other Assets
        15,117,761
        
        
        11,794,168Total Assets
        $371,661,446
        
        
        $335,295,707Interest-Bearing Liabilities:Money Market and NOW Accounts
        91,223,484
        680,438
        1.50%
        $103,936,299
        $588,311
        1.14%Savings Accounts
        43,010,509
        369,525
        1.73%
        25,683,040
        89,925
        0.71%Certificates of Deposit
        95,281,466
        1,824,376
        3.86%
        75,583,738
        1,061,988
        2.83%Certificates of Deposit of $100,000 and Over
        0
        0
        0.00%
        12,256,921
        181,428
        2.98%Federal Funds Purchased/Other Borrowed
Funds
        38,242,265
        957,133
        5.05%
        28,435,260
        603,789
        4.28%Redeemable Subordinated Debentures
        6,591,160
        267,552
        8.12%
        5,155,000
        160,269
        6.27%Total Interest-Bearing Liabilities
        274,348,884
        4,099,023
        3.01%
        251,050,258
        2,685,710
        2.16%Net Interest Spread
        
        
        4.53%
        
        
        4.21%Demand Deposits
        61,998,664
        
        
        54,459,629Other Liabilities
        4,882,757
        
        
        2,759,437Total Liabilities
        341,230,305
        
        
        308,269,324Shareholders' Equity
        30,431,141
        
        
        27,026,383Total Liabilities and Shareholders' Equity
        371,661,446
        
        
        335,295,707Net Interest Margin
        
        $8,991,000
        5.18%
        
        $7,326,742
        4.66%

The
current year increase in interest income resulted from a higher average balance
in the loan portfolio combined with higher average yields earned on the
securities and loan portfolios. Net amortization of premiums on mortgage-backed
investment securities decreased to $29,515 for the six months ended June 30,
2006 compared to $81,640 for the six months ended June 30, 2005. Average loans
increased $45,249,621, or 20.6%, to $264,896,605 for the six months ended June
30, 2006 from $219,646,984 for the six months ended June 30, 2005, while the
yield on the portfolio increased 99 basis points to 8.37% for the six months
ended June 30, 2006 from 7.38% for the six months ended June 30, 2005. The
higher loan yield reflected the higher interest rate environment that evolved
during the latter half of 2004 and continued through the first half of 2006.





16
Table of Contents



Average securities decreased $12,437,674, or 12.9%, from $96,531,671 for the six
months ended June 30, 2005 to $84,093,997 for the six months ended June 30,
2006, while the yield on the securities portfolio increased to 4.89% for the six
months ended June 30, 2006 from 4.10% for the six months ended June 30, 2005.



Overall, the yield on the Companys total interest-earning assets increased 117
basis points to 7.54% for the six months ended June 30, 2006 from 6.37% for the
six months ended June 30, 2005.



Interest Expense



Total interest expense for the six months ended June 30, 2006 was $4,099,024, an
increase of $1,413,314, or 52.6%, compared to $2,685,710 for the six months
ended June 30, 2005. The increase in interest expense for the current period
resulted primarily from the impact of higher levels of interest-bearing
liabilities priced at higher market interest rate levels. The average rate paid
on interest bearing liabilities for the six months ended June 30, 2006 increased
85 basis points to 3.01% from 2.16% for the six months ended June 30, 2005.



Net
Interest Income



The
Companys net interest income for the six months ended June 30, 2006 was
$8,843,235, an increase of $1,671,856, or 23.3%, compared to $7,171,379 for the
six months ended June 30, 2005. The net interest margin (on a tax-equivalent
basis), which is net interest income divided by average interest-earning assets,
was 5.18% for the six months ended June 30, 2006 compared to 4.66% for the six
months ended June 30, 2005.



Provision for Loan Losses



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 loan 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. As a result of this evaluation
process, the Companys provision for loan losses was $340,000 for the six months
ended June 30, 2006 and $195,000 for the six months ended June 30, 2005.



Non-Interest Income



Total non-interest income for the six months ended June 30, 2006 was $1,204,295,
a decrease of $227,121, or 15.9%, from non-interest income of $1,431,416 for the
six months ended June 30, 2005.



17
Table of Contents





Gain
on sale of loans held for sale represents the largest single source on
non-interest income. Gain on sale of loans held for sale for the six months
ended June 30, 2006 was $493,619 compared to $750,266 for the six months ended
June 30, 2005. The current rising interest rate environment in 2006 has had a
negative impact on the volume of mortgage loan originations and subsequent
secondary market mortgage loan sales.



Service charges on deposit accounts were $353,601 for the six months ended June
30, 2006 compared to $329,245 for the six months ended June 30, 2005. Service
charge income increased in 2006 principally due to managements actions to
restructure service charged and fees based on the results of a comparative study
of market fees performed in early 2005. This also resulted in an increase in the
other income component of non-interest income to $293,255 for the six months
ended June 30, 2006 compared to $230,295 for the six months ended June 30, 2005.



Income from Bank Owned Life Insurance (BOLI) amounted to $163,534 for the six
months ended June 30, 2006, compared to $121,610 for the six months ended June
30, 2005. The Company owns $8.0 million in tax-free BOLI assets which partially
offset the cost of employee benefit plans and reduced the Companys overall
effective tax rate.



Non-Interest Expense



Total non-interest expense for the six months ended June 30, 2006 was
$6,198,331, an increase of $1,006,593, or 19.4%, compared to non-interest
expense of $5,191,738 for the six months ended June 30, 2005.



The
following table presents the major components of non-interest expense for the
six months ended June 30, 2006 and 2005.




Non-interest ExpensesSix months ended June 30,2006
        2005Salaries and employee benefits
        $3,397,981
        $2,766,543Occupancy expense
        697,127
        690,101Equipment expense
        237,167
        240,119Marketing
        174,198
        170,122Computer services
        341,962
        302,401Regulatory, professional and other fees
        681,569
        480,445Office expense
        207,652
        200,878All other expenses
        460,675
        341,129$6,198,331
        $5,191,738

Salaries and employee benefits increased $631,438, or 22.8%, to $3,397,981 for
the six months ended June 30, 2006 compared to $2,766,543 for the six months
ended June 30, 2005. This increase reflects the increase in staffing levels plus
normal employee salary increases. 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 continue to increase in 2006.
See Share-Based Compensation.



18
Table of Contents





Regulatory, professional and other fees increased by $201,124, or 41.9%, to
$681,569 for the six months ended June 30, 2006 compared to $480,445 for the six
months ended June 30, 2005. The Company incurred increased consulting fees
primarily as a result of preparations for internal control compliance
requirements contained in Section 404 of the Sarbanes-Oxley Act for which the
Company must be in compliance at December 31, 2007.

The
Companys efficiency ratio increased modestly to 61.7% for the six months ended
June 30, 2006 compared to a ratio of 60.3% for the six months ended June 30,
2005.



Financial Condition



June 30, 2006 Compared with December 31, 2005

Total consolidated assets at June 30, 2006 totaled $381,625,731, increasing by
$9,130,265 from $372,495,466 at December 31, 2005.

Cash and Cash Equivalents

Cash and Cash Equivalentsat June
30, 2006 totaled $9,017,842 compared to $12,137,750 at December 31, 2005. Cash
and cash equivalents at June 30, 2006 consisted of cash and due from banks of
$7,997,038 and Federal funds sold/short term investments of $1,020,804. The
corresponding balances at December 31, 2005 were $9,394,929 and $2,742,821,
respectively.

Securities

The
Banks investment securities represented 22.1% of total assets at June 30, 2006
and 24.4% of total assets at December 31, 2005. Total investment securities
decreased $8,898,073, or 9.8%, at June 30, 2006 to $82,096,955 from $90,995,028
at December 31, 2005.

Investment Securities available for sale totaled $64,660,366 at June 30, 2006, a
decrease of $4,576,322, or 6.6%, from $69,236,658 at December 31, 2005. During
the first six months of 2006, $7,479,257 of securities available for sale
matured (predominantly U.S. government agency securities) and, among other uses,
assisted in funding the growth in the loan portfolio.

Investment Securities held to maturity totaled $17,436,619 at June 30, 2006, a
decrease of $4,321,751, or 19.9%, from $21,758,370 at December 31, 2005.





19
Table of Contents





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 Companys
primary lending focus continues to be construction loans, commercial loans,
owner-occupied commercial mortgage loans and tenanted commercial real estate
loans.

The
following table sets forth the classification of loans by major category at June
30, 2006 and December 31, 2005.




Loan Portfolio Composition
        
        June 30, 2006
        
        December 31, 2005Component
        
        Amount
        
        %of total
        
        Amount
        
        %of totalConstruction loans
        
        $128,870,184
        
        49%
        
        $109,862,614
        
        46%Residential real estate loans
        
        7,882,038
        
        3%
        
        8,602,975
        
        4%Commercial and industrial loans
        
        110,038,480
        
        42%
        
        104,448,196
        
        43%Loans to individuals
        
        17,229,966
        
        6%
        
        16,441,994
        
        7%Lease financing
        
        11,797
        
        0%
        
        21,073
        
        0%All other loans
        
        487,932
        
        0%
        
        637,497
        
        0%$264,520,397
        
        100%
        
        $240,014,349
        
        100.0%

The
loan portfolio increased $24,506,048, or 10.2%, at June 30, 2006 to $264,520,397
from $240,014,349 at December 31, 2005. The ability of the Company to enter into
larger loan relationships and managements philosophy of relationship banking
are key factors in the Companys strategy for loan growth. The ultimate
collectability of the loan portfolio and the recovery of the carrying amount of
real estate are subject to changes in the Companys market region's economic
environment and real estate market.

Non-Performing Assets

Non-performing assets consist of non-performing loans and other real estate
owned. Non-performing loans are composed of (1) loans on a non-accrual basis,
(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.

Non-accrual loans amounted to $827,904 at June 30, 2006, compared to $833,150 at
December 31, 2005. Management believes that non-performing loans at June 30,
2006 are generally well collateralized and do not present a major risk of
financial loss to the Company. The table below sets forth non-performing assets



20
Table of Contents



and risk elements in the Banks portfolio by type at June 30, 2006 and December 31, 2005.
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.

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.


Non-Performing Assets and Loans
        June 30
        December 312006
        2005Non-Performing loans:Loans 90 days or more past due and still accruing
        $-
        $209Non-accrual loans
        827,904
        833,150Total non-performing loans
        827,904
        833,359Other real estate owned
        -
        -Total non-performing assets
        $827,904
        $833,359Non-performing loans to total loans
        0.30%
        0.32%Non-performing assets to total assets
        0.22%
        0.22%

The
Company had no loans classified as restructured loans or potential problem loans
at June 30, 2006 and December 31, 2005. Impaired loans totaled $827,904 at June
30, 2006 and $833,150 at December 31, 2005.

Allowance for Loan Losses

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

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



21
Table of Contents


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
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,
management of 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.



22
Table of Contents





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 June 30, 2006, management believed that the
allowance for loan losses and nonperforming loans was adequate.

The
allowance for loan losses amounted to $2,692,737 at June 30, 2006, an increase
of $331,361 from December 31, 2005. The ratio of the allowance for loan losses
to total loans was 0.97% at June 30, 2006 and 0.92% at December 31, 2005,
respectively. 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
following table presents, for the periods indicated, an analysis of the
allowance for loan losses and other related data.


Allowance for Loan Losses
        June 30,
2006
        
        December 31,
2005
        
        June 30,
2005Balance, beginning of period
        $2,361,375
        
        $2,005,169
        
        $2,005,169Provision charged to operating expenses
        340,000
        
        405,000
        
        195,000Loans charged off:Construction loans
        -
        
        -
        
        -Residential real estate loans
        -
        
        -
        
        -Commercial and commercial real estate
        (11,154)
        
        (39,150)
        
        (3,543)Loans to individuals
        (285)
        
        (13,653)
        
        -Lease financing
        -
        
        -
        
        (6,639)All other loans
        -
        
        -
        
        -(11,439)
        
        (52,803)
        
        (10,182)Recoveries:Construction loans
        -
        
        -
        
        -Residential real estate loans
        -
        
        -
        
        -Commercial and commercial real estate
        -
        
        1,498
        
        -Loans to individuals
        2,800
        
        2,511
        
        -Lease financing
        -
        
        -
        
        749All other loans
        -
        
        -
        
        -2,800
        
        4,009
        
        749Net (charge offs) / recoveries
        (8,639)
        
        (48,794)
        
        (9,433)Balance, end of period
        $2,692,736
        
        $2,361,375
        
        $2,190,736Loans:At period end
        $277,471,033
        
        $256,772,083
        
        $236,231,218Average during the period
        264,896,605
        
        231,418,672
        
        219,646,984Net charge offs to average loans outstanding
        0.00%
        
        (0.02%)
        
        0.00%Allowance for loan losses to:Total loans at period end
        0.97%
        
        0.92%
        
        0.93%Non-performing loans
        325.25%
        
        283.36%
        
        182.46%



23
Table of Contents





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 Company offers a variety of products designed to attract and
retain customers, with the Companys primary focus being on building and
expanding long-term relationships.

Total deposits decreased $11,884,098, or 3.9%, to $293,925,369 at June 30, 2006
from $305,809,467 at December 31, 2005. This decrease in total deposits was
primarily the result of a $13,581,941 decrease in interest bearing deposits of
$243,122,665 at December 31, 2005 to $229,540,724 at June 30, 2006, which
management believes is the result of depositors with maturing time deposits
moving funds from the Bank to other alternatives yielding higher rates.

Other Borrowings

Other Borrowings are mainly comprised of fixed rate convertible advances from
the Federal Home Loan Bank (FHLB) and federal funds purchased. These
borrowings are primarily used to fund asset growth not supported by deposit
generation. The balance of other borrowings at June 30, 2006 consisted of
long-term FHLB borrowings of $23,500,000 and overnight funds purchases of
$4,900,000. The balance of other borrowings at December 31, 2005 consisted of
long-term FHLB borrowings of $23,500,000 and overnight funds purchased of
$5,000,000. FHLB advances are fully secured by marketable securities.

Shareholders Equity And Dividends

Shareholders equity at June 30, 2006 totaled $31,707,860, an increase of
$1,910,993, or 6.4%, from $29,796,867 at December 31, 2005. Book value per
common share rose to $9.21 at June 30, 2006 from $8.67 at December 31, 2005.

The
increase in shareholders equity and book value per share resulted primarily
from net income of $2,612,022 less the combined effects of stock buybacks and
the increase in unrealized holding losses on available for sale securities.

The
Companys stock is listed for trading on the Nasdaq Global Market, under the
symbol FCCY.

In
July 2005, the Board of Directors authorized a common stock repurchase program
that allows for the repurchase of a limited number of the Companys shares at
managements discretion on the open market. The Company undertook this
repurchase program in order to increase shareholder value. A table disclosing
repurchases of Company shares made during the quarter ended June 30, 2006 is set
forth under Part II, Item 2 of this report,Unregistered
Sales of Equity Securities and Use of Proceeds.



24
Table of Contents





Actual capital amounts and ratios for the Company and the Bank as of June 30,
2006 and December 31, 2005 are as follows:


Actual
        For Capital
Adequacy Purposes
        To Be Well Capitalized
Under Prompt Corrective
Action ProvisionAmount
        Ratio
        Amount
        Ratio
        Amount
        RatioAs of June 30, 2006 -CompanyTotal Capital to Risk Weighted Assets
        $55,860,451
        18.42%
        $24,261,200
        >8%
        $30,326,500
        >10%Tier 1 Capital to Risk Weighted Assets
        44,306,714
        14.61%
        12,130,600
        >4%
        18,195,900
        >6%Tier 1 Capital to Average Assets
        44,306,714
        11.92%
        14,866,440
        >4%
        18,583,050
        >5%BankTotal Capital to Risk
Weighted Assets
        $40,461,691
        13.34%
        $24,259,280
        >8%
        $30,324,100
        >10%Tier 1 Capital to Risk Weighted Assets
        37,768,954
        12.46%
        12,129,640
        >4%
        18,194,460
        >6%Tier 1 Capital to Average Assets
        37,768,954
        10.10%
        14,953,200
        >4%
        18,691,500
        >5%


As of December 31, 2005 -CompanyTotal Capital to Risk Weighted Assets
        $37,923,500
        13.30%
        $22,817,040
        >8%
        $28,521,300
        >10%Tier 1 Capital to Risk Weighted Assets
        35,562,125
        12.47%
        11,408,520
        >4%
        17,112,780
        >6%Tier 1 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 1 Capital to Risk Weighted Assets
        35,132,225
        12.32%
        11,408,520
        >4%
        17,112,780
        >6%Tier 1 Capital to Average Assets
        35,132,225
        9.64%
        14,578,280
        >4%
        18,222,850
        >5%

The
minimum regulatory capital requirements for financial institutions require
institutions to have a Tier 1 capital to average assets ratio of 4.0%, a Tier 1
capital to risk weighted assets ratio of 4.0% and a total capital to risk
weighted assets ratio of 8.0%. To be considered well capitalized, an
institution must have a minimum Tier 1 leverage ratio of 5.0%. At June 30, 2006,
the ratios of the Company exceeded the ratios required to be considered well
capitalized. It is managements goal to monitor and maintain adequate capital
levels to continue to support asset growth and continue its status as a
well-capitalized institution.

Liquidity

At
June 30, 2006, the amount of liquid assets remained at a level management deemed
adequate to ensure that contractual liabilities, depositors withdrawal
requirements, and other operational and customer credit needs could be
satisfied.

Liquidity 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



25
Table of Contents



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
Company has established a borrowing relationship with the FHLB which further
supports and enhances liquidity.

The
Consolidated Statements of Cash Flows present the changes in cash from
operating, investing and financing activities. At June 30, 2006, the balance of
cash and cash equivalents was $9,017,842.

Net
cash provided by operating activities totaled $7,359,712 in the six months ended
June 30, 2006 compared to $3,159,007 in the six months ended June 30, 2006. The
primary sources of funds are net income from operations adjusted for provision
for loan losses, depreciation expenses, and net proceeds from sales of loans
held for sale.

Net
cash used in investing activities totaled $17,062,006 in the six months ended
June 30, 2006 compared to $7,487,609 used in investing activities in the six
months ended June 30, 2005. The current period amount was the result of a
$24,514,687 increase in the loan portfolio combines with $6,958,616 in available
for sale security purchases for the six months ended June 30, 2006.

Net
cash provided by financing activities amounted to $6,582,386 in the six months
ended June 30, 2006 compared to $8,449,475 in the six months ended June 30,
2005. The current period amount resulted primarily from a decrease in deposits
offset by the $18,557,000 proceeds from the issuance of redeemable subordinated
debentures during the six months period ended June 30, 2006.

The
securities portfolio is also a source of liquidity, providing cash flows from
maturities and periodic repayments of principal. During the six months ended
June 30, 2006, maturities and prepayments of investment securities totaled
$11,790,912. Another source of liquidity is the loan portfolio, which provides a
flow of payments and maturities.

Interest Rate Sensitivity Analysis

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

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



26
Table of Contents




Item 3.
        Quantitative and Qualitative Disclosures About Market
Risk

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 June 30, 2006 and December
31, 2005, 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.

The
following tables set forth certain information relating to the Companys
financial instruments that are sensitive to changes in interest rates,
categorized by expected maturity or repricing and the instruments fair value at
June 30, 2006 and December 31, 2005.

Market Risk Analysis

June 30, 2006


Change in Interest Rates
        Flat
        -200bp
        +200bpEconomic
Value of Portfolio Equity
        $45,481,000
        $46,114,000
        $40,292,000Change
        
        $633,000
        ($5,190,000)Change as a
Percentage of Assets
        
        0.17%
        (1.36%)

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
Percentage of Assets
        
        (0.43%)
        (0.77%)





27

Table of Contents




Item 4.
        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 design and operation of the Companys disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this quarterly report. Disclosure controls and procedures include
those designed to ensure that information required to be disclosed is
accumulated and communicated to the Companys management as appropriate to allow
timely decisions regarding disclosure. Based upon such evaluation, the Companys
chief executive officer and chief financial officer have concluded that the
Companys disclosure controls and procedures are effective as of the end of the
period covered by this quarterly report.

The
Companys 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 that have materially affected, or are reasonably likely
to materially affect, the Companys internal control over financial reporting.







28
Table of Contents

PART II. OTHER INFORMATION


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

On
July 21, 2005, the Board of Directors authorized a 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 June 30, 2006.

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
        EndingApril 1, 2006
        April 30, 2006
        -
        -
        -
        170,172May 1, 2006
        May 31, 2006
        -
        -
        -
        170,172June 1, 2006
        June 30, 2006
        250
        $18.75
        250
        169,922Total
        250
        $18.75
        250
        169,922_________________




(1)
        The Companys common stock repurchase program covers a
maximum of 173,617 shares of common stock of the Company,
representing 5% of the outstanding common stock of the Company on
July 21, 2005, as adjusted for the 5% stock dividend paid January
31, 2006.





29
Table of Contents



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



The
Companys Annual Meeting of Shareholders (the Annual Meeting) was held on May
18, 2006



There were present at the Annual Meeting in person or by proxy shareholders
holding an aggregate of 3,149,987 shares of common stock of a total number of
3,445,162 shares of common stock issued, outstanding and entitled to vote at the
Annual Meeting.



At
the Annual Meeting, Charles S. Crow III and David C. Reed were re-elected as a
Class I directors of the Company, with 3,132,867 shares votes cast for and
17,120 shares withheld. Directors whose term of office continued following the
meeting were Frank E. Walsh, III, Robert F. Mangano, and William M. Rue.



A
vote of the shareholders was taken at the Annual Meeting on the proposal to
approve the adoption of the 1ST Constitution Bancorp 2006 Directors
Stock Plan. The proposal was approved by the shareholders with 1,622,719 shares
voting in favor of the proposal and 200,746 shares voting against the proposal.
There were 1,621,697 abstentions and broker non-votes.



A
vote of the shareholders was taken at the Annual Meeting on the proposal to
approve and ratify the appointment of Grant Thornton LLP as the Companys
independent auditor for the year ending December 31, 2006. The proposal was
approved by the shareholders, with 3,129,713 shares voting in favor of the
proposal, and 18,178 shares voting against the proposal. There were 297,271
abstentions and broker non-votes.









30
Table of Contents



Item 6.Exhibits.




3(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)10.1
        
        1st Constitution Bancorp 2006 Directors Stock Plan
(incorporated by reference to Exhibit 10.1 to the Companys Form 8-K
filed with the SEC on May 19, 2006)10.2
        
        Form of Nonqualified Stock Option Agreement under the
1st Constitution Bancorp 2006 Directors Stock Plan (incorporated by
reference to Exhibit 10.2 to the Companys Form 8-K filed with the
SEC on May 19, 2006)10.3
        
        Form of Restricted Stock Agreement under the 1st
Constitution Bancorp 2006 Directors Stock Plan (incorporated by
reference to Exhibit 10.3 to the Companys Form 8-K filed with the
SEC on May 19, 2006)10.4
        
        Amended and Restated Declaration of Trust of 1st
Constitution Capital Trust II, dated as of June 15, 2006, among 1st
Constitution Bancorp, as sponsor, the Delaware and institutional
trustee named therein, and the administrators named therein
(incorporated by reference to Exhibit 10.1 to the Companys Form 8-K
filed with the SEC on June 16, 2006)10.5
        
        Indenture, dated as of June 15, 2006, between 1st
Constitution Bancorp, as issuer, and the trustee named therein,
relating to the Floating Rate Junior Subordinated Debt Securities
due 2036 (incorporated by reference to Exhibit 10.2 to the Companys
Form 8-K filed with the SEC on June 16, 2006)10.6
        
        Guarantee Agreement, dated as of June 15, 2006, between
1st Constitution Bancorp and the guarantee trustee named therein
(incorporated by reference to Exhibit 10.3 to the Companys Form 8-K
filed with the SEC on June 16, 2006)31.1
        *
        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

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SIGNATURES

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






1ST CONSTITUTION BANCORP




Date: August 7, 2006
        By:
        ROBERT F. MANGANORobert F. ManganoPresident and Chief Executive Officer(Principal Executive Officer)




Date: August 7, 2006
        By:
        JOSEPH M. REARDONJoseph M. ReardonSenior Vice President and Treasurer(Principal Accounting Officer)













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