##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)



|CHECK BOX |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--------- |  | ----------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2001

or



|BOX |  | 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 or 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 officers)                     |  | (Zip Code)                         



(609) 655-4500
(Registrant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 subjected to
such filing requirements for the past 90 days.

BOX  Yes      CHECK BOX  No

As of November 2, 2001 there were 1,331,705 shares of common stock, no par
value outstanding.

1



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TABLE OF CONTENTS



|                            |                                                                                                |  |  |  |  |  |  | 
|--------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                            | Consolidated Statements Of Condition                                                          
|                            | Consolidated Statements of Income                                                             
|                            | Consolidated Statements Of Cash Flows                                                         
|                            | Notes To Consolidated Financial Statements                                                    
|                            | ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|                            | Market Risk Analysis                                                                          
|Part II  OTHER INFORMATION
|                            | Item 1    Legal Proceedings                                                                  
|                            | Item 2    Changes in Securities                                                              
|                            | Item 3    Defaults upon Senior Securities                                                    
|                            | Item 4    Submission of Matters to a Vote of Security Holders                                
|                            | Item 5    Other Information                                                                  
|Signatures                 



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##### Table of Contents



1st Constitution Bancorp

FORM 10-QSB

INDEX

|           |  |   |  |                                                                                      
|---------- |  | - |  | -------------------------------------------------------------------------------------
|PART I     |  | - |  | FINANCIAL INFORMATION                                                                
|          
|          
|          
|          
|ITEM 1     |  | - |  | Financial Statements and Notes to
Consolidated Financial Statements                  
|          
|          
|          
|          
|ITEM 2     |  | - |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations
|          
|          
|          
|          
|ITEM 3     |  | - |  | Market Risk                                                                          
|          
|          
|          
|          
|PART II    |  | - |  | OTHER INFORMATION                                                                    
|          
|          
|          
|          
|ITEM 1     |  | - |  | Legal Proceedings                                                                    
|          
|          
|          
|          
|ITEM 2     |  | - |  | Changes in Securities                                                                
|          
|          
|          
|          
|ITEM 3     |  | - |  | Defaults upon Senior Securities                                                      
|          
|          
|          
|          
|ITEM 4     |  | - |  | Submission of Matters to a Vote of Security Holders                                  
|          
|          
|          
|          
|ITEM 5     |  | - |  | Other Information                                                                    
|          
|          
|          
|          
|ITEM 6     |  | - |  | Exhibits and Reports on Form 8-K                                                     
|          
|          
|          
|          
|SIGNATURES |  |   |  |                                                                                      

2



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##### Table of Contents






1st Constitution Bancorp and Subsidiary
Consolidated Statements Of Condition

|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                   |            |            |             | 
|------------------------------------------------------------------------------------------------------------------------ | ---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | -------------------------- | ---------- | ------------------ | ----------- | ----------------- | ---------- | ---------- | ----------- | 
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            | September 30, 2001 |             | December 31, 2000
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|ASSETS                                                                                                                   |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|CASH AND DUE FROM BANKS                                                                                                  |                  | $                                                                                                                                                                                      | 5,732,109            |                            |            | $                  | 6,839,966   |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS                                                                              |                  |                                                                                                                                                                                        | 19,583,919           |                            |            |                    | 700,000     |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  | Total cash and cash equivalents                                                                                                                                                        |                      |                            | 25,316,028 |                    |             |                   | 7,539,966  |           
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|SECURITIES                                                                                                               |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  | Available for sale, at market value                                                                                                                                                    |                      |                            | 60,060,429 |                    |             |                   | 48,537,571 |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  | Held to maturity (market value of $6,438,573 and $8,528,995 in 2001
and 2000, respectively)                                                                                            |                      |                            | 6,247,340  |                    |             |                   | 8,503,675  |           
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         | Total securities |                                                                                                                                                                                        |                      | 66,307,769                 |            |                    |             | 57,041,246        |           
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|LOANS HELD FOR SALE                                                                                                      |                  |                                                                                                                                                                                        | 3,549,294            |                            |            |                    | 1,306,806   |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|LOANS                                                                                                                    |                  |                                                                                                                                                                                        | 124,695,412          |                            |            |                    | 110,631,471 |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  | Less- Allowance for loan losses                                                                                                                                                        |                      |                            | (1,314,582 | )                  |             |                   | (1,132,555 | )         
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      | Net loans                  |            |                    | 123,380,830 |                   |            |            | 109,498,916 | 
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|PREMISES AND EQUIPMENT, net                                                                                              |                  |                                                                                                                                                                                        | 950,070              |                            |            |                    | 939,838     |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|ACCRUED INTEREST RECEIVABLE                                                                                              |                  |                                                                                                                                                                                        | 1,191,124            |                            |            |                    | 1,287,741   |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|OTHER ASSETS                                                                                                             |                  |                                                                                                                                                                                        | 516,769              |                            |            |                    | 1,225,862   |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Total assets                                                                                                             |                  | $                                                                                                                                                                                      | 221,211,884          |                            |            | $                  | 178,840,375 |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                     |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|LIABILITIES:                                                                                                             |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  | Deposits                                                                                                                                                                               |                      |                            |            |                    |             |                   |            |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  |                                                                                                                                                                                        | Non-interest bearing |                            | $          | 32,108,487         |             |                   | $          | 31,462,624 |            
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  |                                                                                                                                                                                        | Interest bearing     |                            |            | 131,552,332        |             |                   |            | 97,730,417 |            
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      | Total deposits             |            |                    | 163,660,819 |                   |            |            | 129,193,041 | 
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE                                                                           |                  |                                                                                                                                                                                        | 22,126,700           |                            |            |                    | 16,835,430  |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|OTHER BORROWINGS                                                                                                         |                  |                                                                                                                                                                                        | 15,500,000           |                            |            |                    | 15,500,000  |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|ACCRUED INTEREST PAYABLE                                                                                                 |                  |                                                                                                                                                                                        | 1,654,277            |                            |            |                    | 1,541,439   |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|ACCRUED EXPENSES AND OTHER LIABILITIES                                                                                   |                  |                                                                                                                                                                                        | 838,260              |                            |            |                    | 549,635     |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      | Total liabilities          |            |                    | 203,780,056 |                   |            |            | 163,619,545 | 
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|COMMITMENTS AND CONTINGENCIES                                                                                            |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|SHAREHOLDERS EQUITY:                                                                                                    |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                         |                  | Common stock, no par value; 10,000,000 shares authorized; 1,337,995
shares issued and 1,331,705 and 1,336,105 outstanding as of
September 30, 2001 and December 31, 2000, respectively |                      |                            | 13,910,514 |                    |             |                   | 13,912,814 |           
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Retained earnings                                                                                                        |                  |                                                                                                                                                                                        | 3,085,309            |                            |            |                    | 1,496,268   |                  
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Treasury Stock, shares at cost (6,290 shares and 1,890 shares at September
30, 2001 and December 31, 2000, respectively) |                  |                                                                                                                                                                                        | (81,122              | )                          |            |                    | (20,204     | )                
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|                                                                                                                        
|Accumulated other comprehensive income/(loss)                                                                            |                  |                                                                                                                                                                                        | 517,127              |                            |            |                    | (168,048    | )                
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      | Total shareholders equity |            |                    | 17,431,828  |                   |            |            | 15,220,830  | 
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  
|Total liabilities and shareholders equity                                                                               |                  | $                                                                                                                                                                                      | 221,211,884          |                            |            | $                  | 178,840,375 |                  
|                                                                                                                         |                  |                                                                                                                                                                                        |                      |                            |            |                    |             |                  

See accompanying notes to consolidated financial statements.

3



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##### Table of Contents






1st Constitution Bancorp and Subsidiary
Consolidated Statements of Income

|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |           | 
|---------------------------------------------------------------------------------- | --------------------------------------------------- | - | ---------------------------- | --------- | --------------------------- | - | --------- | --------- | ---- | - | --------- | ---------- |  | - | --------- | --------- | 
|                                                                                   |                                                     |   | Three months ended Sept. 30, |           | Nine months ended Sept. 30,
|                                                                                   |                                                     |   |                              |           |                            
|                                                                                   |                                                     |   | 2001                         |           | 2000                        |   | 2001      |           | 2000
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |     
|INTEREST INCOME                                                                    |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Interest on loans                                                                  |                                                     | $ | 2,690,416                    |           |                             | $ | 2,416,662 |           |      | $ | 7,977,041 |            |  | $ | 6,676,709 |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Interest on securities                                                             |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Taxable                                             |   |                              | 950,996   |                             |   |           | 792,002   |      |   |           | 2,869,919  |  |   |           | 2,282,724 | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Tax-exempt                                          |   |                              | 39,841    |                             |   |           | 30,720    |      |   |           | 118,690    |  |   |           | 66,836    | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Interest on Federal funds sold and
short-term investments                          |                                                     |   | 87,573                       |           |                             |   | 29,027    |           |      |   | 222,021   |            |  |   | 91,866    |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Total interest income                               |   |                              | 3,768,826 |                             |   |           | 3,268,411 |      |   |           | 11,187,671 |  |   |           | 9,118,135 | 
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|INTEREST EXPENSE                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Interest on deposits                                                               |                                                     |   | 1,351,533                    |           |                             |   | 1,144,296 |           |      |   | 4,102,470 |            |  |   | 3,074,925 |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Interest on securities sold under agreement
to repurchase and other borrowed funds |                                                     |   | 346,944                      |           |                             |   | 338,320   |           |      |   | 1,083,697 |            |  |   | 895,989   |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Total interest expense                              |   |                              | 1,698,477 |                             |   |           | 1,482,616 |      |   |           | 5,186,167  |  |   |           | 3,970,914 | 
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Net interest income                                 |   |                              | 2,070,349 |                             |   |           | 1,785,795 |      |   |           | 6,001,504  |  |   |           | 5,147,221 | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Provision for loan losses                                                          |                                                     |   | 60,000                       |           |                             |   | 45,000    |           |      |   | 180,000   |            |  |   | 135,000   |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Net interest income after provision for loan losses |   |                              | 2,010,349 |                             |   |           | 1,740,795 |      |   |           | 5,821,504  |  |   |           | 5,012,221 | 
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|NON-INTEREST INCOME                                                                |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Service charges on deposit accounts                                                |                                                     |   | 110,217                      |           |                             |   | 108,354   |           |      |   | 296,777   |            |  |   | 327,663   |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Gain on sale of loans held for sale                                                |                                                     |   | 219,280                      |           |                             |   | 156,964   |           |      |   | 498,208   |            |  |   | 448,751   |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Gain on sale of securities                                                         |                                                     |   | 5,352                        |           |                             |   | 0         |           |      |   | 5,352     |            |  |   | 6,247     |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Other income                                                                       |                                                     |   | 75,704                       |           |                             |   | 37,385    |           |      |   | 218,004   |            |  |   | 82,995    |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Total non-interest income                           |   |                              | 410,553   |                             |   |           | 302,703   |      |   |           | 1,018,341  |  |   |           | 865,656   | 
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|NON-INTEREST EXPENSE                                                               |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Salaries and employee benefits                                                     |                                                     |   | 773,020                      |           |                             |   | 645,479   |           |      |   | 2,288,604 |            |  |   | 1,893,354 |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Occupancy Expense                                                                  |                                                     |   | 189,720                      |           |                             |   | 181,932   |           |      |   | 547,997   |            |  |   | 753,266   |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Other operating expenses                                                           |                                                     |   | 551,314                      |           |                             |   | 556,820   |           |      |   | 1,511,054 |            |  |   | 1,354,025 |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Total non-interest expense                          |   |                              | 1,514,054 |                             |   |           | 1,384,231 |      |   |           | 4,347,655  |  |   |           | 4,000,645 | 
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|Income before income taxes                                                         |                                                     |   | 906,848                      |           |                             |   | 659,267   |           |      |   | 2,492,190 |            |  |   | 1,877,232 |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|Income taxes                                                                       |                                                     |   | 329,160                      |           |                             |   | 236,100   |           |      |   | 903,143   |            |  |   | 680,300   |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   | Net income                                          |   | $                            | 577,688   |                             |   | $         | 423,167   |      |   | $         | 1,589,047  |  |   | $         | 1,196,932 | 
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                   |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|NET INCOME PER SHARE                                                               |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Basic                                               |   | $                            | 0.43      |                             |   | $         | 0.31      |      |   | $         | 1.19       |  |   | $         | 0.89      | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Diluted                                             |   | $                            | 0.42      |                             |   | $         | 0.31      |      |   | $         | 1.15       |  |   | $         | 0.87      | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|WEIGHTED AVERAGE SHARES OUTSTANDING                                                |                                                     |   |                              |           |                             |   |           |           |      |   |           |            |  |   |           |          
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Basic                                               |   |                              | 1,331,763 |                             |   |           | 1,337,898 |      |   |           | 1,333,211  |  |   |           | 1,338,163 | 
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                  
|                                                                                   | Diluted                                             |   |                              | 1,374,702 |                             |   |           | 1,347,407 |      |   |           | 1,376,150  |  |   |           | 1,363,462 | 

See accompanying notes to consolidated financial statements

4



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##### Table of Contents






1st Constitution Bancorp and Subsidiary
Consolidated Statements Of Cash Flows

|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |             |             |             |  
|-------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | ----------- | ------------------------------- | ----------- | ---------- | ----------- | ----------- | ----------- | -
|                                                   |                                                                             |                                                                                             |                                                     |             | Nine months ended September 30,
|                                                   |                                                                             |                                                                                             |                                                     |             |                                
|                                                   |                                                                             |                                                                                             |                                                     |             | 2001                            |             | 2000      
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |           
|OPERATING ACTIVITIES                               |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net income                                                                  |                                                                                             | $                                                   | 1,589,047   |                                 |             | $          | 1,196,932   |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Adjustments to reconcile net income
to net cash provided by (used in) operating activities- |                                                     |             |                                 |             |            |             |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Provision for loan losses                                                                   |                                                     |             | 180,000                         |             |            |             | 135,000     |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Depreciation and amortization                                                               |                                                     |             | 166,898                         |             |            |             | 169,822     |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Net amortization on securities                                                              |                                                     |             | 8,673                           |             |            |             | 614         |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Gain on sale of loans held for sale                                                         |                                                     |             | (498,208                        | )           |            |             | (448,751    | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Gain on sale of securities available for sale                                               |                                                     |             | (5,352                          | )           |            |             | (6,247      | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Originations of loans held for sale                                                         |                                                     |             | (41,942,496                     | )           |            |             | (24,450,387 | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Proceeds from sales of loans held for sale                                                  |                                                     |             | 40,198,216                      |             |            |             | 20,925,998  |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Increase in accrued interest receivable                                                     |                                                     |             | 96,617                          |             |            |             | (122,382    | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Decrease in other assets                                                                    |                                                     |             | 292,893                         |             |            |             | 55,321      |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Increase in accrued interest payable                                                        |                                                     |             | 112,838                         |             |            |             | 461,009     |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Increase in accrued expenses and other liabilities                                          |                                                     |             | 288,625                         |             |            |             | 152,269     |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             | Net cash provided by (used in) operating activities |             |                                 | 487,751     |            |             |             | (1,930,802  | )
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|INVESTING ACTIVITIES:                              |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Purchases of securities -                                                   |                                                                                             |                                                     |             |                                 |             |            |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Available for sale                                                                          |                                                     |             | (31,162,155                     | )           |            |             | (5,624,122  | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Held to maturity                                                                            |                                                     |             | (2,829,268                      | )           |            |             | (1,365,000  | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from maturities and prepayments of securities -
Available for sale |                                                                                             |                                                     | 17,775,401  |                                 |             |            | 1,186,636   |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Held to maturity                                                                            |                                                     |             | 5,085,603                       |             |            |             | 911,814     |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Proceeds from sales of securities available for sale                        |                                                                                             |                                                     | 2,898,728   |                                 |             |            | 994,742     |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in loans                                                       |                                                                                             |                                                     | (14,061,915 | )                               |             |            | (15,562,275 | )          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Capital expenditures                                                        |                                                                                             |                                                     | (177,131    | )                               |             |            | (103,044    | )          
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             | Net cash used in investing activities               |             |                                 | (22,470,737 | )          |             |             | (19,561,249 | )
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|FINANCING ACTIVITIES:                              |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in demand, savings and time deposits                           |                                                                                             |                                                     | 34,467,778  |                                 |             |            | 10,517,866  |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net increase in securities sold under agreements to repurchase              |                                                                                             |                                                     | 5,291,270   |                                 |             |            | 7,612,229   |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             | Net cash provided by financing activities           |             |                                 | 39,759,048  |            |             |             | 18,130,095  |  
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             | Increase (decrease) in cash and cash equivalents    |             |                                 | 17,776,062  |            |             |             | (3,361,956  | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD   |                                                                             |                                                                                             | 7,539,966                                           |             |                                 |             | 12,416,867 |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|CASH AND CASH EQUIVALENTS
AT END OF PERIOD         |                                                                             | $                                                                                           | 25,316,028                                          |             |                                 | $           | 9,054,911  |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION: |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             | Cash paid during the period for -                                                           |                                                     |             |                                 |             |            |             |             |            
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             | Interest                                            |             | $                               | 5,073,329   |            |             | $           | 3,509,905   |  
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   |                                                                             |                                                                                             | Income taxes                                        |             | $                               | 1,179,600   |            |             | $           | 546,397     |  
|                                                   |                                                                             |                                                                                             |                                                     |             |                                 |             |            |            

See accompanying notes to consolidated financial statements.

5



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##### Table of Contents






1st Constitution Bancorp and Subsidiary
Notes To Consolidated Financial Statements
September 30, 2001 (Unaudited)

(1)     Basis of Presentation

The accompanying unaudited Consolidated Financial Statements herein have been
prepared by 1st Constitution Bancorp (the Company), in accordance with
generally accepted accounting principles and pursuant to the rules and
regulations of the Securities and Exchange Commission. 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.

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.

Certain reclassifications have been made to the prior years financial
statements to conform with the classifications used in 2001.

(2)     Net Income Per Common Share

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

Diluted net income per common share is computed 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.
Potential shares of common stock resulting from stock option and stock grant
agreements totaled 42,939 for the three-month and nine-month periods ended
September 30, 2001, respectively and 9,509 and 25,299 for the three and
nine-month periods ended September 30, 2000, respectively.

(3)     Recent Accounting Pronouncement

On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133 Accounting for Derivative Instruments and Hedging
Activities as amended in June 1999 by SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities  Deferral of the Effective Date of SFAS No.
133, and in June 2000 by SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, (collectively SFAS No. 133). The
adoption of the above statements did not have a material impact on the
financial statements of the Company.

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 141, Business Combinations,and Statement No. 142, Goodwill and
Other Intangible Assets. Statement 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
as well as all purchase method business combinations completed after June 30,
2001. Statement 141 also specifies criteria intangible assets acquired in a
purchase method business combination must meet to be recognized and reported
apart from goodwill. Statement 142 will require that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead tested
for impairment at least annually in accordance with the provisions of Statement
142.

6



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##### Table of Contents



Statement 142 will also require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of.

Statement 142 requires that goodwill and any intangible asset determined to
have an indefinite useful life that are acquired in a purchase business
combination completed after June 30, 2001 will not be amortized, but will
continue to be evaluated for impairment in accordance with the appropriate
pre-Statement 142 accounting literature. Goodwill and intangible assets
acquired in business combinations completed before July 1, 2001 will continue
to amortized prior to the adoption of Statement 142.

The Company is required to adopt the provisions of Statement 141 immediately.
The initial adoption of Statement 141 had no impact on the Companys
consolidated financial statements. The Company is required to adopt Statement
142 effective January 1, 2002. The Company currently has no recorded goodwill
or intangible assets and does not anticipate that the initial adoption of
Statement 142 will have a significant impact on the Companys consolidated
financial statements.

7



---



##### Table of Contents






ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion of the operating results and financial condition at
September 30, 2001 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 nine-month periods
ended September 30, 2001 are not necessarily indicative of results to be
attained for any other period.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Such statements are not
historical facts and include expressions about our confidence and strategies
and our expectations about new and existing programs and products,
relationships, opportunities, technology and market conditions. These
statements may be identified by such forward-looking terminology as expect,
believe, anticipate, or by expressions of confidence such as continuing
or strong or similar statements or variations of such terms. Such
forward-looking statements involve certain risks and uncertainties. These
include, but are not limited to, expected cost savings not being realized or
not being realized within the expected time frame; income or revenues being
lower than expected or operating costs higher; competitive pressures in the
banking or financial services industries increasing significantly, business
disruption related to program implementation or methodologies; weakening of
general economic conditions nationally or in New Jersey; changes in legal and
regulatory barriers and structures; and unanticipated occurrences delaying
planned programs or initiatives or increasing their costs or decreasing their
benefits, as well as other risks and uncertainties detailed from time to time
in filings of the Company with the U.S. Securities and Exchange Commission.
Actual results may differ materially from such forward-looking statements. The
Company assumes no obligation for updating any such forward-looking statements
at any time.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2001 and September 30, 2000

Summary

The Company realized net income of $577,688 for the three months ended
September 30, 2001 as compared to $423,167 reported for the same period in
2000. Net income per diluted share was $0.42 for the three months ended
September 30, 2001 compared to $0.31 per diluted share for the prior year.

Earnings Analysis

Interest Income

Interest income for the quarter ended September 30, 2001 was $3,768,826, an
increase of $500,415 or 15.3% from the $3,268,411 reported in the same period
of 2000. This increase is primarily attributable to an increase in earning
asset volume, with most of the growth coming in the loan portfolio. For the
three months ended September 30, 2001, average interest earning assets
increased $50,424,424 or 32.5%, compared with the same period in 2000. The
increase in interest income resulting from increases in earning asset volume
somewhat was somewhat tempered by a decrease in the average yield earned on
these assets. For the three months ended September 30, 2001, the average yield
on earning assets decreased 111 basis points to 7.31% from 8.42% for the same
period last year.

8



---



##### Table of Contents



Interest Expense

Interest expense for the quarter ended September 30, 2001 was $1,698,477, an
increase of $215,861 or 14.6% from $1,482,616 reported in the same period last
year. The average cost of interest bearing liabilities decreased 70 basis
points to 4.09% for the current quarter of 2001 from 4.79% for the same period
last year, primarily as a result of a decrease in rates paid on deposits and
short-term borrowed funds. Total average interest bearing liabilities
increased by $41,476,881 for the current quarter of 2001 compared to the same
period in 2000.

Net Interest Income

The net effect of the changes in interest income and interest expense for the
three months ended September 30, 2001 compared to the prior year period was an
increase of $284,554 in net interest income. For the three months ended
September 30, 2001, the net interest margin, on a fully taxable equivalent
basis, decreased 59 basis points from the same period last year. The decrease
in the net interest margin was the result of interest bearing assets repricing
faster than interest earning liabilities in the decreasing rate environment
that has continued through the first nine months of 2001.

Provision for Loan Losses

For the three months ended September 30, 2001, the provision for loan losses
was $60,000, compared to $45,000 for the same period last year. Contributing
to the increase was an increase in total loan portfolio outstandings. The
amount of the loan loss provisions and the level of the allowance for loan
losses are based upon a number of factors including Managements evaluation of
potential losses in the portfolio after consideration of appraised collateral
values, financial conditions and past credit history of the borrowers as well
as prevailing and anticipated economic conditions.

Non-Interest Income

For the three months ended September 30, 2001, compared to the same period of
2000, total non-interest income increased $107,850 or 35.6%, to $410,553
compared to $302,703. The increase was due primarily to increases of $62,316
in gains on sale of loans held for sale and $38,319 in other income.

Non-Interest Expense

For the three months ended September 30, 2001, non-interest expense increased
$129,823, or 9.4%, from the same period last year. Salaries and employee
benefits increased $127,541 compared to the prior year period primarily due to
increased staffing levels to manage the continuing growth of the Company plus
normal salary increases. Occupancy expense increased $7,788 while other
operating expenses decreased $5,506.

An important industry productivity measure is the efficiency ratio. The
efficiency ratio is calculated by dividing total operating expenses by net
interest income and other income. An increase in the efficiency ratio
indicates that more resources are being utilized to generate the same or
greater volume of income, while a decrease would indicate a more efficient
allocation of resources. The Companys efficiency ratio decreased for the
quarter ended September 30, 2001 to 61.0% compared to 66.3% for the quarter
ended September 30, 2000.

9



---



##### Table of Contents



Nine Months Ended September 30, 2001 and September 30, 2000

Summary

The Company realized net income of $1,589,047 for the nine months ended
September 30, 2001, an increase of 32.8% over the $1,196,932 for the same
period in 2000. Net income per diluted share was $1.15 for the nine months
ended September 30, 2001 compared to $0.87 per diluted share for the prior
year.

Earnings Analysis

Interest Income

For the first nine months of 2001, total interest income was $11,187,671, an
increase of 22.7% compared to total interest income of $9,118,135 for the same
period in 2000. 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 nine-month periods ended September 30, 2001 and 2000.

Average Balance Sheets with Resultant Interest and Rates

|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |       |      |   |  | 
|----------------------------------------- | ----------------------------------------------- | ------------------------------------ | ---------- | ------------------------------------ | ----------- | ------- | ----------- | --------- | ---------- | ---- | ---- | ------- | ---- | -------- | ---------- | ----------- | ----------- | - | ----------- | --------- | --------- |  | ---- | ----- | ---- | - |  | 
|(yields on a tax-equivalent basis)        |                                                 | Nine months ended September 30, 2001 |            | Nine months ended September 30, 2000
|                                          |                                                 |                                      |            |                                     
|                                          |                                                 |                                      |            |                                      |             | Average |             |           |            |      |      | Average |      | Average  |            |             |             |   |             | Average  
|                                          |                                                 |                                      |            |                                      |             | Balance |             | Interest  |            | Rate |      | Balance |      | Interest |            | Rate       
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |            
|Assets:                                   |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|Federal Funds Sold/Short-Term
Investments |                                                 | $                                    | 7,205,035  |                                      |             | $       | 222,021     |           |            | $    | 4.12 | %       |      | $        | 1,908,397  |             |             | $ | 91,866      |           |           |  | 6.41 | %    
|                                         
|                                         
|                                         
|                                         
|Investment Securities:                    |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|                                          | U.S. Treasury Bonds                             |                                      |            | 217,780                              |             |         |             | 8,407     |            |      |      | 5.16    | %    |          |            | 493,166     |             |   |             | 19,130    |           |  |      | 5.17  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Collateralized Mortgage Obligations             |                                      |            | 61,012,875                           |             |         |             | 2,861,512 |            |      |      | 6.25    | %    |          |            | 44,753,068  |             |   |             | 2,263,594 |           |  |      | 6.62  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Mortgage Backed Securities                      |                                      |            | 3,339,904                            |             |         |             | 175,661   |            |      |      | 7.01    | %    |          |            | 1,966,106   |             |   |             | 98,917    |           |  |      | 6.59  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | States and Political Subdivisions               |                                      |            | 3,339,904                            |             |         |             | 175,661   |            |      |      | 7.01    | %    |          |            | 1,966,106   |             |   |             | 98,917    |           |  |      | 6.59  | %   
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                          | Total                                           |                                      |            | 64,570,559                           |             |         |             | 3,045,580 |            |      |      | 6.29    | %    |          |            | 47,212,340  |             |   |             | 2,381,641 |           |  |      | 6.60  | %   
|                                         
|                                         
|                                         
|                                         
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|Loan Portfolio                            |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|                                          | Commercial                                      |                                      |            | 23,938,344                           |             |         |             | 1,989,162 |            |      |      | 11.11   | %    |          |            | 25,973,619  |             |   |             | 2,070,192 |           |  |      | 10.62 | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Installment                                     |                                      |            | 14,959,559                           |             |         |             | 896,547   |            |      |      | 8.01    | %    |          |            | 14,972,5561 |             |   |             | 863,844   |           |  |      | 7.69  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Commercial Mortgages and
Construction Wholesale |                                      |            | 56,037,293                           |             |         |             | 3,337,543 |            |      |      | 7.96    | %    |          |            | 32,736,361  |             |   |             | 2,144,862 |           |  |      | 8.73  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Residential Mortgages and
Construction Retail   |                                      |            | 19,760,471                           |             |         |             | 1,170,384 |            |      |      | 7.92    | %    |          |            | 17,307,142  |             |   |             | 1,005,096 |           |  |      | 7.74  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | All Other Loans                                 |                                      |            | 7,505,076                            |             |         |             | 583,405   |            |      |      | 10.07   | %    |          |            | 5,627,233   |             |   |             | 592,715   |           |  |      | 12.57 | %   
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                          | Total                                           |                                      |            | 122,200,743                          |             |         |             | 7,977,041 |            |      |      | 8.73    | %    |          |            | 96,616,916  |             |   |             | 6,676,709 |           |  |      | 9.21  | %   
|                                         
|                                         
|                                         
|                                         
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|                                          |                                                 | Total Interest-Earning Assets        |            |                                      | 193,976,337 |         |             |           | 11,244,642 |      |      |         | 7.75 | %        |            |             | 145,737,653 |   |             |           | 9,150,216 |  |      |       | 8.36 | %
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|Allowance for Loan Losses                 |                                                 |                                      | (1,230,194 | )                                    |             |         |             |           |            |      |      |         |      |          | (1,007,903 | )           |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|Cash and Due From Bank                    |                                                 |                                      | 6,345,315  |                                      |             |         |             |           |            |      |      |         |      |          | 5,811,730  |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|Other Assets                              |                                                 |                                      | 3,055,933  |                                      |             |         |             |           |            |      |      |         |      |          | 3,586,644  |             |             |   |             |           |           |  |      |      
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                          |                                                 |                                      |            | Total Assets                         |             | $       | 202,147,391 |           |            |      |      |         |      |          |            |             |             | $ | 154,128,124 |           |           |  |      |       |      |   |  | 
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                          |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|Interest-Bearing Liabilities:             |                                                 |                                      |            |                                      |             |         |             |           |            |      |      |         |      |          |            |             |             |   |             |           |           |  |      |      
|                                         
|                                         
|                                         
|                                         
|                                          | Money Market and NOW Accounts                   |                                      | $          | 35,394,744                           |             |         | $           | 700,177   |            |      |      | 2.64    | %    |          | $          | 32,014,174  |             |   | $           | 638,835   |           |  |      | 2.66  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Savings Accounts                                |                                      |            | 10,592,749                           |             |         |             | 194,189   |            |      |      | 2.45    | %    |          | $          | 32,014,174  |             |   |             | 214,533   |           |  |      | 2.68  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Certificates of Deposit                         |                                      |            | 51,886,702                           |             |         |             | 2,263,289 |            |      |      | 5.83    | %    |          |            | 43,542,256  |             |   |             | 1,858,603 |           |  |      | 5.69  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Certificates of Deposit of $100,000
and Over    |                                      |            | 24,415,922                           |             |         |             | 944,814   |            |      |      | 5.17    | %    |          |            | 8,210,809   |             |   |             | 362,953   |           |  |      | 5.89  | %   
|                                         
|                                         
|                                         
|                                         
|                                          | Federal Funds Purchased/Other
Borrowed Funds    |                                      |            | 31,795,081                           |             |         |             | 1,083,698 |            |      |      | 4.56    | %    |          |            | 20,861,984  |             |   |             | 895,990   |           |  |      | 5.72  | %   

10



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##### Table of Contents



|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |      |   |      |   | 
|------------------------------------------ | ---------------------------------- | ------------------------------------ | ------------------- | ------------------------------------ |  | ------- |  | --------- | - | --------- |  | ------- | - | -------- | ----------- | ----------- |  |  |  | --------- | - | --------- |  | ---- | - | ---- | - | 
|(yields on a tax-equivalent basis)         |                                    | Nine months ended September 30, 2001 |                     | Nine months ended September 30, 2000
|                                           |                                    |                                      |                     |                                     
|                                           |                                    |                                      |                     |                                      |  | Average |  |           |   |           |  | Average |   | Average  |             |             |  |  |  | Average  
|                                           |                                    |                                      |                     |                                      |  | Balance |  | Interest  |   | Rate      |  | Balance |   | Interest |             | Rate       
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |            
|                                          
|                                          
|                                          
|                                          
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|                                          
|                                          
|                                          
|                                          
|                                           | Total Interest-Bearing Liabilities |                                      |                     | 154,085,198                          |  |         |  | 5,186,167 |   |           |  | 4.50    | % |          |             | 115,288,580 |  |  |  | 3,970,914 |   |           |  | 4.59 | %
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|                                          
|                                          
|                                          
|                                          
|                                           |                                    |                                      | Net Interest Spread |                                      |  |         |  |           |   |           |  |         |   | 3.25     | %           |             |  |  |  |           |   |           |  |      |   | 3.77 | %
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|                                          
|                                          
|                                          
|                                          
|Demand Deposits                            |                                    |                                      | 29,534,199          |                                      |  |         |  |           |   |           |  |         |   |          | 24,427,290  |             |  |  |  |           |   |           |  |     
|                                          
|                                          
|                                          
|                                          
|Other Liabilities                          |                                    |                                      | 2,591,297           |                                      |  |         |  |           |   |           |  |         |   |          | 1,575,356   |             |  |  |  |           |   |           |  |     
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|Total Liabilities                          |                                    |                                      | 186,210,694         |                                      |  |         |  |           |   |           |  |         |   |          | 141,291,226 |             |  |  |  |           |   |           |  |     
|                                          
|                                          
|                                          
|                                          
|Shareholders Equity                       |                                    |                                      | 15,936,697          |                                      |  |         |  |           |   |           |  |         |   |          | 12,836,897  |             |  |  |  |           |   |           |  |     
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|Total Liabilities and Shareholders
Equity |                                    |                                      | 202,147,391         |                                      |  |         |  |           |   |           |  |         |   |          | 154,128,123 |             |  |  |  |           |   |           |  |     
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     
|                                           |                                    |                                      | Net Interest Margin |                                      |  |         |  |           | $ | 6,058,475 |  |         |   | 4.18     | %           |             |  |  |  |           | $ | 5,179,302 |  |      |   | 4.73 | %
|                                           |                                    |                                      |                     |                                      |  |         |  |           |   |           |  |         |   |          |             |             |  |  |  |           |   |           |  |     

The current year increase in interest income was primarily due to higher
average balances in the securities and loan portfolios partially offset by
lower yields earned on these portfolios. Average loans increased $25,583,827,
or 26.5% while the yield on the portfolio decreased 48 basis points to 8.73%
from 9.21%. The lower loan yield reflected the lower interest rate environment
during the first nine months of 2001 compared to the same period in 2000.

Average securities increased $17,358,219, or 36.8%, while the yield on the
securities portfolio decreased 31 basis points to 6.29% from 6.60%.

Overall, the yield on the Companys total interest-earning assets decreased 61
basis points to 7.75% for the nine months ended September 30, 2001 from the
8.36% for the same period in 2000.

Interest Expense

Total interest expense for the nine months ended September 30, 2001 was
$5,186,167, an increase of 30.6% compared to $3,970,914 for the same period in
2000. The increase in interest expense for the current period resulted
primarily from higher levels of interest-bearing liabilities partially offset
by lower rates paid on deposits. The average rate paid on interest bearing
liabilities for the nine months ended September 30, 2001 decreased 9 basis
points to 4.50% from 4.59% for the same period of 2000.

Net Interest Income

The Companys net interest income for the nine month period ended September 30,
2001 was $6,001,504, an increase of 16.6% compared to $5,147,221 for the same
period in 2000. For the first nine months of 2001, interest income increased
by $2,069,536 compared to the same period in 2000 while interest expense
increased by $1,215,253 compared to the same period in 2000. Although the loan
and securities portfolios average balances increased during the first nine
months of 2001, those assets earned lower rates of return in 2001 than during
2000.

The net interest margin (on a tax-equivalent basis), which is net interest
income divided by average interest-earning assets, was 4.18% for the first nine
months of 2001 compared to 4.73% for the same period in 2000. The principal
factor causing the decline in the net interest margin was the lower interest
rate environment during the first nine months of 2001 compared to the same
period in 2000.

Provision for Loan Losses

The provision for loan losses for the nine months ended September 30, 2001 was
$180,000 compared to $135,000 for the same period of 2000. While the quality
of the loan portfolio remains sound, the increase in the provision for loan
losses was due primarily to continuing growth in the loan portfolio.

11



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##### Table of Contents



Non-Interest Income

Total non-interest income for the nine months ended September 30, 2001 was
$1,018,341, an increase of 17.6% over non-interest income of $865,656 for the
same period in 2000. The increase was due primarily to increases in gains on
loans held for sale and other non-interest income partially offset by decreases
in gains on sale of securities and service charges on deposit accounts.

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 nine months
ended September 30, 2001 was $498,208 compared to $448,751 for the same period
in 2000. In January 2001, the Company added four full-time mortgage loan
originators in an effort to increase loan origination and secondary market
sales volumes. During 2000, the Company engaged non-employee contractors for
this service.

Service charges on deposit accounts amounted to $296,777 for the nine months
ended September 30, 2001 compared to $327,663 for the same period in 2000.
Service charge income decreased in 2001 principally due to the decrease in
income from overdraft fees.

The Company also generates non-interest income from a variety of fee-based
services. These fees are monitored annually by Management to reflect current
costs amid the Companys competitive market.

Non-Interest Expense

Total non-interest expense for the nine months ended September 30, 2001 was
$4,347,655, an increase of 8.7% compared to non-interest expense of $4,000,645
for the same period in 2000. The increase in non-interest expense was
primarily due to the increase in salaries and employee benefits.

The following table presents the major components of non-interest expense for
the nine months ended September 30, 2001 and 2000.

Non-interest Expenses

|                                        |  |                           |           |      |  |   |           | 
|--------------------------------------- |  | ------------------------- | --------- | ---- |  | - | --------- | 
|                                        |  | Nine months ended Sept 30
|                                        |  |                          
|                                        |  | 2001                      |           | 2000
|                                        |  |                           |           |     
|Salaries and employee benefits          |  | $                         | 2,288,604 |      |  | $ | 1,893,354 | 
|                                       
|                                       
|                                       
|                                       
|Occupancy expenses                      |  |                           | 547,997   |      |  |   | 753,266   | 
|                                       
|                                       
|                                       
|                                       
|Equipment expense                       |  |                           | 222,472   |      |  |   | 221,401   | 
|                                       
|                                       
|                                       
|                                       
|Marketing                               |  |                           | 129,772   |      |  |   | 159,191   | 
|                                       
|                                       
|                                       
|                                       
|Computer services                       |  |                           | 359,219   |      |  |   | 306,398   | 
|                                       
|                                       
|                                       
|                                       
|Regulatory, professional and other fees |  |                           | 273,802   |      |  |   | 223,780   | 
|                                       
|                                       
|                                       
|                                       
|Office expense                          |  |                           | 242,593   |      |  |   | 188,555   | 
|                                       
|                                       
|                                       
|                                       
|All other expenses                      |  |                           | 283,196   |      |  |   | 254,700   | 
|                                        |  |                           |           |      |  |   |           | 
|                                        |  | $                         | 4,347,655 |      |  | $ | 4,000,645 | 
|                                        |  |                           |           |      |  |   |           | 

Salaries and employee benefits increased 20.9% to $2,288,604 for the nine
months ended September 30, 2001 compared to $1,893,354 for the nine months
ended September 30, 2000. This increase reflects the increase in staffing for
the mortgage loan origination function plus normal salary increases. In past
years, the Company engaged independent contractors to originate mortgage loans
that were sold in the secondary market. In January 2001, the Company employed
four full-time mortgage originators and ceased using independent contractors
for this function.

12



---



##### Table of Contents



The Companys ratio of non-interest expense to average assets decreased to
2.88% for the nine months ended September 30, 2001 compared to 3.47% for the
same period in 2000. The Companys efficiency ratio decreased to 66.3% for the
first nine months of 2001 compared to a ratio of 66.5% for the first nine
months of 2000.

Financial Condition

September 30, 2001 Compared with December 31, 2000

Total consolidated assets at September 30, 2001 totaled $221,211,884, an
increase of $42,371,509 or 23.7% compared to $178,840,375 at December 31, 2000.
The growth in the Companys asset base during the first nine months of 2001
was primarily due to increases in cash and cash equivalents, securities
available for sale and the loan portfolio. Funding for these increases in
assets was primarily achieved through a significant increase in total deposits
at September 30, 2001. Total deposits increased by $34,467,778 or 26.7% to
$163,660,819 at September 30, 2001 compared to $129,193,041 at December 31,
2000.

Cash and Cash Equivalents

Cash and Cash Equivalents at September 30, 2001 totaled $25,316,028 compared to
$7,539,966 at December 31, 2000. Cash and cash equivalents at September 30,
2001 consisted of cash and due from banks of $5,732,109 and Federal funds
sold/short term investments of $19,583,919. The corresponding balances at
December 31, 2000 were $6,839,966 and $700,000, respectively. The higher
balances of cash and cash equivalents at September 30, 2001 were primarily due
to increased interest bearing deposit balances raised to fund loan growth and
manage the Companys liquidity position.

Securities

Securities represented 30.0% of total assets at September 30, 2001 and 31.9% at
December 31, 2000. Total securities increased $9,226,523 or 16.2% at September
30, 2001 to $66,307,769 compared to $57,041,246 at year-end 2000.

Information relative to the companys securities portfolio at September 30,
2001, is as follows:

|                     |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |            | 
|-------------------- | ------------------------------------------------------------------------------------- | - | ---------- | ---------- | ---------- | - | ---------- | ------- | ------ | - | --------- | ------ |  | - | ---------- | ---------- | 
|                     |                                                                                       |   |            |            |            |   | Gross      |         | Gross  |   | Estimated
|                     |                                                                                       |   | Amortized  |            | Unrealized |   | Unrealized |         | Market
|                     |                                                                                       |   | Cost       |            | Gains      |   | Losses     |         | Value 
|                     |                                                                                       |   |            |            |            |   |            |         |       
|September 30, 2001   |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                    
|                    
|                    
|                    
|Available for sale  |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                    
|                    
|                    
|                    
|                     | U.S. Treasury securities and obligations of U.S.
Government corporations and agencies |   | $          | 31,924,387 |            |   | $          | 504,258 |        |   | $         | 68,811 |  |   | $          | 32,359,843 | 
|                    
|                    
|                    
|                    
|                     | Mortgage backed securities                                                            |   |            | 21,442,204 |            |   |            | 348,079 |        |   |           | 0      |  |   |            | 21,790,283 | 
|                    
|                    
|                    
|                    
|                     | FHLB stock and other securities                                                       |   |            | 5,910,303  |            |   |            | 0       |        |   |           | 0      |  |   |            | 5,910,303  | 
|                     |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                     |                                                                                       | $ | 59,276,894 |            |            | $ | 852,336    |         |        | $ | 68,811    |        |  | $ | 60,060,429 |           
|                     |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                     |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                    
|                    
|                    
|                    
|Held to maturity    |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                    
|                    
|                    
|                    
|                     | U.S. Treasury securities and obligations of U.S.
Government corporations and agencies |   | $          | 3,230,207  |            |   | $          | 87,632  |        |   | $         | 0      |  |   | $          | 3,317,839  | 
|                    
|                    
|                    
|                    
|                     | Mortgage backed securities                                                            |   |            | 3,017,133  |            |   |            | 103,601 |        |   |           | 0      |  |   |            | 3,120,735  | 
|                     |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           
|                     |                                                                                       | $ | 6,247,340  |            |            | $ | 191,233    |         |        | $ | 0         |        |  | $ | 6,438,573  |           
|                     |                                                                                       |   |            |            |            |   |            |         |        |   |           |        |  |   |            |           

13



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##### Table of Contents



Securities available for sale totaled $60,060,429 at September 30, 2001, an
increase of $11,522,858 or 23.7% from year-end 2000. During the first nine
months of 2001, $31,162,155 of securities available for sale were purchased
(predominantly mortgage backed securities) and funded by deposit generation,
calls and maturities of securities held to maturity and securities available
for sale.

Securities held to maturity totaled $6,247,340 at September 30, 2001, a
decrease of $2,256,335 or 26.5% from year-end 2000.

The net unrealized gain on securities available for sale was $783,525 at
September 30, 2001 compared to a net unrealized loss of $254,618 at December
31, 2000. The net unrealized gain, net of tax effect, was $517,127 as reported
in accumulated other comprehensive income/(loss) in Shareholders Equity at
September 30, 2001 and the net unrealized loss, net of tax effect, of $168,048
was reported at December 31, 2000. The change from net unrealized loss to net
unrealized gain on securities available for sale is primarily due to the
declining interest rate environment existing between December 31, 2000 and
September 30, 2001.

Loans

The loan portfolio, which represents the Company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 commercial loans,
owner-occupied commercial mortgage loans and tenanted commercial real estate
loans.

The following table sets forth the classification of loans by major category at
September 30, 2001 and December 31, 2000.

|                                |  |                    |             |                   |  |        |       |          |  |   |             |   |  |  |       |  
|------------------------------- |  | ------------------ | ----------- | ----------------- |  | ------ | ----- | -------- |  | - | ----------- | - |  |  | ----- | -
|Loan Portfolio Composition      |  | September 30, 2001 |             | December 31, 2000
|                                |  |                    |             |                  
|                                |  |                    |             |                   |  | %      |       |          |  |   |             | %
|Component                       |  | Amount             |             | of total          |  | Amount |       | of total
|                                |  |                    |             |                   |  |        |       |         
|Construction loans              |  | $                  | 31,107,478  |                   |  |        | 24.9  | %        |  | $ | 17,957,852  |   |  |  | 16.2  | %
|                               
|                               
|                               
|                               
|Residential real estate loans   |  |                    | 12,736,478  |                   |  |        | 10.2  | %        |  |   | 14,854,583  |   |  |  | 13.4  | %
|                               
|                               
|                               
|                               
|Commercial and industrial loans |  |                    | 59,023,674  |                   |  |        | 47.3  | %        |  |   | 54,974,300  |   |  |  | 49.7  | %
|                               
|                               
|                               
|                               
|Loans to individuals            |  |                    | 15,009,614  |                   |  |        | 12.0  | %        |  |   | 14,767,100  |   |  |  | 13.3  | %
|                               
|                               
|                               
|                               
|Lease financing                 |  |                    | 6,439,239   |                   |  |        | 5.2   | %        |  |   | 7,809,845   |   |  |  | 7.1   | %
|                               
|                               
|                               
|                               
|All other loans                 |  |                    | 378,929     |                   |  |        | 0.4   | %        |  |   | 267,791     |   |  |  | 0.3   | %
|                                |  |                    |             |                   |  |        |       |          |  |   |             |   |  |  |       |  
|                                |  | $                  | 124,695,412 |                   |  |        | 100.0 | %        |  | $ | 110,631,471 |   |  |  | 100.0 | %
|                                |  |                    |             |                   |  |        |       |          |  |   |             |   |  |  |       |  

The loan portfolio increased $14,063,941 or 12.7% at September 30, 2001 to
$124,695,412 from $110,631,471 at December 31, 2000. The ability of the
Company to enter into larger loan relationships and managements philosophy of
relationship banking are key factors in continued loan growth. Strong
competition from both bank and non-bank competitors could result in
comparatively lower yields on new and established lending relationships. 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.

14



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##### Table of Contents



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 Companys policy with regard to non-accrual loans varies by the type of
loan involved. Generally, commercial 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. Residential mortgage loans are not generally placed on a non-accrual
status unless the value of the real estate has deteriorated to the point that a
potential loss of principal or interest exists. Subsequent payments are
credited to income only if collection of principal is not in doubt.

Nonaccrual loans amounted to $661,623 at September 30, 2001, an increase of
$554,664 from $106,959 at year-end 2000. Loans 90 days or more past due and
still accruing decreased from $471,040 at December 31, 2000 to none at
September 30, 2001. As the table demonstrates, loan quality and ratios remain
strong. This was accomplished through quality loan underwriting, a proactive
approach to loan monitoring and aggressive workout strategies.

|                                      |                                                   |              |      |             |  |  |      |         | 
|------------------------------------- | ------------------------------------------------- | ------------ | ---- | ----------- |  |  | ---- | ------- | 
|Non-Performing Assets and Loans       |                                                   | September 30 |      | December 31
|                                      |                                                   | 2001         |      | 2000       
|                                      |                                                   |              |      |             | 
|Non-Performing loans:                 |                                                   |              |      |             |  |  |      |        
|                                     
|                                     
|                                     
|                                     
|                                      | Loans 90 days or more past due and still
accruing |              | $    | 0           |  |  | $    | 471,040 | 
|                                     
|                                     
|                                     
|                                     
|                                      | Non-accrual loans                                 |              |      | 661,623     |  |  |      | 106,959 | 
|                                      |                                                   |              |      |             |  |  |      |        
|                                      | Total non-performing loans                        |              |      | 661,623     |  |  |      | 577,999 | 
|                                     
|                                     
|                                     
|                                     
|Other real estate owned               |                                                   |              | 0    |             |  |  | 0    |        
|                                      |                                                   |              |      |             |  |  |      |        
|                                      | Total non-performing assets                       |              | $    | 661,623     |  |  | $    | 577,999 | 
|                                      |                                                   |              |      |             |  |  |      |        
|                                      |                                                   |              |      |             |  |  |      |        
|                                     
|                                     
|                                     
|                                     
|Non-performing loans to total loans   |                                                   |              | 0.52 | %           |  |  | 0.52 | %      
|                                     
|                                     
|                                     
|                                     
|Non-performing assets to total assets |                                                   |              | 0.30 | %           |  |  | 0.32 | %      

The Company had no restructured loans, other real estate owned or potential
problem loans at September 30, 2001, or December 31, 2000.

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed by management
sufficient to absorb estimated credit losses in the loan portfolio as of the
date of the financial statements. The allowance for loan losses is a valuation
reserve available for losses incurred or inherent in the loan portfolio and
other extensions of credit.

Management utilizes a systematic and documented allowance adequacy methodology
for loan losses that requires specific allowance assessment for all loans,
including real estate mortgages and consumer loans. This methodology assigns
reserves based upon credit risk ratings for all loans. The reserves are based
upon various factors, including historical performance and the current economic
environment. Management continually reviews the process used to determine the
adequacy of the allowance for loan

15



---



##### Table of Contents



losses. Allocations to the allowance for loan losses, both specific and
general, are determined after this review. Loans are classified based on
internal reviews and evaluations performed by the lending staff. These
evaluations are, in turn, examined by the Companys internal loan review
specialist. A formal loan review function, independent of loan origination, is
used to identify and monitor risk classifications.

The allowance for loan losses amounted to $1,314,582 at September 30, 2001, an
increase of $182,027 from December 31, 2000. The ratio of the allowance for
loan losses to total loans was 1.05% at September 30, 2001 and 1.02% at
December 31, 2000, respectively. The allowance for loan losses as a percentage
of non-performing loans was 198,69% at September 30, 2001, compared to 195.94%
at the end of 2000. The quality of the loan portfolio remains strong and it is
managements belief that the allowance for loan losses is adequate in relation
to credit risk exposure levels.

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

|                                             |                           |               |           |              |   |   |           |             |  
|-------------------------------------------- | ------------------------- | ------------- | --------- | ------------ | - | - | --------- | ----------- | -
|Allowance for Loan Losses                    |                           | September 30, |           | December 31,
|                                             |                           | 2001          |           | 2000        
|                                             |                           |               |           |              |  
|Balance, beginning of period                 |                           | $             | 1,132,555 |              |   | $ | 941,556   |            
|                                            
|                                            
|                                            
|                                            
|Provision charged to operating expenses      |                           |               | 180,000   |              |   |   | 215,875   |            
|                                            
|                                            
|                                            
|                                            
|Loans charged off                            |                           |               | (392      | )            |   |   | (28,158   | )          
|                                            
|                                            
|                                            
|                                            
|Recoveries                                   |                           |               | 2,419     |              |   |   | 3,282     |            
|                                             |                           |               |           |              |   |   |           |            
|Net (charge offs) / recoveries               |                           |               | 2,026     |              |   |   | (24,876   | )          
|                                             |                           |               |           |              |   |   |           |            
|Balance, end of period                       |                           | $             | 1,314,582 |              |   | $ | 1,132,555 |            
|                                             |                           |               |           |              |   |   |           |            
|                                             |                           |               |           |              |   |   |           |            
|                                            
|                                            
|                                            
|                                            
|Loans:                                       |                           |               |           |              |   |   |           |            
|                                            
|                                            
|                                            
|                                            
|                                             | At period end             |               | $         | 124,695,412  |   |   | $         | 110,631,471 |  
|                                            
|                                            
|                                            
|                                            
|                                             | Average during the year   |               |           | 122,200,743  |   |   |           | 99,472,064  |  
|                                            
|                                            
|                                            
|                                            
|Net charge offs to average loans outstanding |                           |               | 0.00      | %            |   |   | (0.03     | %)         
|                                            
|                                            
|                                            
|                                            
|Allowance for loan losses to:                |                           |               |           |              |   |   |           |            
|                                            
|                                            
|                                            
|                                            
|                                             | Total loans at period end |               |           | 1.05         | % |   |           | 1.02        | %
|                                            
|                                            
|                                            
|                                            
|                                             | Non-performing loans      |               |           | 198.69       | % |   |           | 195.94      | %

Deposits

Deposits, which include demand deposits (interest bearing and non-interest
bearing), savings and time deposits, are a fundamental and cost-effective
source of funding. The Bank offers a variety of products designed to attract
and retain customers, with the Companys primary focus being on building and
expanding long-term relationships.

|                                            |       |                                  |            |             |          |  |            |       |  
|------------------------------------------- | ----- | -------------------------------- | ---------- | ----------- | -------- |  | ---------- | ----- | -
|Average Deposit Balance                     |       | Nine months ended Sept. 30, 2001
|                                            |       |                                 
|                                            |       |                                  |            |             |          |  | Percentage
|                                            |       |                                  | Balance    |             | of Total
|                                            |       |                                  |            |             |         
|Non-interest bearing demand deposits        |       | $                                | 29,534,199 |             |          |  | 19.5       | %    
|                                           
|                                           
|                                           
|                                           
|Interest bearing demand deposits            |       |                                  | 35,394,744 |             |          |  | 23.3       | %    
|                                           
|                                           
|                                           
|                                           
|Savings deposits                            |       |                                  | 10,592,749 |             |          |  | 7.0        | %    
|                                           
|                                           
|                                           
|                                           
|Certificates of deposit of $100,000 or more |       |                                  | 24,415,922 |             |          |  | 16.1       | %    
|                                           
|                                           
|                                           
|                                           
|Other time deposits                         |       |                                  | 51,886,702 |             |          |  | 34.2       | %    
|                                            |       |                                  |            |             |          |  |            |      
|                                            |       |                                  |            |             |          |  |            |      
|                                           
|                                           
|                                           
|                                           
|                                            | Total |                                  | $          | 151,824,316 |          |  |            | 100.0 | %
|                                            |       |                                  |            |             |          |  |            |      

16



---



##### Table of Contents



Total deposits increased $34,467,778 or 26.7% to $163,660,819 at September 30,
2001 from $129,193,041 at December 31, 2000. This increase in deposits was
primarily the result of a $33,821,915 increase in interest bearing deposits to
$131,552,332 at September 30, 2001. The major component of this increase was
certificates of deposit of $100,000 or more which totaled $24,787,083 at
September 30, 2001 compared to $6,617,511 at December 31, 2000.

Other Borrowings

Other Borrowings are comprised of Federal Home Loan Bank (FHLB) borrowings.
These borrowings are primarily used to fund asset growth not supported by
deposit generation.

The balances of other borrowed funds was $15,500,000 at September 30, 2001 and
December 31, 2000.

During 2000, the Company purchased three ten-year fixed rate convertible
advances from the FHLB. These advances, in the amounts of $2,500,000;
$5,000,000; and $5,000,000 bear interest at the rates of 5.50%; 5.34%; and
5.06%, respectively. These advances are convertible at the end of 1 year; 2
years; and 3 years and quarterly thereafter and reduce the Companys exposure
to rising interest rates. These advances are fully secured by marketable
securities and qualifying one-to-four family mortgage loans.

Shareholders Equity And Dividends

Shareholders equity at September 30, 2001 totaled $17,431,828, an increase of
$2,210,998, or 14.5%, compared to December 31, 2000. Book value per common
share rose to $13.09 at September 30, 2001 compared to $11.39 at December 31,
2000. The increase in shareholders equity and book value per share at
September 30, 2001 resulted from net income of $1,589,047 for the first nine
months of 2001 plus the net unrealized gain on securities available for sale
was $517,127 at September 30, 2001 compared to a net unrealized loss of
$168,048 at December 31, 2000. This shift from a net unrealized loss to a net
unrealized gain resulted in a $685,175 increase in shareholders equity. These
increases were partially offset by the $60,918 increase in Treasury Stock to
$81,122 at September 30, 2001 as a result of continuation of the Companys
stock buyback program.

In 2000, the Board of Directors authorized a stock buyback 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. During the nine months ended September
30, 2001, 4,400 shares of common stock were purchased and, during 2000, 1,890
shares were purchased under this program. Treasury stock totaled $81,122 at
September 30, 2001 compared to $20,204 at December 31, 2000.

During the period 1996  2000, the Company has achieved a four year compounded
growth rate for shareholders equity of 27.9% per annum. In addition, the
Companys book value per share has increased over this period at a compounded
growth rate of 14.7% per annum. In lieu of cash dividends, the Company and,
prior to its acquisition by the Company, the Bank, have declared a stock
dividend every year since 1992, which has been paid every year since 1993. A
5% stock dividend was declared in the year 2000.

The Companys stock is not listed for trading on any securities exchange, but
quotations appear on the OTC Bulletin Board under the symbol FCCY.

17



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##### Table of Contents



The table below presents the actual capital amounts and ratios of the Company
for the periods indicated:

|                           |                                                   |   |            |            |       |  |       |       |  
|-------------------------- | ------------------------------------------------- | - | ---------- | ---------- | ----- |  | ----- | ----- | -
|Capital Ratios             |                                                   |  
|                           |                                                   |   | Amount     |            | Ratio
|                           |                                                   |   |            |            |      
|As of September 30, 2001 - |                                                   | $ | 18,226,283 |            |       |  | 12.63 | %    
|                          
|                          
|                          
|                          
|                           | Total capital to risk weighted assets             |   |            | 16,911,701 |       |  |       | 11.72 | %
|                          
|                          
|                          
|                          
|                           | Tier 1 capital to risk weighted assets            |   |            | 16,911,701 |       |  |       | 7.92  | %
|                          
|                          
|                          
|                          
|                           | Tier 1 capital to average assets (leverage ratio) |   |            |            |       |  |       |       |  
|                          
|                          
|                          
|                          
|                           |                                                   |   |            |            |       |  |       |      
|                          
|                          
|                          
|                          
|As of December 31, 2000-  
|                          
|                          
|                          
|                          
|                           | Total capital to risk weighted assets             |   | $          | 16,505,078 |       |  |       | 13.46 | %
|                          
|                          
|                          
|                          
|                           | Tier 1 capital to risk weighted assets            |   |            | 15,372,523 |       |  |       | 12.53 | %
|                          
|                          
|                          
|                          
|                           | Tier 1 capital to average assets (leverage ratio) |   |            | 15,372,523 |       |  |       | 8.61  | %

The minimum regulatory capital requirements for financial institutions require
institutions to have a Tier 1 capital to average assets ratio of 4.0%, a Tier 1
capital to risk weighted assets ratio of 4.0% and a total capital to risk
weighted assets ratio of 8.0%. To be considered well capitalized, an
institution must have a minimum Tier 1 leverage ratio of 5.0%. At September
30, 2001, 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

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 banks ability to meet its liquidity needs.
On the asset side, liquid funds are maintained in the form of cash and cash
equivalents, Federal funds sold, investment securities held to maturity
maturing within one year, securities available for sale and loans held for
sale. Additional asset-based liquidity is derived from scheduled loan
repayments as well as investment repayments of principal and interest from
mortgage-backed securities. On the liability side, the primary source of
liquidity is the ability to generate core deposits. Short-term borrowings are
used as supplemental funding sources when growth in the core deposit base does
not keep pace with that of earnings assets.

The Company has established borrowing relationship with the FHLB and its
correspondent banks which further support and enhance liquidity.

The Consolidated Statements of Cash Flows present the changes in cash from
operating, investing and financing activities.

Net cash provided by operating activities totaled $487,751 in 2001 compared to
$1,930,802 used in operating activities in 2000. The primary source of funds
is net income from operations adjusted for provision for loan losses,
depreciation expenses, and amortization of intangibles.

Net cash used in investing activities totaled $22,470,737 in 2001 compared to
$19,561,249 in 2000. The increase in usage resulted from the purchase of
securities and an increase in loans.

18



---



##### Table of Contents



Net cash provided by financing activities amounted to $39,759,048 in 2001
compared to $18,130,095 in 2000. The increase in 2001 resulted primarily from
the increase in deposits.

The securities portfolio is also a source of liquidity, providing cash flows
from maturities and periodic repayments of principal. During 2001, maturities
of investment securities totaled $22,861,004. Another source of liquidity is
the loan portfolio, which provides a steady 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.

One measure of interest rate risk is the gap ratio, which is defined as the
difference between the dollar volume of interest-earning assets and
interest-bearing liabilities maturing or repricing within a specified period of
time as a percentage of total assets. A positive gap results when the volume
of interest rate-sensitive assets exceeds that of interest rate-sensitive
liabilities within comparable time periods. A negative gap results when the
volume of interest rate-sensitive liabilities exceeds that of interest
rate-sensitive assets within comparable time periods. As indicated in the
table below, the one year gap position at September 30, 2001 was a positive
3.3%. Generally, a financial institution with a positive gap position will
most likely experience increases in net interest income during periods of
rising rates and decreases in net interest income during periods of falling
interest rates.

Included in the analysis of the gap position are certain savings deposit and
demand accounts which are less sensitive to fluctuations in interest rates than
other interest-bearing sources of funds. In determining the sensitivity of
such deposits, management reviews the movement of its deposit rates for the
past four years relative to market rates. Using regression analysis,
management has estimated that these deposits are approximately 25-30% sensitive
to interest rate changes (i.e., if short term rates were to increase 100 basis
points, the interest rate on such deposits would increase 25-30 basis points).

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-costing retail deposits.

In addition to utilizing the gap ratio for interest rate risk assessment,
management utilizes simulation analysis whereby the model estimates the
variance in net income with a change in interest rates of plus or minus 300
basis points over a twelve and twenty-four month period. Given recent
simulations, net interest income would be within policy guidelines regardless
of the direction of market rates.

19



---



##### Table of Contents



Interest Rate Sensitivity at September 30, 2001
($ in thousand)

|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |         | 
|--------------------------------- | ---------------------------------- |  | --------------------------- | ------ | ------ |  | ------- | -------- | ------- |  | -------- | -------- | --------- |  | ------ | -------- | ----- |  | ------- | ------ | -------- |  | -------- | ------ | - |  | ------------ | -------- | - |  | ------- | ------- | 
|                                  |                                    |  | Interest Sensitivity Period |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  | Non-interest |          |   |  |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  | Sensitive    |          |   |  |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  | Total   |        | One Year |  | and      |        |   |  |             
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  | Within  |        | To       |  | Over Two |        |   |  |             
|                                  |                                    |  | 30 Day                      |        | 90 Day |  | 180 Day |          | 365 Day |  | One Year |          | Two Years |  | Years  |          | Total
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |      
|Earning Assets:                   |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                 
|                                 
|                                 
|                                 
|                                  | Total Investment
Securities        |  | $                           | 12,981 |        |  | $       | 4,312    |         |  | $        | 4,456    |           |  | $      | 5,238    |       |  | $       | 26,987 |          |  | $        | 13,728 |   |  | $            | 25,594   |   |  | $       | 66,309  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Loans                              |  |                             | 57,789 |        |  |         | 2,949    |         |  |          | 2,556    |           |  |        | 5,880    |       |  |         | 69,174 |          |  |          | 12,306 |   |  |              | 43,216   |   |  |         | 124,696 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Other Interest-earning
assets      |  |                             | 23,133 |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         | 23,133 |          |  |          |        |   |  |              | 10,106   |   |  |         | 33,239  | 
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                  |                                    |  | 93,903                      |        |        |  | 7,261   |          |         |  | 7,102    |          |           |  | 11,118 |          |       |  | 119,294 |        |          |  | 26,034   |        |   |  | 78,916       |          |   |  | 224,244 |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                 
|                                 
|                                 
|                                 
|Source of Funds:                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                 
|                                 
|                                 
|                                 
|                                  | Savings and time deposits          |  |                             | 10,012 |        |  |         | 20,215   |         |  |          | 20,060   |           |  |        | 20,752   |       |  |         | 71,039 |          |  |          | 16,195 |   |  |              | 7,389    |   |  |         | 94,623  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Other interest-bearing
liabilities |  |                             | 34,111 |        |  |         | 552      |         |  |          | 828      |           |  |        | 1,655    |       |  |         | 37,146 |          |  |          | 3,310  |   |  |              | 34,101   |   |  |         | 74,557  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Non-interest-bearing
sources       |  |                             | 3,647  |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         | 3,647  |          |  |          |        |   |  |              | 51,417   |   |  |         | 55,064  | 
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                  |                                    |  | 47,770                      |        |        |  | 20,767  |          |         |  | 20,888   |          |           |  | 22,407 |          |       |  | 111,832 |        |          |  | 19,505   |        |   |  | 92,907       |          |   |  | 224,244 |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                  |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                 
|                                 
|                                 
|                                 
|Asset (Liability Sensitivity Gap: |                                    |  |                             |        |        |  |         |          |         |  |          |          |           |  |        |          |       |  |         |        |          |  |          |        |   |  |              |          |   |  |         |        
|                                 
|                                 
|                                 
|                                 
|                                  | Period Gap                         |  | $                           | 46,133 |        |  |         | ($13,506 | )       |  |          | ($13,876 | )         |  |        | ($11,289 | )     |  | $       | 7,462  |          |  | $        | 6,529  |   |  |              | ($13,991 | ) |  | $       | 0       | 
|                                 
|                                 
|                                 
|                                 
|                                  | Cumulative Gap                     |  | $                           | 46,133 |        |  | $       | 32,627   |         |  | $        | 18,751   |           |  | $      | 7,462    |       |  | $       | 7,462  |          |  | $        | 13,991 |   |  |              |          |   |  |         |         | 
|                                 
|                                 
|                                 
|                                 
|                                  | Cumulative Gap to Total
Assets     |  |                             | 20.6   | %      |  |         | 14.5     | %       |  |          | 8.4      | %         |  |        | 3.3      | %     |  |         | 3.3    | %        |  |          | 6.2    | % |  |              |          |   |  |         |         | 




Market Risk Analysis

To measure the impacts of longer-term asset and liability mismatches beyond two
years, the Company utilizes Modified Duration of Equity and Economic Value of
Portfolio Equity (EVPE) models. The modified duration of equity measures the
potential price risk of equity to changes in interest rates. A longer modified
duration of equity indicates a greater degree of risk to rising interest rates.
Because of balance sheet optionality, an EVPE analysis is also used to
dynamically model the present value of asset and liability cash flows, with
rates ranging up or down 200 basis points. The economic value of equity is
likely to be different as interest rates change. Results falling outside
prescribed ranges require action by management. At September 30, 2001 and
December 31, 2000, 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
September 30, 2001 and December 31, 2000.

Market Risk Analysis

|                                   |  |                    |            |                   |  |        |            |      |  |        |            |        |  |   |            |  |  |   |            |    |  |   |            |   
|---------------------------------- |  | ------------------ | ---------- | ----------------- |  | ------ | ---------- | ---- |  | ------ | ---------- | ------ |  | - | ---------- |  |  | - | ---------- | -- |  | - | ---------- | --
|                                   |  | September 30, 2001 |            | December 31, 2000
|                                   |  |                    |            |                  
|Change in Rates                    |  | Flat               |            | -200bp            |  | +200bp |            | Flat |  | -200bp |            | +200bp
|                                   |  |                    |            |                   |  |        |            |      |  |        |            |       
|Economic Value
of Portfolio
Equity |  | $                  | 24,396,000 |                   |  | $      | 20,948,000 |      |  | $      | 21,491,000 |        |  | $ | 22,759,000 |  |  | $ | 19,559,000 |    |  | $ | 19,727,000 |   
|                                  
|                                  
|                                  
|                                  
|                                   |  |                    |            |                   |  |        |            |      |  |        |            |        |  |   |            |  |  |   |            |    |  |   |            |   
|                                  
|                                  
|                                  
|                                  
|Change                             |  |                    |            |                   |  |        | (3,448,000 | )    |  |        | (2,905,000 | )      |  |   |            |  |  |   | (3,200,000 | )  |  |   | (3,032,000 | ) 
|                                  
|                                  
|                                  
|                                  
|                                   |  |                    |            |                   |  |        |            |      |  |        |            |        |  |   |            |  |  |   |            |    |  |   |            |   
|                                  
|                                  
|                                  
|                                  
|Change as a %
of assets            |  |                    |            |                   |  |        | (1.54      | %)   |  |        | (1.30      | %)     |  |   |            |  |  |   | (1.79      | %) |  |   | (1.70      | %)

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##### Table of Contents






Part II  OTHER INFORMATION




Item 1       Legal Proceedings



| |  |  | The Company is party in the ordinary course of business to
litigation involving collection matters, contract claims
and other miscellaneous causes of action arising from its
business. Management does not consider that such
proceedings depart from usual routine litigation and, in
its judgment, the Companys financial position and results
of operations will not be affected materially by such
proceedings.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 2       Changes in Securities



| |  |  | None.
| |  |  | -----




Item 3       Defaults upon Senior Securities



| |  |  | None.
| |  |  | -----




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



| |  |  | None.
| |  |  | -----




Item 5       Other Information



| |  |  | None
| |  |  | ----

Item 6       Exhibits and Reports on Form 10-SB



| |  |  | (a) Exhibits                                                                                                                                                                                                        
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 3(i) Articles of Incorporation
Certificate of Incorporation of the Company is incorporated by
reference to Exhibit 2.1 of the Companys Registration Statement on
Form 10-SB File No. 000-32891 filed June 15, 2001.
|
| |  |  | 3(ii) Bylaws
By laws of the Company are incorporated by reference to Exhibit 2.2
of the Companys Registration Statement on Form 10-SB File No.
000-32891, filed June 15, 2001.                                     
|
| |  |  | (b) Form 8-K
There has been no Form 8-K filed during the third quarter of 2001.                                                                                                                                     

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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
(Registrant)                                                              
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|                         |  |     |  |                                                                                                    
|Dated: November 14, 2001 |  | By: |  | /s/ Robert F. Mangano                                                                              
|                         |  |     |  | Robert F. Mangano
President ChiefExecutive Officer                                                 
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|                         |  |     |  |                                                                                                    
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|                         |  |     |  | /s/ Joseph M.
Reardon
Joseph M. Reardon
Vice President and Treasurer
(Principal Accounting Officer)

22