GlobeNewswire Inc | Oct 23, 2020 09:15AM EDT

October 23, 2020

CRANBURY, N.J., Oct. 23, 2020 (GLOBE NEWSWIRE) -- 1ST Constitution Bancorp (NASDAQ: FCCY), the holding company (the Company) for 1ST Constitution Bank (the Bank), today reported net income of $4.9 million and diluted earnings per share of $0.48 for the three months ended September 30, 2020 compared to net income of $3.6 million and diluted earnings per share of $0.42 for the three months ended September 30, 2019. Net income increased 35.5% and diluted earnings per share increased 14.3% for the third quarter of 2020 compared to the third quarter of 2019. Net income for the three months ended September 30, 2019 included $265,000 of after tax merger expenses related to the merger of Shore Community Bank (Shore).

The Board of Directors declared a quarterly cash dividend of $0.09 per share of common stock that will be payable on November 25, 2020 to shareholders of record on November 10, 2020.

Robert F. Mangano, President and Chief Executive Officer, stated The Company continued to generate solid fundamental operating performance during the third quarter of 2020 despite the challenging economic environment. The Companys residential mortgage banking and mortgage warehouse lending operations continued to benefit from the low interest rate environment, which drove a $2.0 million increase in gain on sale of loans and a $76.9 million increase in mortgage warehouse loans for the third quarter of 2020. Our sharp focus on deposit pricing and the mix and term structure of our funding resulted in the cost of interest-bearing liabilities declining to 0.79%. Due to continued economic uncertainty, the provision for loan losses was increased to $2.3 million and the allowance for loan losses increased 19.1% to $14.5 million at September 30, 2020.

Mr. Mangano added, As we are navigating through the COVID-19 pandemic impact and the economic and social disruption to our customers and communities we serve, we continue to closely monitor our loan portfolio to identify potential weaknesses. The unknown severity and duration of the pandemic present a continuing challenge. However, we believe that the Company has the financial strength and flexibility to address these adverse economic and operating conditions.

THIRD QUARTER 2020 HIGHLIGHTS

-- Return on average total assets and return on average shareholders' equity were 1.08% and 10.92%, respectively. -- Net interest income was $15.4 million and net interest margin was 3.67% on a tax equivalent basis. -- A provision for loan losses of $2.3 million was recorded for the third quarter of 2020, net recoveries were $5,000. -- Total loans were $1.5 billion at September 30, 2020 and increased $100.2 million from June 30, 2020. Mortgage warehouse loans increased $76.9 million and commercial real estate loans increased $23.7 million from June 30, 2020. -- As of September 30, 2020, the Bank had funded $75.6 million in Small Business Administration ("SBA") Paycheck Protection Program ("PPP") loans under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). -- Total deposits were $1.5 billion at September 30, 2020 and increased $101.6 million, with non-interest demand deposits increasing $29.3 million, from June 30, 2020. -- Non-performing assets were $17.5 million, or 0.95% of total assets at September 30, 2020, increased $3.5 million from June 30, 2020 and included $267,000 of other real estate owned ("OREO").

For the nine months ended September 30, 2020, net income was $12.0 million and diluted earnings per share were $1.17 compared to net income of $10.4 million and diluted earnings per share of $1.19 for the nine months ended September 30, 2019, respectively. Net income for the nine-months ended September 30, 2020 and 2019 included $45,000 and $456,000, respectively, of after-tax merger expenses related to the merger of Shore.

COVID-19 Impact and Response

In the earnings press releases issued for the first and second quarters of 2020, the Company reported the initial steps that it took in response to the sudden emergence of the COVID-19 global pandemic.

During the third quarter of 2020, the Company continued working with customers severely impacted by the economic disruption. Management significantly increased the provision for loan losses in response to the higher incurred losses in the loan portfolio. Management may further adjust the provision and allowance for loan losses in response to changes in economic conditions and the performance of the loan portfolio in future periods.

As we conduct our daily operations, the safety of our employees and customers remains our primary concern and we continue to maintain the same measures and protective procedures that we implemented in the second quarter of 2020.

To support our loan and deposit customers and the communities we serve:

-- We continue to provide access to additional credit and forbearance on loan interest and or principal payments for up to 90 days where management has determined that it is warranted. Through September 30, 2020, $149.3 million of loans ($140.9 million of commercial loans and $8.4 million of consumer loans) were modified to provide deferral of interest and or principal by borrowers for up to 90 days. -- As a long-standing SBA preferred lender, we actively participated in the SBAs PPP lending program established under the CARES Act. As of September 30, 2020, we funded 467 SBA PPP loans totaling $75.6 million. -- We are registered to utilize the Main Street New Loan Facility (Facility) established by the Board of Governors of the Federal Reserve System (the Federal Reserve) under the CARES Act to provide financing to our customers and communities. This Facility is intended to facilitate lending by banks to small and medium-sized businesses, which we believe may be beneficial to certain of our customers. -- We are participating in the Federal Reserve's PPP loan funding program and are pledging the PPP loans to collateralize a like amount of borrowings from the Federal Reserve at a favorable interest rate of 0.35% up to a two-year term.

Modification of Loans and Deferral of Payments

Through September 30, 2020, $140.9 million of commercial business and commercial real estate loans and $8.4 million of consumer loans had been modified to provide deferral of interest and or principal by borrowers for up to 90 days. As of September 30, 2020, $123.6 million of commercial business and commercial real estate loans that had previously received deferrals were no longer deferred and had made the contractually due payments in the third quarter of 2020. During the third quarter of 2020, commercial business and commercial real estate loans to three borrowers totaling $10.3 million received a second modification and commercial real estate loans to three borrowers totaling $1.8 million received a first modification to defer principal and or interest up to 90 days. Two commercial real estate loans totaling $4.6 million that had received a modification in the second quarter of 2020 were placed on non-accrual during the third quarter of 2020. One commercial real estate loan with a balance of $595,000 had not made the first payment after the end of the deferral period. Commercial business and commercial real loans with a modification to defer principal and or interest up to 90 days totaled $12.1 million at September 30, 2020.

All but two loans totaling $974,000 of the $8.4 million of consumer loans that had received a deferral made the contractually due payments during the third quarter of 2020.

Allowance for Loan and Lease Losses

As part of the review of the adequacy of the allowance for loan losses at September 30, 2020, management reviewed over 95% of the $140.9 million of commercial business and commercial real estate loans that had been modified to defer interest and or principal for up to 90 days. Loans excluded from the review had a balance less than $250,000.

At June 30, 2020 management had concluded that although loans with modifications and deferrals of loan payments were credit rated Pass-Watch, the deferral of payments indicated a somewhat weaker financial strength than Pass credit rated loans. Therefore, an additional reserve for incurred losses of $1.0 million was maintained at September 30, 2020 for loans that were rated Pass-Watch and had received a deferral.

Management previously identified the hotel and restaurant-food service industries as most likely to be adversely impacted in the near-term by the economic disruption caused by the COVID-19 pandemic. At September 30, 2020 loans to hotel and restaurant-food service industries were $67.9 million and $48.4 million, respectively. Management reviewed over 99% of the hotel loans and over 95% of the restaurant-food service loans. Loans excluded from this review had a balance of less than $250,000.

Construction loans are closely monitored on a quarterly basis and are reviewed to assess the progress of construction relative to the plan and budget and lease-up or sales of units.

Management also expanded its loan level review for the third quarter of 2020 to include a review of loans to schools that are private educational institutions that are generally sponsored or affiliated with religious organizations. The loans totaled $28.8 million at September 30, 2020, and 99% of these loans were reviewed.

The expanded review also included commercial loans made under the SBA 7(a) loan program with loan balances greater than $250,000. These loans were not reviewed in the second quarter of 2020 because the SBA was making the loan payments through September 30, 2020 as part of the CARES Act financial assistance. $6.7 million, or 45% of the total loans of $14.8, million were reviewed.

In connection with this review for the third quarter of 2020, loans totaling $1.2 million and $7.5 million were down-graded to Special Mention and Substandard, respectively. Two hotel loans totaling $4.6 million were placed on non-accrual during the third quarter of 2020.

On the basis of the results of the loan review process, management recorded a provision for loan losses of $2.3 million for the third quarter of 2020 and the allowance for loan losses was increased to $14.5 million at September 30, 2020.

Discussion of Financial ResultsOn November 8, 2019, the Company completed the merger with Shore with and into the Bank (the Shore Merger). The former operations of Shore contributed approximately $192.3 million and $271.5 million in loans and deposits, respectively, at September 30, 2020.

Net income was $4.9 million, or $0.48 per diluted share, for the third quarter of 2020 compared to net income of $3.6 million, or $0.42 per diluted share, for the third quarter of 2019. For the three months ended September 30, 2020, net interest income increased $3.8 million compared to the three months ended September 30, 2019 driven by the increase in the average balance of loans over the 12-month period ended September 30, 2020. Gain on sales of loans for the third quarter of 2020 increased $2.0 million compared to the third quarter of 2019 due primarily to the higher volume of residential mortgage loans sold. The provision for loan losses was $2.3 million for the third quarter of 2020 compared to $350,000 for the third quarter of 2019. This increase reflected managements current estimate of loan losses that were incurred due to the economic disruption caused by the COVID-19 pandemic. Non-interest expenses were $11.0 million for the third quarter of 2020, representing an increase of $2.5 million, compared to $8.4 million for the third quarter of 2019, which included $302,000 of merger-related expenses.

Net interest income was $15.4 million for the third quarter of 2020 and increased $3.8 million compared to net interest income of $11.5 million for the third quarter of 2019. Total interest income was $17.7 million for the three months ended September 30, 2020 compared to $14.9 million for the three months ended September 30, 2019. The increase in total interest income was primarily due to a net increase of $476.2 million in average loans, reflecting growth in all segments of the loan portfolio except construction loans and included $75.5 million in average SBA PPP loans. The growth in average loans included approximately $193.4 million of loans from the Shore Merger. Average interest-earning assets were $1.7 billion with a tax-equivalent yield of 4.23% for the third quarter of 2020 compared to average interest-earning assets of $1.2 billion, with a tax-equivalent yield of 5.05%, for the third quarter of 2019. The yield on average interest-earning assets for the third quarter of 2020 declined 82 basis points to 4.23%, primarily due to the steep decline in market interest rates beginning in the third quarter of 2019 and continuing through the first nine months of 2020. The Federal Reserve reduced the targeted federal funds rate 50 basis points in the third quarter of 2019, 25 basis points in the fourth quarter of 2019 and, in response to the COVID-19 pandemic, further reduced the targeted federal funds rate by 150 basis points in March 2020. The prime rate was 5.00% at September 30, 2019. As a result of the reductions in the targeted federal funds rate in 2019, the prime rate declined to 4.75% in October 2019 and declined further to 3.25% in March 2020. The Bank had approximately $571.8 million of loans with an interest rate tied to the prime rate and approximately $49.2 million of loans with an interest rate tied to either 1 or 3-month LIBOR at September 30, 2020.

Interest expense on average interest-bearing liabilities was $2.4 million, with an interest cost of 0.79%, for the third quarter of 2020, compared to $2.9 million, with an interest cost of 1.04%, for the second quarter of 2020 and $3.4 million, with an interest cost of 1.51%, for the third quarter of 2019. Despite an increase of $300.5 million in average interest-bearing liabilities for the third quarter of 2020 compared to the third quarter of 2019, interest expense declined $1.0 million largely due to the decline in interest rates paid on deposits, borrowings and the redeemable subordinated debentures as a direct result of the falling interest rate environment. The average cost of interest-bearing deposits was 0.81% for the third quarter of 2020, 1.04% for the second quarter of 2020 and 1.41% for the third quarter of 2019. The lower interest cost of interest-bearing deposits for the third quarter of 2020 compared to the third quarter of 2019 primarily reflects a steep decline in market interest rates beginning in the fourth quarter of 2019 and continuing through the first nine months of 2020. The interest rates paid on deposits generally do not adjust quickly to rapid changes in market interest rates and decline over time in a falling interest rate environment. The growth in average interest-bearing liabilities included average interest-bearing deposits of $174.0 million acquired in the Shore Merger. Of the total increase in average interest-bearing liabilities, certificates of deposit which generally have a higher interest cost than other types of interest-bearing deposits, increased $59.0 million. At September 30, 2020, there were $260.0 million of certificates of deposit with an average interest cost of 1.33% that mature within the following nine months. Management will continue to adjust the interest rates paid on deposits to reflect the then current interest rate environment and competitive factors.

The net interest margin on a tax-equivalent basis decreased 24 basis points to 3.67% for the third quarter of 2020 compared to 3.91% for the third quarter of 2019 due primarily to the 82 basis point decline in the yield of average interest-earning assets, partially offset by the 72 basis points decline in the interest cost of average interest-bearing liabilities. Due to the decline in the prime rate in the third and fourth quarters of 2019 followed by the further decline in the prime rate in March 2020, the yield of loans declined 95 basis points to 4.57% and the interest cost of interest-bearing liabilities was not reduced to the same extent as the decline in the yield of loans.

The Company recorded a provision for loan losses of $2.3 million for the third quarter of 2020 compared to a provision for loan losses of $350,000 for the third quarter of 2019. The significant increase in the provision for loan losses in the third quarter of 2020 included an additional provision of approximately $1.5 million to increase specific reserves on impaired loans. The higher provision also reflected changes in loan ratings and the growth and change in mix of the loan portfolio. At September 30, 2020, total loans were $1.5 billion and the allowance for loan losses was $14.5 million, or 0.99% of total loans, compared to total loans of $1.0 billion and an allowance for loan losses of $9.0 million, or 0.88% of total loans, at September 30, 2019. Included in total loans at September 30, 2020 were $186.6 million of loans that were acquired in the Shore Merger. Acquisition accounting for the Shore Merger in 2019 and the merger with New Jersey Community Bank (NJCB) in 2018 resulted in the Shore and NJCB loans being recorded at their fair value and no allowance for loan losses as of the effective time of the respective mergers. The unaccreted general credit fair value discounts related to the former Shore and NJCB loans were approximately $1.8 million and $0.5 million at September 30, 2020, respectively. In addition, at September 30, 2020, there were $75.6 million of SBA PPP loans which are 100% guaranteed by the SBA and, accordingly, no reserve was provided.

Non-interest income was $4.7 million for the third quarter of 2020, representing an increase of $2.5 million, or 114.7%, compared to $2.2 million for the third quarter of 2019. The significant increase in non-interest income was driven primarily by a $2.0 million increase in gain on sale of loans. In the third quarter of 2020, residential mortgage banking operations originated approximately $118.0 million of residential mortgages, sold $97.5 million of residential mortgages and recorded $2.9 million of gain on sale of loans compared to $53.3 million of residential mortgages originated, $38.8 million of residential mortgage loans sold and $1.1 million of gain on sale of loans recorded in the third quarter of 2019. The residential mortgage loan pipeline was $71.7 million at September 30, 2020 and was comprised 64% and 36% of refinance and purchase loan applications and commitments for mortgages, respectively. Management believes that the increase in residential mortgage loans originated and sold was due primarily to increased residential mortgage lending activity as a result of significantly lower mortgage interest rates in the 2020 period compared to the 2019 period. In the third quarter of 2020, $5.1 million of SBA loans were sold and gain of $463,000 was recorded compared to $2.4 million of SBA loans sold and gains of $205,000 recorded in the third quarter of 2019. For the third quarter of 2020 compared to the third quarter of 2019, service charges on deposit accounts decreased $39,000, due primarily to lower overdraft fees and income on bank-owned life insurance (BOLI) increased $39,000 due primarily to the increase in BOLI acquired in the Shore Merger. Gain on sales and calls of securities increased $63,000 for the third quarter of 2020 as a result of sales and calls of approximately $14.4 million of investment securities. Other income increased $422,000 in the third quarter of 2020 compared to the third quarter of 2019 primarily due to an interest rate swap fee collected of $172,000, an expired loan commitment fee of $59,000, gain from the sale of OREO of $71,000 and general increases in other income components.

Non-interest expenses were $11.0 million for the third quarter of 2020 and increased $2.5 million, or 30.0%, compared to $8.4 million for the third quarter of 2019, which included $302,000 of expenses related to the Shore Merger. The primary reasons for the increase were higher commissions related to the origination of residential mortgages for sale of $1.2 million and expenses from inclusion of the former Shore operations of $941,000 in the third quarter of 2020. Salaries and employee benefits expense increased $1.9 million, or 35.8%, for the third quarter of 2020 compared to the third quarter of 2019 due primarily to a $1.2 million increase in mortgage commissions resulting from significantly higher residential mortgage lending activity, salaries and benefits for former Shore employees ($478,000) who joined the Company, merit increases and increases in employee benefit expenses, which amounts were partially offset by higher deferred loan origination expenses of approximately $142,000 related to the origination of loans. Occupancy expense increased $250,000, or 25.7%, due primarily to the addition of the five former Shore branch offices. Data processing expenses increased $107,000, or 28.2%, due primarily to the addition of the Shore operations and increases in loans, deposits and other customer services. FDIC insurance expense increased $272,000 due primarily to the growth of assets, the acquisition of Shore, a credit of $87,000 from the FDIC applied to the second quarter of 2019 assessment and an increase in the FDIC assessment rate in 2020. Other operating expenses increased $350,000, or 22.6%, primarily resulting from the inclusion of the former Shore operations of $157,000, higher professional fees of $149,000 and general increases in other operating expenses.

Income tax expense was $1.9 million for the third quarter of 2020, resulting in an effective tax rate of 27.9%, compared to income tax expense of $1.3 million, which resulted in an effective tax rate of 26.6% for the third quarter of 2019. The increase in the effective tax rate for the third quarter of 2020 was due primarily to the lower percentage of the total of income on BOLI and tax-exempt interest to pre-tax income in the third quarter of 2020 compared to the third quarter of 2019.

Total assets increased $257.8 million to $1.84 billion at September 30, 2020 from $1.59 billion at December 31, 2019, due primarily to a $239.7 million increase in total loans, a $22.3 million increase in loans held for sale and a $5.2 million increase in total cash and cash equivalents partially offset by a $9.5 million decrease in total investment securities. The increase in assets was funded primarily by a $233.7 million increase in deposits and a $13.8 million increase in short-term borrowings. Total portfolio loans at September 30, 2020 were $1.46 billion, compared to $1.22 billion at December 31, 2019. The $239.7 million increase in loans was due primarily to an increase of $137.3 million in mortgage warehouse loans, the origination and funding of $75.6 million of SBA PPP loans through September 30, 2020 and an increase of $48.3 million in commercial real estate loans, which were partially offset by decreases in other components of the loan portfolio. Total investment securities were $222.9 million at September 30, 2020, representing a decrease of $9.5 million compared to $232.4 million at December 31, 2019. Investment securities available for sale decreased $20.7 million and investment securities held to maturity increased $11.2 million at September 30, 2020 from December 31, 2019.

Total deposits increased $233.7 million to $1.51 billion at September 30, 2020 from $1.28 billion at December 31, 2019. The increase in deposits was due primarily to a $139.0 million increase in non-interest-bearing demand deposits, a $35.6 million increase in interest-bearing demand deposits, a $40.6 million increase in savings deposits and an $18.5 million increase in certificates of deposit. Short-term borrowings increased $13.8 million to $105.9 million at September 30, 2020, compared to $92.0 million at December 31, 2019.

Regulatory capital ratios for the Company and the Bank continue to reflect a strong capital position. Under current regulatory capital standards, the Companys estimated common equity Tier 1 to risk-based assets (CET1), total risk-based capital, Tier I capital, and leverage ratios were 9.44%, 11.58%, 10.63% and 9.11%, respectively, at September 30, 2020. The Banks estimated CET1, total risk-based capital, Tier 1 capital and leverage ratios were 10.62%, 11.57%, 10.62% and 9.10%, respectively, at September 30, 2020. The Company and the Bank are considered well capitalized under these capital standards.

Asset Quality

Non-accrual loans were $17.2 million at September 30, 2020 compared to $4.5 million at December 31, 2019. During the first nine months of 2020, $14.9 million of loans were placed on non-accrual and included a participation in a construction loan with a balance of $7.5 million, $6.9 million of commercial real estate loans, an $84,000 commercial business loan, a $160,000 residential loan and $248,000 of loans to individuals. During the first nine months of 2020, $2.2 million of non-performing loans were resolved.

Non-performing loans to total loans were 1.18% and non-performing assets to total assets were 0.95% at September 30, 2020 compared to non-performing loans to total loans of 0.37% and non-performing assets to total assets of 0.32% at December 31, 2019.

OREO at September 30, 2020 was $267,000 and consisted of three residential lots acquired in the Shore merger with a carrying value of $174,000 and land with a carrying value of $93,000 that was foreclosed in the second quarter of 2018.

About 1ST Constitution Bancorp

1ST Constitution Bancorp, through its primary subsidiary, 1ST Constitution Bank, operates 26 branch bankingoffices in Asbury Park, Cranbury (2), Fair Haven, Fort Lee, Freehold, Hamilton, Hightstown, Hillsborough, Hopewell, Jackson, Jamesburg, Lawrenceville, Little Silver, Long Branch, Manahawkin, Neptune City, Perth Amboy, Plainsboro, Princeton, Rocky Hill, Rumson, Shrewsbury and Toms River (3), New Jersey.

1ST Constitution Bancorp is traded on the Nasdaq Global Market under the trading symbol FCCY and information about the Company can be accessed through the Internet at www.1STCONSTITUTION.com

Cautionary Language Concerning Forward-Looking Statements

The foregoing contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 relating to, without limitation, our future economic performance, plans and objectives for future operations, and projections of revenues and other financial items that are based on our beliefs, as well as assumptions made by and information currently available to us. The words "may," "will," "anticipate," "should," "would," "believe," "contemplate," "could," "project," "predict," "expect," "estimate," "continue," and "intend," as well as other similar words and expressions of the future, are intended to identify forward-looking statements.

These forward-looking statements are based upon our opinions and estimates as of the date they are made and are not guarantees of future performance. Although we believe that the expectations reflected in these forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties that may be beyond our control, which could cause actual results, performance and achievements to differ materially from results, performance and achievements projected, expected, expressed or implied by the forward-looking statements.

Examples of factors or events that could cause actual results to differ materially from historical results or those anticipated, expressed or implied include, without limitation, changes in the overall economy and interest rate changes; inflation, market and monetary fluctuations; the ability of our customers to repay their obligations; the accuracy of our financial statement estimates and assumptions, including the adequacy of the estimate made in connection with determining the adequacy of the allowance for loan losses; increased competition and its effect on the availability and pricing of deposits and loans; significant changes in accounting, tax or regulatory practices and requirements; changes in deposit flows, loan demand or real estate values; the enactment of legislation or regulatory changes; changes in monetary and fiscal policies of the U.S. government; changes to the method that LIBOR rates are determined and to the phasing out of LIBOR after 2021; changes in loan delinquency rates or in our levels of non-performing assets; our ability to declare and pay dividends; changes in the economic climate in the market areas in which we operate; the frequency and magnitude of foreclosure of our loans; changes in consumer spending and saving habits; the effects of the health and soundness of other financial institutions, including the need of the FDIC to increase the Deposit Insurance Fund assessments; technological changes; the effects of climate change and harsh weather conditions, including hurricanes and man-made disasters; the economic impact of any future terrorist threats and attacks, acts of war or threats thereof and the response of the United States to any such threats and attacks; our ability to integrate acquisitions and achieve cost savings; other risks described from time to time in our filings with the Securities and Exchange Commission; and our ability to manage the risks involved in the foregoing. Further, the foregoing factors may be exacerbated by the ultimate impact of the COVID-19 pandemic, which is unknown at this time.

In addition, statements about the COVID-19 pandemic and the potential effects and impacts of the COVID-19 pandemic on the Companys business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that actual results may differ, possibly materially, from what is reflected in such forward-looking statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond our control, including the scope, duration and extent of the pandemic, actions taken by governmental authorities in response to the pandemic and the direct and indirect impact of the pandemic on our employees, customers, business and third-parties with which we conduct business.

Although management has taken certain steps to mitigate any negative effect of the aforementioned factors, significant unfavorable changes could severely impact the assumptions used and have an adverse effect on profitability. Any forward-looking statements made by us or on our behalf speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement to reflect the impact of subsequent events or circumstances, except as required by law.

1ST Constitution BancorpSelected Consolidated Financial Data(Dollars in thousands, except per share data)(Unaudited)

Three months ended Nine Months Ended September September 30, 30, 2020 2019 2020 2019Per share data: Earnings per share - $ 0.48 $ 0.42 $ 1.18 $ 1.20 basicEarnings per share - 0.48 0.42 1.17 1.19 dilutedBook value per share 17.78 15.95 at end of periodTangible book valueper common share at 14.22 14.55 end of period^(1) Weighted averageshares outstanding - 10,230,488 8,666,251 10,213,601 8,641,684 basicWeighted averageshares outstanding - 10,268,951 8,722,349 10,260,477 8,698,959 dilutedShares outstanding 10,237,520 8,682,401 at end of periodPerformance ratios/ data:Return on average 1.08 % 1.14 % 0.96 % 1.14 %total assetsReturn on average 10.92 % 10.57 % 9.17 % 10.52 %shareholders' equityNet interest income(tax-equivalent $ 15,487 $ 11,622 $ 42,520 $ 34,511 basis)^(2)Net interest margin(tax-equivalent 3.67 % 3.91 % 3.66 % 4.06 %basis)^(3)Efficiency ratio(tax-equivalent 54.21 % 61.00 % 57.93 % 61.58 %basis)^(4) Loan portfolio September 30, December 31,composition: 2020 2019Commercial real $ 615,957 $ 567,655 estateMortgage warehouse 374,007 236,672 linesConstruction loans 141,583 148,939 Commercial business 210,004 139,271 Residential real 88,206 90,259 estateLoans to individuals 27,432 32,604 Other loans 122 137 Gross loans 1,457,311 1,215,537 Deferred (fees) (1,627 ) 491 costs, netTotal loans $ 1,455,684 $ 1,216,028 Asset quality data: Loans past due over90 days and still $ 92 $ ? accruingNon-accrual loans 17,153 4,497 OREO property 267 571 Total non-performing $ 17,512 $ 5,068 assets Net (charge-offs) $ 5 $ (14 ) $ (160 ) $ (481 )recoveriesAllowance for loanlosses to total 0.99 % 0.76 %loansAllowance for loanlosses to 83.69 % 206.16 %non-performing loansNon-performing loans 1.18 % 0.37 %to total loansNon-performingassets to total 0.95 % 0.32 %assetsCapital ratios: 1^ST Constitution BancorpCommon equity tier 1capital to 9.44 % 9.70 %risk-weighted assetsTotal capital to 11.58 % 11.69 %risk-weighted assetsTier 1 capital to 10.63 % 11.01 %risk-weighted assetsTier 1 leverage 9.11 % 10.56 %ratio1^ST Constitution BankCommon equity tier 1capital to 10.62 % 10.99 %risk-weighted assetsTotal capital to 11.57 % 11.67 %risk-weighted assetsTier 1 capital to 10.62 % 10.99 %risk-weighted assetsTier 1 leverage 9.10 % 10.54 %ratio

(1) Tangible book value per common share is a non-GAAP financial measure and is calculated by subtracting goodwill and other intangible assets from shareholders' equity and dividing it by common shares outstanding.(2) The tax-equivalent adjustment was $134 and $105 for the three months ended September 30, 2020 and 2019, respectively, the tax-equivalent adjustment was $383 and $334 for the nine months ended September 30, 2020 and 2019, respectively.(3) Represents net interest income on a tax-equivalent basis as a percent of average interest-earning assets.(4) Represents non-interest expenses divided by the sum of net interest income on a tax-equivalent basis and non-interest income.

1ST Constitution BancorpConsolidated Balance Sheets(Dollars in thousands)(Unaudited)

September 30, December 31, 2020 2019ASSETS Cash and due from banks $ 8,811 $ 2,547 Interest-earning deposits 11,244 12,295 Total cash and cash equivalents 20,055 14,842 Investment securities: Available for sale, at fair value 135,123 155,782 Held to maturity (fair value of $90,735 and$78,223 at September 30, 2020 andDecember 31, 87,811 76,620 2019, respectively)Total investment securities 222,934 232,402 Loans held for sale 28,196 5,927 Loans 1,455,684 1,216,028 Less: allowance for loan losses (14,450 ) (9,271 )Net loans 1,441,234 1,206,757 Premises and equipment, net 14,503 15,262 Right-of-use assets 16,910 17,957 Accrued interest receivable 5,689 4,945 Bank-owned life insurance 37,131 36,678 Other real estate owned 267 571 Goodwill and intangible assets 36,471 36,779 Other assets 20,640 14,142 Total assets $ 1,844,030 $ 1,586,262 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits Non-interest bearing $ 426,528 $ 287,555 Interest bearing 1,084,505 989,807 Total deposits 1,511,033 1,277,362 Short-term borrowings 105,867 92,050 Redeemable subordinated debentures 18,557 18,557 Accrued interest payable 1,069 1,592 Lease liability 17,714 18,617 Accrued expense and other liabilities 7,783 7,506 Total liabilities 1,662,023 1,415,684 SHAREHOLDERS EQUITY Preferred stock, no par value; 5,000,000 shares ? ? authorized; none issuedCommon stock, no par value; 30,000,000 sharesauthorized; 10,285,229 and 10,224,974 sharesissued and 10,237,520 and 10,191,676 shares 110,825 109,964 outstanding as of September 30, 2020 and December31, 2019, respectivelyRetained earnings 70,058 60,791 Treasury stock, 47,709 and 33,298 shares at (611 ) (368 )September 30, 2020 and December 31, 2019Accumulated other comprehensive income 1,735 191 Total shareholders' equity 182,007 170,578 Total liabilities and shareholders' equity $ 1,844,030 $ 1,586,262

1ST Constitution Bancorp Consolidated Statements of Income(Dollars in thousands, except per share data)(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019INTEREST INCOME Loans, including fees $ 16,477 $ 13,316 $ 46,656 $ 38,342 Securities: Taxable 725 1,130 2,633 3,615 Tax-exempt 504 393 1,438 1,256 Federal funds sold and 2 35 95 129 short-term investmentsTotal interest income 17,708 14,874 50,822 43,342 INTEREST EXPENSE Deposits 2,171 2,904 8,133 7,892 Borrowings 95 268 205 698 Redeemable subordinated 90 185 348 575 debenturesTotal interest expense 2,356 3,357 8,686 9,165 Net interest income 15,352 11,517 42,136 34,177 PROVISION FOR LOAN LOSSES 2,320 350 5,340 1,050 Net interest income after 13,032 11,167 36,796 33,127 provision for loan lossesNON-INTEREST INCOME Service charges on deposit 126 165 471 490 accountsGain on sales of loans, 3,396 1,351 6,987 3,556 netIncome on bank-owned life 188 149 632 437 insuranceGain on sales/calls of 79 16 97 16 securitiesOther income 947 525 2,105 1,743 Total non-interest income 4,736 2,206 10,292 6,242 NON-INTEREST EXPENSES Salaries and employee 7,106 5,231 19,276 15,472 benefitsOccupancy expense 1,222 972 3,597 2,984 Data processing expenses 486 379 1,402 1,072 FDIC insurance expense 225 (47 ) 484 113 Other real estate owned 27 52 58 134 expensesMerger-related expenses ? 302 64 575 Other operating expenses 1,896 1,546 5,711 4,746 Total non-interest 10,962 8,435 30,592 25,096 expensesIncome before income taxes 6,806 4,938 16,496 14,273 INCOME TAXES 1,896 1,315 4,475 3,883 Net income $ 4,910 $ 3,623 $ 12,021 $ 10,390 EARNINGS PER COMMON SHARE Basic $ 0.48 $ 0.42 $ 1.18 $ 1.20 Diluted 0.48 0.42 1.17 1.19 WEIGHTED AVERAGE SHARES OUTSTANDINGBasic 10,230,488 8,666,251 10,213,601 8,641,684 Diluted 10,268,951 8,722,349 10,260,477 8,698,959

1ST Constitution Bancorp Net Interest Margin Analysis(Unaudited)

Three months ended September 30, Three months ended September 30, 2020 2019(In thousands exceptyield/cost Average Average Average Averageinformation)Assets Balance Interest Yield Balance Interest YieldInterest-earning assets:Federal funds sold/short term $ 8,027 $ 2 0.10 % $ 6,452 $ 35 2.15 %investmentsInvestment securities:Taxable 155,242 725 1.87 % 161,538 1,130 2.80 %Tax-exempt^ (1) 83,461 638 3.06 % 52,990 498 3.76 %Total investment 238,703 1,363 2.28 % 214,528 1,628 3.04 %securitiesLoans:^ (2) Commercial real 609,917 7,789 5.00 % 405,885 5,295 5.10 %estateMortgage warehouse 333,461 3,383 4.06 % 191,812 2,644 5.39 %linesConstruction 136,252 1,794 5.24 % 157,752 2,705 6.80 %Commercial business 138,073 1,445 4.16 % 117,465 1,731 5.85 %SBA PPP loans 75,484 470 2.48 % ? ? ? %Residential real 89,755 1,137 4.96 % 57,026 624 4.38 %estateLoans to individuals 27,284 293 4.20 % 20,555 260 4.95 %Loans held for sale 23,914 155 2.59 % 5,160 49 3.80 %All other loans 643 11 6.69 % 772 8 4.05 %Deferred (fees) (1,736 ) ? ? % 450 ? ? %costs, netTotal loans 1,433,047 16,477 4.57 % 956,877 13,316 5.52 %Totalinterest-earning 1,679,777 $ 17,842 4.23 % 1,177,857 $ 14,979 5.05 %assetsNon-interest-earning assets:Allowance for loan (12,348 ) (8,786 ) lossesCash and due from 11,460 11,684 bankOther assets 125,309 83,543 Totalnon-interest-earning 124,421 86,441 assetsTotal assets $ 1,804,198 $ 1,264,298 Liabilities andshareholders' equity:Interest-bearing liabilities:Money market and NOW $ 425,401 $ 542 0.51 % $ 335,997 $ 720 0.85 %accountsSavings accounts 290,055 461 0.63 % 190,985 491 1.02 %Certificates of 350,654 1,168 1.33 % 291,674 1,693 2.30 %depositFederal Reserve Bank 35,296 33 0.37 % ? ? ? %PPPLF borrowingsShort-term 63,175 62 0.39 % 45,378 268 2.34 %borrowingsRedeemablesubordinated 18,557 90 1.90 % 18,557 185 3.99 %debenturesTotalinterest-bearing 1,183,138 $ 2,356 0.79 % 882,591 $ 3,357 1.51 %liabilitiesNon-interest-bearing liabilities:Demand deposits 413,350 221,166 Other liabilities 28,764 24,566 Totalnon-interest-bearing 442,114 245,732 liabilitiesShareholders' equity 178,946 135,975 Total liabilitiesand shareholders' $ 1,804,198 $ 1,264,298 equityNet interest spread^ 3.44 % 3.54 %(3)Net interest income $ 15,486 3.67 % $ 11,622 3.91 %and margin^ (4)

(1) Tax-equivalent basis, using 21% federal tax rate in 2020 and 2019.(2) Loan origination fees and costs are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include non-accrual loans with no related interest income and the average balance of loans held for sale.(3) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities.(4) The net interest margin is equal to net interest income divided by average interest-earning assets.

1ST Constitution Bancorp Net Interest Margin Analysis(Unaudited)

Nine months ended September 30, 2020 Nine months ended September 30, 2019(Dollars in Average Average Average Averagethousands)Assets: Balance Interest Yield Balance Interest YieldInterest-earning assets:Federal funds sold/short term $ 16,433 $ 95 0.77 % $ 7,140 $ 129 2.42 %investmentsInvestment securities:Taxable 163,979 2,633 2.14 % 162,809 3,615 2.96 %Tax-exempt^ (1) 77,145 1,821 3.15 % 56,723 1,590 3.74 %Total investment 241,124 4,454 2.46 % 219,532 5,205 3.16 %securitiesLoans:^ (2) Commercial real 588,145 22,935 5.12 % 400,096 15,494 5.11 %estateMortgage warehouse 244,470 7,702 4.20 % 155,962 6,682 5.71 %linesConstruction 141,428 5,965 5.63 % 157,245 8,135 6.92 %Commercial business 142,010 4,815 4.53 % 120,774 5,386 5.96 %SBA PPP loans 43,374 818 2.52 % ? ? ? %Residential real 89,333 3,085 4.54 % 50,562 1,682 4.39 %estateLoans to individuals 28,857 1,001 4.56 % 21,748 827 5.01 %Loans held for sale 14,160 304 2.86 % 3,556 107 4.01 %All other loans 872 31 4.67 % 799 29 4.79 %Deferred (fees) (345 ) ? ? % 233 ? ? %costs, netTotal loans 1,292,304 46,656 4.82 % 910,975 38,342 5.63 %Totalinterest-earning 1,549,861 $ 51,205 4.41 % 1,137,647 $ 43,676 5.13 %assetsNon-interest-earning assets:Allowance for loan (10,684 ) (8,693 ) lossesCash and due from 12,182 11,270 bankOther assets 123,841 81,186 Totalnon-interest-earning 125,339 83,763 assetsTotal assets $ 1,675,200 $ 1,221,410 Liabilities andshareholders' equity:Interest-bearing liabilities:Money market and NOW $ 417,557 $ 1,913 0.61 % $ 337,004 $ 1,977 0.78 %accountsSavings accounts 275,679 1,612 0.78 % 190,589 1,380 0.97 %Certificates of 354,551 4,608 1.74 % 268,851 4,535 2.26 %depositFederal Reserve Bank 13,169 36 0.37 % ? ? ? %PPPLF borrowingsShort-term 39,344 169 0.58 % 36,992 698 2.52 %borrowingsRedeemablesubordinated 18,557 348 2.46 % 18,557 575 4.13 %debenturesTotalinterest-bearing 1,118,857 $ 8,686 1.04 % 851,993 $ 9,165 1.44 %liabilitiesNon-interest-bearing liabilities:Demand deposits 351,291 214,618 Other liabilities 29,911 22,720 Totalnon-interest-bearing 381,202 237,338 liabilitiesShareholders' equity 175,141 132,079 Total liabilitiesand shareholders' $ 1,675,200 $ 1,221,410 equityNet interest spread 3.37 % 3.69 %^(3)Net interest income $ 42,519 3.66 % $ 34,511 4.06 %and margin^ (4)

(1) Tax-equivalent basis, using 21% federal tax rate in 2020 and 2019.(2) Loan origination fees and costs are considered an adjustment to interest income. For the purpose of calculating loan yields, average loan balances include non-accrual loans with no related interest income and the average balance of loans held for sale.(3) The net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities.(4) The net interest margin is equal to net interest income divided by average interest-earning assets.

1ST Constitution Bancorp Reconciliation of Non-GAAP Measures (1)(Dollars in thousands, except per share data)(Unaudited)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Adjusted net income Net income $ 4,910 $ 3,623 $ 12,021 $ 10,390 Adjustments: Merger-related expenses ? 302 64 575 Income tax effect of ? (37 ) (19 ) (119 )adjustmentsAdjusted net income $ 4,910 $ 3,888 $ 12,066 $ 10,846 Adjusted net income per diluted shareAdjusted net income $ 4,910 $ 3,888 $ 12,066 $ 10,846 Diluted shares 10,268,951 8,722,349 10,260,477 8,698,959 outstandingAdjusted net income per $ 0.48 $ 0.45 $ 1.18 $ 1.25 diluted share Adjusted return on average total assetsAdjusted net income $ 4,910 $ 3,888 $ 12,066 $ 10,846 Average assets 1,804,198 1,264,298 1,675,200 1,221,410 Adjusted return on 1.08 % 1.22 % 0.96 % 1.19 %average total assets Adjusted return onaverage shareholders' equityAdjusted net income $ 4,910 $ 3,888 $ 12,066 $ 10,846 Average equity 178,946 135,975 175,141 132,079 Adjusted return onaverage shareholders' 10.92 % 11.34 % 9.2 % 10.98 %equity Book value and tangiblebook value per common shareShareholders' equity $ 182,007 $ 138,527 Less: goodwill and 36,471 12,165 intangible assetsTangible shareholders' 145,536 126,362 equityShares outstanding 10,237,520 8,682,401 Book value per common $ 17.78 $ 15.95 shareTangible book value per $ 14.22 $ 14.55 common share

(1) The Company used the non-GAAP financial measures, Adjusted net income, Adjusted net income per diluted share, Adjusted return on average total assets, Adjusted return on average shareholders' equity and tangible book value per common share, because the Company believes that it is helpful to readers in understanding the Company's financial performance and the effect on its financial statements of the merger-related expenses related to the Shore Merger in 2019. These non-GAAP measures improve the comparability of the current period results with the results of the prior periods. The Company cautions that the non-GAAP financial measures should be considered in addition to, but not as a substitute for, the Company's GAAP financial results.

Robert F. Mangano Stephen J. GilhoolyCONTACT: President & Chief Sr. Vice President & Chief Executive Officer Financial Officer (609) 655-4500 (609) 655-4500