The purpose of this discussion and analysis of the operating results and financial condition at March 31, 2012 is intended to help readers analyze the accompanying financial statements, notes and other supplemental information contained in this document. Results of operations for the three month period ended March 31, 2012 are not necessarily indicative of results to be attained for any other period.

This discussion and analysis should be read in conjunction with the Consolidated Financial Statements, notes and tables included elsewhere in this report and Part II, Item 7 of the Company's Form 10-K (Management's Discussion and Analysis of Financial Condition and Results of Operations) for the year ended December 31, 2011, as filed with the Securities and Exchange Commission (the "SEC") on March 23, 2012.

General

Throughout the following sections, the "Company" refers to 1st Constitution Bancorp and, as the context requires, its wholly-owned subsidiary, 1st Constitution Bank (the "Bank") and the Bank's wholly-owned subsidiaries, 1st Constitution Investment Company of New Jersey, Inc., FCB Assets Holdings, Inc., 1st Constitution Title Agency, 204 South Newman Street Corp. and 249 New York Avenue, LLC. 1st Constitution Capital Trust II, ("Trust II") a subsidiary of the Company is not included in the Company's consolidated financial statements as it is a variable interest entity and the Company is not the primary beneficiary.

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

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

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

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements. When used in this and in future filings by the Company with the SEC, in the Company's press releases and in oral statements made with the approval of an authorized executive officer of the Company, the words or phrases "will," "will likely result," "could," "anticipates," "believes," "continues," "expects," "plans," "will continue," "is anticipated," "estimated," "project" or "outlook" or similar expressions (including confirmations by an authorized executive officer of the Company of any such expressions made by a third party with respect to the Company) are intended to identify forward-looking statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speaks only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected.

Factors that may cause actual results to differ from those results expressed or implied, include, but are not limited to, those listed under "Business", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K filed with the SEC on March 23, 2012, such as the overall economy and the interest rate environment; the ability of customers to repay their obligations; the adequacy of the allowance for loan losses; competition; significant changes in accounting, tax or regulatory practices and requirements; certain interest rate risks; risks associated with investments in mortgage-backed securities; and risks associated with speculative construction lending. Although management has taken certain steps to mitigate any negative effect of the aforementioned items, significant unfavorable changes could severely impact the assumptions used and could have an adverse effect on profitability. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements, except as required by law.

Acquisition of Three Branches in 2011

On March 25, 2011, the Bank acquired certain deposit and other liabilities, real estate and related assets of the Rocky Hill, Hillsborough and Hopewell, New Jersey branch banking offices from another financial institution for a purchase price of $9.85 million (the "March 2011Acquisition"). The March 2011 Acquisition was completed pursuant to the terms and conditions of the Branch Purchase and Assumption Agreement and Agreement for Purchase dated as of December 30, 2010, which was previously disclosed on a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 3, 2011.

As a result of the March 2011 Acquisition, the three branches became branches of the Bank. Included in the March 2011 Acquisition were the assumption of deposit liabilities of $111.9 million, primarily consisting of demand deposits, and the acquisition of cash of approximately $101.5 million, fixed assets of approximately $4.6 million, which includes, without limitation, ownership of the real estate and improvements upon which the branches are situated, and loans of $862,000. The Bank recorded goodwill of approximately $3.2 million and a core deposit intangible asset of approximately $1.7 million as a result of the March 2011 Acquisition.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2012 Compared to the Three Months Ended March 31, 2011

Summary

The Company reported net income of $1,166,732 for the three months ended March 31, 2012, an increase of $376,864, or 47.7%, from the $789,868 reported for the three months ended March 31, 2011. The increase is due primarily to increases in net interest income and non-interest income. Net income per diluted common share was $0.23 for the three months ended March 31, 2012 compared to net income per diluted common share of $0.15 for the three months ended March 31, 2011. All prior year share information has been adjusted for the effect of a 5% stock dividend declared on December 15, 2011 and paid on February 2, 2012 to shareholders of record on January 17, 2012.

Key performance ratios improved for the three months ended March 31, 2012 due to higher net income for that period compared to the three months ended March 31, 2011. Return on average assets and return on average equity were 0.62% and 8.46% for the three months ended March 31, 2012 compared to 0.49% and 6.49%, respectively, for the three months ended March 31, 2011.

The Bank's results of operations depend primarily on net interest income, which is primarily affected by the market interest rate environment, the shape of the U.S. Treasury yield curve, and the difference between the yield on interest-earning assets and the rate paid on interest-bearing liabilities. Other factors that may affect the Bank's operating results are general and local economic and competitive conditions, government policies and actions of regulatory authorities. The net interest margin for the three months ended March 31, 2012 was 3.98% as compared to the 3.54% net interest margin recorded for the three months ended March 31, 2011, an increase of 44 basis points. The Company will continue to closely monitor the mix of earning assets and funding sources to maximize net interest income during this challenging interest rate environment.

Earnings Analysis

Net Interest Income

Net interest income, the Company's largest and most significant component of operating income, is the difference between interest and fees earned on loans and other earning assets, and interest paid on deposits and borrowed funds. This component represented 85.1% of the Company's net revenues for the three month period ended March 31, 2012 and 83.4% of net revenues for the three-month period ended March 31, 2011. Net interest income also depends upon the relative amount of average interest-earning assets, average interest-bearing liabilities, and the interest rate earned or paid on them, respectively.

The following table sets forth the Company's consolidated average balances of assets and liabilities and shareholders' equity as well as interest income and expense on related items, and the Company's average yield or rate for the three month periods ended March 31, 2012 and 2011. The average rates are derived by dividing interest income and expense by the average balance of assets and liabilities, respectively.

Average Balance Sheets with Resultant Interest and Rates
(yields on a tax-equivalent basis)         Three months ended March 31, 2012                 Three months ended March 31, 2011
                                         Average                          Average          Average                          Average
                                         Balance          Interest         Yield           Balance          Interest         Yield
Assets:
Federal Funds Sold/Short-Term
Investments                          $    25,778,075     $    15,034          0.23 %   $    14,984,566     $     9,106          0.25 %
Investment Securities:
Taxable                                  169,451,907       1,184,205          2.81 %       204,398,959       1,284,944          2.55 %
Tax-exempt                                52,496,087         622,441          4.77 %        32,125,900         421,907          5.33 %
Total                                    221,947,994       1,806,646          3.27 %       236,524,859       1,706,851          2.93 %

Loan Portfolio:
Construction                              51,229,408         886,115          6.96 %        66,996,941       1,015,700          6.15 %
Residential real estate                   12,553,551         160,487          5.14 %        10,487,786         170,146          6.58 %
Home Equity                               11,017,237         155,074          5.66 %        12,380,893         175,411          5.75 %
Commercial and commercial
 real estate                             142,809,968       2,618,799          7.38 %       135,025,788       2,498,671           7.5 %
Mortgage warehouse lines                 192,404,738       2,289,469          4.79 %       101,779,484       1,227,643          4.89 %
Installment                                  414,501           6,927          6.72 %           421,663           7,450          7.17 %
All Other Loans                           32,488,520         297,588          3.68 %        28,432,869         259,186          3.70 %
Total                                    442,917,923       6,414,459          5.82 %       355,525,424       5,354,207          6.11 %

  Total Interest-Earning Assets          690,643,992       8,236,139          4.80 %       607,034,849       7,070,164          4.72 %

Allowance for Loan Losses                 (5,759,191 )                                      (6,050,453 )
Cash and Due From Bank                    17,525,148                                        17,307,166
Other Assets                              53,200,991                                        34,107,247
      Total Assets                   $   755,610,940                                   $   652,398,809

Liabilities and Shareholders'
Equity:
Money Market and NOW Accounts        $   204,819,526     $   306,804          0.60 %   $   136,295,377     $   373,313          1.11 %
Savings Accounts                         188,803,014         318,354          0.68 %       172,918,852         375,488          0.88 %
Certificates of Deposit                  144,509,899         561,316          1.56 %       153,113,579         649,329          1.72 %
Other Borrowed Funds                      22,069,231         117,922          2.15 %        13,895,000         106,920          3.12 %
Trust Preferred Securities                18,557,000          99,312          2.15 %        18,557,000         264,154          5.77 %
Total Interest-Bearing Liabilities       578,758,670       1,403,708          0.98 %       494,779,808       1,769,204          1.45 %

       Net Interest Spread                                                    3.82 %                                            3.27 %

Demand Deposits                          112,977,065                                        96,658,478
Other Liabilities                          8,426,611                                        11,578,464
Total Liabilities                        700,162,346                                       603,016,750
Shareholders' Equity                      55,448,594                                        49,382,059
Total Liabilities and
Shareholders' Equity                  $  755,610,940                                    $  652,398,809
Net Interest Margin                                      $ 6,832,431          3.98 %                       $ 5,300,960          3.54 %

The Company's net interest income increased on a tax-equivalent basis by $1,531,471, or 28.9%, to $6,832,431 for the three months ended March 31, 2012 from the $5,300,960 reported for the three months ended March 31, 2011. The principal factors contributing to the increase in net interest income was an increase in average rate earned on interest earnings assets and a decrease in the average rate paid on interest bearing liabilities.

Average interest earning assets increased by $83,609,143, or 13.8%, to $690.643,992 for the three month period ended March 31, 2012 from $607,034,849 for the three month period ended March 31, 2011. The overall yield on interest earning assets, on a tax-equivalent basis, increased 8 basis points to 4.80% for the three month period ended March 31, 2012 when compared to 4.72% for the three month period ended March 31, 2011.

Average interest bearing liabilities increased by $83,978,862, or 17.0%, to $578,758,670 for the three month period ended March 31, 2012 from $494,779,808 for the three month period ended March 31, 2011. Overall, the cost of total interest bearing liabilities decreased 47 basis points to 0.98% for the three months ended March 31, 2012 compared to 1.45% for the three months ended March 31, 2011.

The net interest margin (on a tax-equivalent basis), which is net interest income divided by average interest earning assets, was 3.98% for the three months ended March 31, 2012 compared to 3.54% the three months ended March 31, 2011.

Provision for Loan Losses

Management considers a complete review of the following specific factors in determining the provisions for loan losses: historical losses by loan category, non-accrual loans, and problem loans as identified through internal classifications, collateral values, and the growth and size of the loan portfolio. In addition to these factors, management takes into consideration current economic conditions and local real estate market conditions. Using this evaluation process, the Company's provision for loan losses was $599,998 for the three months ended March 31, 2012 and $399,998 for the three months ended March 31, 2011. The increased provision for 2012 was primarily the result of increased general allowances on commercial real estate loans.

Non-Interest Income

Total non-interest income for the three months ended March 31, 2012 was $1,165,165, an increase of $140,415, or 13.7%, over non-interest income of $1,024,750 for the three months ended March 31, 2011.
A significant portion of the increase in total non-interest income and its major components when compared with non-interest income for the prior year period was attributable to the March 2011 Acquisition.

Service charges on deposit accounts represent a consistent source of non-interest income. Service charge revenues increased to $227,972 for the three months ended March 31, 2012 from the $175,842 for the three months ended March 31, 2011. This increase was the result of a higher volume of uncollected funds and overdraft fees collected on deposit accounts during the first three months of 2012 compared to the first three months of 2011.

Gain on sales of loans held for sale increased by $31,478, or 7.2%, to $468,217 for the three months ended March 31, 2012 when compared to $436,739 for the three months ended March 31, 2011. The Bank sells both residential mortgage loans and Small Business Administration loans in the secondary market. The volume of mortgage loan sales increased for the first three months of 2012 compared to the first three months of 2011.

Non-interest income also includes income from bank-owned life insurance ("BOLI"), which amounted to $111,922 for the three months ended March 31, 2012 compared to $95,137 for the three months ended March 31, 2011, an increase of $16,785 for the first quarter of 2012 as compared to the first quarter of 2011. The Bank purchased additional tax-free BOLI assets during the fourth quarter of 2011 to partially offset the cost of employee benefit plans and reduced the Company's overall effective tax rate.

The Bank also generates non-interest income from a variety of fee-based services. These include safe deposit box rental, wire transfer service fees and Automated Teller Machine fees for non-Bank customers. Increased customer demand for these services contributed to the other income component of non-interest income amounting to $357,054 for the three months ended March 31, 2012, compared to $317,032 for the three months ended March 31, 2011, an increase of $40,022 for the first quarter of 2012 as compared to the first quarter of 2011.

Non-Interest Expense

Non-interest expenses increased by $949,685, or 20.4%, to $5,612,517 for the
three months ended March 31, 2012 from $4,662,832 for the three months ended
March 31, 2011. A significant portion of the increase in total non-interest
expense and its major components when compared with non-interest expense for the
prior year period was attributable to the March 2011 Acquisition. The following
table presents the major components of non-interest expenses for the three
months ended March 31, 2012 and 2011.

     Non-interest Expenses
                                                 Three months ended March 31,
                                                    2012                2011
     Salaries and employee benefits            $     2,940,350       $ 2,576,664
     Occupancy expenses                                723,786           566,738
     Data processing services                          263,575           303,473
     Equipment expense                                 271,963           176,561
     Telephone                                          96,868            69,740
     Marketing                                          45,035            27,966
     Regulatory, professional and other fees           182,708           198,152
     Office expense                                     77,667            68,086
     FDIC insurance expense                            147,393           227,547
     Directors' fees                                    24,000            27,000
     Other real estate owned expenses                  377,627           236,381
     Amortization of intangible assets                  66,992             9,178
     Other expenses                                    394,553           175,346
                  Total                        $     5,612,517       $ 4,662,832

Salaries and employee benefits, which represent the largest portion of non-interest expenses, increased by $363,686, or 14.1%, to $2,940,350 for the three months ended March 31, 2012 compared to $2,576,664 for the three months ended March 31, 2011. The increase in salaries and employee benefits for the three months ended March 31, 2012 was a result of an increase in the number of employees, regular merit increases and increased health care costs. Staffing levels overall increased to 147 full-time equivalent employees at March 31, 2012 as compared to 144 full-time equivalent employees at March 31, 2011. Salaries and benefit expense at March 31, 2012 includes three months of expenses for those employees added as a result of the March 2011 Acquisition.

Occupancy expenses increased by $157,048, or 27.7%, to $723,786 for the three months ended March 31, 2012 compared to $566,738 for the three months ended March 31, 2011. The increase in expense was primarily attributable to increased depreciation, property taxes and maintenance costs in maintaining the Bank's branch properties. In addition, the expenses of the three branch offices added as a result of the March 2011 Acquisition are included for the full 2012 first quarter.

The cost of data processing services has decreased to $263,575 for the three months ended March 31, 2012 from $303,473 for the three months ended March 31, 2011, as additional expenses were incurred in the prior year quarter to convert the three new branch offices acquired in the March 2011 Acquisition to the Bank's data systems.

Equipment expense increased by $95,402, or 54.0%, to $271,963 for the three months ended March 31, 2012 compared to $176,561 for the three months ended March 31, 2011 primarily due to increased costs associated with the number of maintenance contracts and supplies on equipment in the three acquired branch offices as compared with the prior period.

Marketing expense increased by $17,069, or 61.0%, to $45,035 for the three months ended March 31, 2012 compared to $27,966 for the three months ended March 31, 2011 as the Bank resumed the use of radio broadcast media in promoting products and services during the first three months of 2012.

Regulatory, professional and other fees decreased by $15,444, or 7.8%, to $182,708 for the three months ended March 31, 2012 compared to $198,152 for the three months ended March 31, 2011. During the first three months of 2011, the Company incurred professional fees in connection with the March 2011 Acquisition.

FDIC insurance expense decreased to $147,393 for the three months ended March 31, 2012 compared to $227,547 for the three months ended March 31 2011 as a result of the changes required by the Dodd-Frank Act with respect to FDIC assessment rules.

Other real estate owned expenses increased by $141,246, to $377,627 for the three months ended March 31, 2012 compared to $236,381 for the three months ended March 31, 2011 as the Company incurred increased loss provisions, property taxes, maintenance and other expenses on more properties during the three months ended March 31, 2012 than were incurred during the same period in 2011.

Amortization of intangible assets expense increased to $66,992 for the three months ended March 31, 2012 compared to $9,178 for the three months ended March 31, 2011, as the expense for 2012 included amortization of the $1.7 million core deposit intangible asset resulting from the March 2011 Acquisition.

All other expenses increased by $252,916, to $593,088 for the three months ended March 31, 2012 compared to $340,172 for the three months ended March 31, 2011 as current year increases occurred in telephone expense, correspondent bank fees, maintenance agreements and ATM operating expenses. All other expenses are comprised of a variety of operating expenses and fees as well as expenses associated with lending activities. The March 2011 Acquisition was a significant factor in the increased expenses.

An important financial services industry productivity measure is the efficiency ratio. The efficiency ratio is calculated by dividing total operating expenses by net interest income plus non-interest income. An increase in the efficiency ratio indicates that more resources are being utilized to generate the same or greater volume of income, while a decrease would indicate a more efficient allocation of resources. The Company's efficiency ratio decreased to 72.0% for the three months ended March 31, 2012, compared to 75.3% for the three months ended March 31, 2011.

Income Taxes

Income tax expense increased by $80,300 to $416,477 for the three months ended March 31, 2012 from $336,177 for the three months ended March 31, 2011. The increase was primarily due to a higher level of pretax income for the first quarter of 2012 as compared to the first quarter of 2011.

Financial Condition

March 31, 2012 Compared with December 31, 2011

Total consolidated assets at March 31, 2012 were $749,599,784, representing a decrease of $42,127,131, or 5.3%, from total consolidated assets of $791,726,915 at December 31, 2011.

Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2012 totaled $27,161,125 compared to $15,195,259 at December 31, 2011. Cash and cash equivalents at March 31, 2012 consisted of cash and due from banks of $27,149,715 and Federal funds sold/short term investments of $11,410. The corresponding balances at December 31, 2011 were $15,183,853 and $11,406, respectively To the extent that the Bank did not utilize the funds for loan originations or securities purchases, the cash inflows accumulated in cash and cash equivalents.

Loans Held for Sale

Loans held for sale at March 31, 2012 amounted to $17,497,128 compared to $19,234,111 at December 31, 2011. As indicated in the Consolidated Statements of Cash Flows, the amount of loans originated for sale was $41,388,684 for the three months ended March 31, 2012.

Investment Securities

Investment securities represented 29.6% of total assets at March 31, 2012 and 29.8% at December 31, 2011. Total investment securities decreased $14,344,576, or 6.1%, to $221,813,621 at March 31, 2012 from $236,158,197 at December 31, 2011. Purchases of investments totaled $18,134,939 during the three months ended March 31, 2012, and proceeds from calls and repayments totaled $32,127,828 during the period.

Securities available for sale are investments that may be sold in response to changing market and interest rate conditions or for other business purposes. Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk and to take advantage of market conditions that create more economically attractive returns. At March 31, 2012, securities available . . .