☑ ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
A. Full title of the plan and the address of the
plan, if different from that of the issuer named below:
B. Name of issuer of the securities held pursuant
to the plan and the address of its principal executive office:
Report of Independent Registered
Public Accounting Firm
The Board of Directors, Audit Committee, Management and Plan Participants
1st Constitution Bank 401(k) Retirement Savings Plan
Cranbury, New Jersey
Opinion on the Financial Statements
We have audited the accompanying statement of
net assets available for benefits of the 1st Constitution Bank 401(k) Retirement Savings Plan (the Plan) as of December 31,
2020 and 2019, the related statement of changes in net assets available for benefits for the year ended December 31, 2020, and the related
notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
net assets available for benefits of the Plan as of December 31, 2020 and 2019, and the changes in net assets available for benefits for
the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements
are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included
performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by the
Plan’s management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Supplemental Information
The supplemental information in the accompanying
supplemental schedule of assets (held at end of year) as of December 31, 2020 has been subjected to audit procedures performed in conjunction
with the audit of the Plan’s financial statements. The supplemental information is presented for the purpose of additional analysis
and is not a required part of the financial statements but included supplemental information required by the Department of Labor’s
Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental information
is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles
to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness
and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we
evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s
Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental
information is fairly stated, in all material respects, in relation to the financial statements as a whole.
/s/ Hancock Askew & Co., LLP
We have served as the Plan’s auditor since 2018.
Peachtree
Corners, Georgia
May 07, 2021
Notes to Financial Statements
December 31, 2020 and 2019
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1.
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Description of the Plan
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The following description of the 1st
Constitution Bank 401(k) Retirement Savings Plan (the “Plan”) provides only general information. Participants should refer
to the Plan document for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan
covering all eligible employees of 1st Constitution Bank (the “Company” or “Sponsoring Employer”) who
have completed 6 months of service and are age twenty-one or older. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (“ERISA”), as amended.
On March 27, 2020, President Trump signed
the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The Plan adopted the following provisions:
For coronavirus-related distributions
made before December 31, 2020, to qualified individuals, as defined in the CARES Act, the maximum distribution is the lesser of the vested
portion of the participant's account balance in the Plan or $100,000. In addition, for active employees, a coronavirus-related distribution
may be repaid at any time during a three-year period beginning on the day after the date on which the distribution was received.
For qualified individuals with outstanding
loans, loan repayments during the period March 27, 2020 through December 31, 2020, were permitted to be suspended for a 12-month period.
The term of the loan was extended by one year to accommodate the suspension period. Subsequent repayments were adjusted to include
accrued interest during the delay period.
Required minimum distributions were
suspended in 2020.
Contributions
Each year, participants may contribute
up to 100% of pretax annual compensation, as defined by the Plan up to the maximum limits of the Internal Revenue Code (“IRC”).
Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions. Participants may also
contribute amounts representing distributions from certain qualified defined benefit or defined contribution plans (rollovers). The Plan
includes an auto-enrollment provision whereby all newly eligible employees are automatically enrolled in the Plan unless they affirmatively
elect not to participate in the Plan. Automatically enrolled participants have their deferral rate set at 6 percent of eligible compensation
and their contributions invested in a designated balanced fund until changed by the participant. Participant contributions to the Plan
are recorded in the period that payroll deductions are made from participants. The Company contributes a matching contribution of up to
3 percent of eligible participant compensation, as defined by the Plan. Matching Company contributions are recorded in the same period
as participant contributions. Participants direct the investment of all contributions into various investment options offered by the Plan.
Contributions are subject to certain limitations.
1st Constitution Bank 401(k) Retirement Savings Plan
Notes to Financial Statements
December 31, 2020 and 2019
Participant Accounts
Each participant’s account is
credited with the participant’s contribution and allocations of (a) the Company’s contribution and (b) Plan earnings and is
charged with an allocation of administrative expenses. Allocations are based on participant earnings, deferrals or account balances, as
defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Participants are immediately vested
in their contributions plus actual earnings thereon. Vesting in the Company’s matching contribution is based on years of continuous
service. Participants are fully vested after three years of credited service, as follows:
Years of Service
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Percentage
|
|
|
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1 year
|
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0%
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2 years
|
|
50%
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3 years
|
|
100%
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A year of service for vesting will be
determined on the basis of the hours of service method. The participant is credited with a year of service for vesting purposes upon completion
of 1,000 hours of service during the Plan year.
Notes Receivable from Participants
Participants may borrow from their fund
accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Borrowings are secured
by the balance in the participant's account and bear an interest rate ranging from 4.25% to 6.50% at December 31, 2020. Principal and
interest is paid ratably through bi-weekly payroll deductions. Terms range from one to five years or greater for the purchase of a primary
residence. The number of outstanding loans that a participant can have at one time is two loans.
Payment of Benefits
On termination of service, a participant
may elect to receive an amount equal to the value of the participant’s vested interest in his or her account in a lump sum. If the
balance is equal to or greater than $5,000, the participant may elect to defer payment. In addition, the Plan allows for withdrawals for
employees over 59 ½ and hardship distributions if certain criteria are met.
Forfeited Accounts
At December 31, 2020 and 2019, forfeited
non-vested accounts totaled $472 and $645, respectively. The forfeiture account is used to offset Plan expenses or future Company matching
contributions. During 2020, $4,021 was used to reduce Company matching contributions and $6,185 was used to reduce Plan administrative
expenses.
1st Constitution Bank 401(k) Retirement Savings Plan
Notes to Financial Statements
December 31, 2020 and 2019
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2.
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Summary of Significant Accounting Policies
|
Basis of Accounting
The financial statements of the Plan
are prepared on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires Plan management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosures of contingent
assets and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments are reported at fair value.
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date (an exit price). See Note 3 for further discussion of fair value measurements.
Purchases and sales of securities are
recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net
appreciation (depreciation) includes the Plan's gains and losses on investments bought and sold as well as held during the year.
Notes Receivable from Participants
Notes receivable from participants are
measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent notes receivable are recorded as distributions
based upon the terms of the Plan.
Administration of Plan Assets
The Plan’s assets are administered
under a contract with Principal Trust Company (Principal), as the record keeper. Delaware Charter Guarantee & Trust, conducting business
as Principal Trust Company acts as the custodian and trustee of the Plan. The custodian invests funds received from contributions, investment
sales, interest, and dividend income and makes distribution payments to participants. Certain administrative expenses of maintaining the
Plan are paid by the Company.
Payment of Benefits
Benefits are recorded when paid.
1st Constitution Bank 401(k) Retirement Savings Plan
Notes to Financial Statements
December 31, 2020 and 2019
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3.
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Fair Value Measurements
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The Plan measures its investments at
fair value on a recurring basis in accordance with U.S. GAAP. Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The framework that the
authoritative guidance establishes for measuring fair value includes a hierarchy used to classify the inputs used in measuring fair value.
The hierarchy prioritizes the inputs used in determining valuations into three levels. The level in the fair value hierarchy within which
the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The
levels of the fair value hierarchy are as follows:
Level 1 - Fair value is based on unadjusted
quoted prices in active markets that are accessible to the Plan for identical assets. These generally provide the most reliable evidence
and are used to measure fair value whenever available.
Level 2 - Fair value is based on significant
inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through
corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets or liabilities,
quoted market prices in inactive markets for identical or similar assets, and other observable inputs.
Level 3 - Fair value is based on significant
unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted
cash flows, and similar techniques.
Following is a description of the valuation
methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2020 and 2019.
There were no transfers of investments between Level 1 and Level 2 during the years ended December 31, 2020 and 2019. The Plan held no
Level 3 investments during 2020 or 2019.
Shares of registered investment companies
are valued at the quoted net asset value (“NAV”) of shares held by the Plan at year end.
The Common Collective Trust Fund is
valued at the NAV of units of a bank collective trust. The NAV, as provided by the trustee, is used as a practical expedient to estimate
fair value. The NAV is based on the fair value of the underlying investments held by the fund less its liabilities. This practical expedient
is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV.
Participant transactions (purchases and sales) may occur daily. Were the Plan to initiate a full redemption of the Common Collective Trust
Fund, the investment adviser reserves the right to temporarily delay withdrawal from the trust in order to ensure that securities liquidations
will be carried out in an orderly business manner. The Plan’s investment in the Common Collective Trust Fund is not subject to any
withdrawal or redemption restrictions. The Plan has no unfunded commitments relating to the Common Collective Trust Fund at December 31,
2020 and 2019.
The Investment in 1st Constitution
Bancorp Common Stock is stated at fair value based upon quoted market prices as reported on NASDAQ on the last business day of the Plan.
The preceding methods may produce a
fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the
Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies
or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.
1st Constitution Bank 401(k) Retirement Savings Plan
Notes to Financial Statements
December 31, 2020 and 2019
The following table sets forth by level,
within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2020:
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Assets at Fair Value as of December 31, 2020
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|
|
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Level 1
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Level 2
|
|
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Level 3
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Total
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Registered investment companies
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$
|
14,261,801
|
|
|
$
|
|
|
|
$
|
-
|
|
|
$
|
14,261,801
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|
1st Constitution Bancorp Stock
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|
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2,355,057
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|
|
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-
|
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|
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-
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2,355,057
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total investments in fair
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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value hierarchy
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|
$
|
16,616,858
|
|
|
$
|
|
|
|
$
|
-
|
|
|
|
16,616,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Investments measured at net asset
value (a)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,032,122
|
|
Total investments at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,648,980
|
|
The following table sets forth by level,
within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2019:
|
|
Assets at Fair Value as of December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
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Registered investment companies
|
|
$
|
11,737,706
|
|
|
$
|
|
|
|
$
|
-
|
|
|
$
|
11,737,706
|
|
1st Constitution Bancorp Stock
|
|
|
2,965,034
|
|
|
|
|
|
|
|
-
|
|
|
|
2,965,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments in fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
value hierarchy
|
|
$
|
14,702,740
|
|
|
$
|
|
|
|
$
|
-
|
|
|
|
14,702,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments measured at net asset
value (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
551,096
|
|
Total investments at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,253,836
|
|
|
(a)
|
Certain investments measured at NAV per share (or its equivalent) have not been classified in the fair
value hierarchy but are included to permit reconciliation of the fair value hierarchy to the investment line item presented in the Statement
of Net Assets Available for Benefits.
|
|
4.
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Related Party Transactions/Party-in- Interest
|
The Plan issues notes to participants,
which are secured by the participant’s account balances. These transactions qualify as party-in-interest transactions. Principal,
as the record keeper, is the administrator of these transactions.
Certain administrative functions of
the Plan are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan.
At December 31, 2020, the Plan held
148,394 shares of 1st Constitution Bancorp Stock, with a cost basis of $2,628,192, and a fair value of $2,355,057. Purchase
transactions and sales proceeds recorded for 1st Constitution Bancorp Stock during 2020 aggregated, $161,237.
At December 31, 2019, the Plan held
133,982 units of 1st Constitution Bancorp Stock, with a cost basis of $2,489,031, and a fair value of $2,965,034.
1st Constitution Bank 401(k) Retirement Savings Plan
Notes to Financial Statements
December 31, 2020 and 2019
Although it has not expressed any intent
to do so, the Company has the right to discontinue its contributions at any time and to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100 percent vested in their Company contributions.
The Plan is based on the Volume Submitter
Profit Sharing Plan (Volume Submitter) of Principal Life Insurance Company, which received an opinion letter from the Internal Revenue
Service (IRS) dated August 8, 2014, stating that the Volume Submitter is designed in accordance with the provisions of the IRC. Although
the Plan has been amended since the date of this opinion letter, the Plan Administrator believes that the Plan is currently designed and
being operated in compliance with the applicable requirements of the IRC and, therefore, the Plan administrator believes that the Plan
was qualified, and the related trust was tax-exempt.
U.S. GAAP requires Plan management
to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely
than not would not be sustained upon examination by the IRS. The Plan administrator has analyzed the tax positions taken by the Plan and
has concluded that as of December 31, 2020 there are no uncertain positions taken, or expected to be taken, that would require recognition
of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there
are currently no audits for any tax periods in progress.
|
7.
|
Risks and Uncertainties
|
The Plan invests in various investment
securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities
will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported
in the Statement of Net Assets Available for Benefits.
As of December 31, 2020 the Plan had
investments of $2,355,057 and $3,395,136, that were concentrated in 1st Constitution Bancorp Stock and the Fidelity 500 Index
Fund, respectively.
The Plan has evaluated, for
consideration of recognition or disclosure, subsequent events that have occurred through the date of issuance, May 7, 2021, and has determined
that, no significant events occurred after December 31, 2020, but prior to the issuance of these financial statements, that would have
a material impact on its financial statements.