Princeton Bancorp, Inc 10-Q for FY2023 Q2
Princeton Bancorp, Inc. (BPRN)
About this 10-Q
Princeton Bancorp, Inc filed this 10-Q on August 14, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $6.79M
- up 7.3% from net income of $6.33M a year earlier
- Diluted EPS
- $1.07
- up 9.2% from $0.98 a year earlier
Table of Contents
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Securities registered or to be registered pursuant to Section 12(b) of the Act: |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
| Emerging growth company |
Table of Contents
TABLE OF CONTENTS
Table of Contents
Explanatory Note
On January 10, 2023 (the “Effective Date”), Princeton Bancorp, Inc., a Pennsylvania corporation (the “Company”) acquired all of the outstanding stock of The Bank of Princeton, a New Jersey state-chartered bank (the “Bank”), (the “Reorganization”). Pursuant to the Reorganization, the Bank became the sole direct wholly owned subsidiary of the Company, the Company became the holding company for the Bank and the stockholders of the Bank became stockholders of the Company.
Before the Effective Date, the Bank’s common stock was registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and the Bank was subject to the information requirements of the Exchange Act and, in accordance with Section 12(i) thereof, filed quarterly reports, proxy statements and other information with the Federal Deposit Insurance Corporation (“FDIC”). As of the Effective Date, pursuant to Rule 12g-3 under the Exchange Act, the Company is the successor registrant to the Bank, the Company’s common stock is deemed to be registered under Section 12(b) of the Exchange Act, and the Company has become subject to the information requirements of the Exchange Act and files reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).
Prior to the Effective Date, the Company conducted no operations other than obtaining regulatory approval for the Reorganization. Accordingly, the consolidated financial statements for periods prior to the Effective Date, discussions of those financial statements, and market data and all other information presented herein for periods prior to the Effective Date, are those of the Bank.
In this report, unless the context indicates otherwise, references to “we,” “us,” and “our” refer to the Company and the Bank. However, if the discussion relates to a period before the Effective Date, the terms refer only to the Bank.
Table of Contents
June 30, |
December 31, |
|||||||
2023 |
2022 |
|||||||
ASSETS |
||||||||
Cash and due from banks |
$ | $ | ||||||
Interest-earning bank balances |
||||||||
Federal funds sold |
||||||||
Total cash and cash equivalents |
||||||||
Securities available-for-sale, |
||||||||
Securities held-to-maturity |
||||||||
Loans receivable, net of deferred costs |
||||||||
Less: allowance for credit lossess |
( |
) | ( |
) | ||||
Loan receivable, net |
||||||||
Bank-owned life insurance |
||||||||
Premises and equipment, net |
||||||||
Accrued interest receivable |
||||||||
Restricted investment in bank stock |
||||||||
Deferred taxes, net |
||||||||
Goodwill |
||||||||
Core deposit intangible |
||||||||
Mortgage servicing rights |
||||||||
Other real estate owned |
||||||||
Operating lease right-of-use |
||||||||
Other assets |
||||||||
TOTAL ASSETS |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
LIABILITIES |
||||||||
Deposits: |
||||||||
Non-interest-bearing |
$ | $ | ||||||
Interest-bearing |
||||||||
Total deposits |
||||||||
Borrowings |
||||||||
Accrued interest payable |
||||||||
Operating lease liability |
||||||||
Other liabilities |
||||||||
TOTAL LIABILITIES |
||||||||
STOCKHOLDERS’ EQUITY: |
||||||||
Common stock, |
||||||||
Paid-in capital |
||||||||
Treasury stock, at cost |
( |
) | ||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
TOTAL STOCKHOLDER’S EQUITY |
||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | $ | ||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
INTEREST AND DIVIDEND INCOME |
||||||||||||||||
Loans receivable, including fees |
$ | $ | $ | $ | ||||||||||||
Securities available-for-sale: |
||||||||||||||||
Taxable |
||||||||||||||||
Tax-exempt |
||||||||||||||||
Securities held-to-maturity |
||||||||||||||||
Other interest and dividend income |
||||||||||||||||
TOTAL INTEREST AND DIVIDEND INCOME |
||||||||||||||||
INTEREST EXPENSE |
||||||||||||||||
Deposits |
||||||||||||||||
Borrowings |
||||||||||||||||
TOTAL INTEREST EXPENSE |
||||||||||||||||
NET INTEREST INCOME |
||||||||||||||||
Provision for credit losses |
||||||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
||||||||||||||||
NON-INTEREST INCOME |
||||||||||||||||
Gain on call/sale of securities available-for-sale |
||||||||||||||||
Income from bank-owned life insurance |
||||||||||||||||
Fees and service charges |
||||||||||||||||
Loan fees, including preypayment penalties |
||||||||||||||||
Gain on bargain purchase |
||||||||||||||||
Other |
||||||||||||||||
TOTAL NON-INTEREST INCOME |
||||||||||||||||
NON-INTEREST EXPENSE |
||||||||||||||||
Salaries and employee benefits |
||||||||||||||||
Occupancy and equipment |
||||||||||||||||
Professional fees |
||||||||||||||||
Data processing and communications |
||||||||||||||||
Federal deposit insurance |
||||||||||||||||
Advertising and promotion |
||||||||||||||||
Office expense |
||||||||||||||||
Other real estate expenses |
||||||||||||||||
Loss on sale of other real estate owned |
||||||||||||||||
Core deposit intangible |
||||||||||||||||
Acquisition-related expenses |
||||||||||||||||
Other |
||||||||||||||||
TOTAL NON-INTEREST EXPENSE |
||||||||||||||||
INCOME BEFORE INCOME TAX EXPENSE |
||||||||||||||||
INCOME TAX EXPENSE |
||||||||||||||||
NET INCOME |
$ | $ | $ | $ | ||||||||||||
Earnings per common share-basic |
$ | $ | $ | $ | ||||||||||||
Earnings per common share-diluted |
$ | $ | $ | $ | ||||||||||||
Dividends declared per common share |
$ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
NET INCOME |
$ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss) |
||||||||||||||||
Unrealized losses arising during period on securities available-for-sale |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Reclassification adjustment for gains realized in income 1 |
( |
) | ( |
) | ||||||||||||
Net unrealized loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Tax effect |
||||||||||||||||
Total other comprehensive income (loss) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
COMPREHENSIVE INCOME |
$ | $ | $ | $ | ||||||||||||
| 1 | Amounts are included in gain on call/sale of securities available-for-sale non-interest income. There was |
Accumulated |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Common |
Paid-in |
Treasury |
Retained |
Comprehensive |
||||||||||||||||||||
Three Months Ended June 30, 2023 and 2022 |
Stock |
Capital |
Stock |
Earnings |
(Loss) Income |
Total |
||||||||||||||||||
Balance, April 1, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Stock options exercised ( |
— | — | — | |||||||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Purchase of treasury stock ( |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | ( |
) | ||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Balance, April 1, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | ||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Accumulated |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Common |
Paid-in |
Treasury |
Retained |
Comprehensive |
||||||||||||||||||||
Six Months Ended June 30, 2023 and 2022 |
stock |
Capital |
Stock |
Earnings |
(Loss) Income |
Total |
||||||||||||||||||
Balance, January 1, 2022 |
$ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Stock options exercised ( |
— | — | — | |||||||||||||||||||||
Restricted stock ( |
— | — | — | |||||||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Purchase of treasury stock ( |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | — | |||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Balance, January 1, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Adoption of CECL |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Formation of Princeton Bancorp, Inc. |
( |
) | — | — | — | |||||||||||||||||||
Stock options exercised ( |
— | — | — | |||||||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | — | |||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Six Months Ended June 30, |
||||||||
2023 |
2022 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Provision for credit losses |
||||||||
Depreciation and amortization |
||||||||
Stock-based compensation expense |
||||||||
Amortization of premiums and accretion of discount on securities |
||||||||
Accretion of net deferred loan fees and costs |
( |
) | ( |
) | ||||
Gain on call/sale of securities available-for-sale |
( |
) | ||||||
Income earned from small business investment company (“SBIC”) Investment |
( |
) | ( |
) | ||||
Increase in cash surrender value of bank-owned life insurance |
( |
) | ( |
) | ||||
Deferred income tax (benefit) |
( |
) | ||||||
Amortization of core deposit intangible |
||||||||
Bargain purchase gain |
( |
) | ||||||
Proceeds from other real estate owned |
||||||||
Write down on other real estate owned |
||||||||
Decrease in accrued interest receivable and other assets |
||||||||
Decrease in accrued interest payable and other liabilities |
( |
) | ( |
) | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
||||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Purchases of available-for-sale |
( |
) | ( |
) | ||||
Principal repayments of securities available-for-sale |
||||||||
Maturities and calls of securities available-for-sale |
||||||||
Maturities, calls and principal repayments of securities held-to-maturity |
||||||||
Net decrease (increase) in loans |
( |
) | ||||||
Cash paid for acquisition |
( |
) | ||||||
Cash received from acquisition |
||||||||
Purchases of premises and equipment |
( |
) | ( |
) | ||||
Purchases of restricted bank stock |
||||||||
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES |
( |
) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Net increase (decrease) in deposits |
( |
) | ||||||
Repayment of overnight borrowings |
( |
) | ||||||
Cash dividends |
( |
) | ( |
) | ||||
Dividend reinvestment program |
||||||||
Purchase of treasury stock |
( |
) | ||||||
Proceeds from exercise of stock options |
||||||||
Release of restricted stock units |
||||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
( |
) | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
( |
) | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | $ | ||||||
SUPPLEMENTARY CASH FLOWS INFORMATION: |
||||||||
Interest paid |
$ | $ | ||||||
Income taxes paid |
$ | $ | ||||||
Reclass of paid-in capital related to holding company formation |
$ | $ | ||||||
Reclass of treasury stock related to holding company formation |
$ | $ | ||||||
Reclass of common stock related to holding company formation |
$ | ( |
) | $ | ||||
Net assets acquired from Noah Bank 1 |
$ | $ | ||||||
Net liabilities assumed from Noah Bank 1 |
$ | $ | ||||||
Fair Value |
||||
| (Dollars in thousands except per share data) | ||||
| Purchase Price Consideration in Cash for Noah Bank’s Outstanding Shares |
||||
| Noah Bank number of common shares outstanding |
||||
| Purchase price per share assigned to cash consideration |
$ | |||
| |
|
|||
| Cash consideration |
$ | |||
| |
|
|||
| Assets Acquired: |
||||
| Cash and cash equivalents |
$ | |||
| Securities available-for-sale |
||||
| Loans receivable, net of allowance |
||||
| Core deposit intangible |
||||
| Premises and equipment |
||||
| Operating leases right-of-use |
||||
| Deferred tax assets |
||||
| Other assets |
||||
| |
|
|||
| Fair value of assets acquired |
||||
| |
|
|||
| Liabilities Assumed: |
||||
| Deposits |
||||
| Operating lease liability |
||||
| Other liabilities assumed |
||||
| |
|
|||
| Fair value of liabilities assumed |
||||
| |
|
|||
| Total identifiable net assets |
||||
| |
|
|||
| Bargain purchase gain |
$ | ( |
) | |
| |
|
|||
Three months ended June 30, |
||||||||
2023 |
2022 |
|||||||
Net income applicable to common stock |
$ | $ | ||||||
Weighted average number of common shares outstanding |
||||||||
Basic earnings per share |
$ | $ | ||||||
Net income applicable to common stock |
$ | $ | ||||||
Weighted average number of common shares outstanding |
||||||||
Dilutive effect on common shares outstanding |
||||||||
Weighted average number of diluted common shares outstanding |
||||||||
Diluted earnings per share |
$ | $ | ||||||
Six months ended June 30, |
||||||||
2023 |
2022 |
|||||||
Net income applicable to common stock |
$ | $ | ||||||
Weighted average number of common shares outstanding |
||||||||
Basic earnings per share |
$ | $ | ||||||
Net income applicable to common stock |
$ | $ | ||||||
Weighted average number of common shares outstanding |
||||||||
Dilutive effect on common shares outstanding |
||||||||
Weighted average number of diluted common shares outstanding |
||||||||
Diluted earnings per share |
$ | $ | ||||||
Three months ended June 30, |
||||||||||||||||
2023 |
2022 |
|||||||||||||||
| Weighted Ave | Weighted Ave | |||||||||||||||
| Options | Exercise Price | Options | Exercise Price | |||||||||||||
Options to purchase |
$ | $ | ||||||||||||||
Anti-dilutive |
$ | $ | ||||||||||||||
Six months ended June 30, |
||||||||||||||||
2023 |
2022 |
|||||||||||||||
| Weighted Ave | Weighted Ave | |||||||||||||||
| Options | Exercise Price | Options | Exercise Price | |||||||||||||
Options to purchase |
$ | $ | ||||||||||||||
Anti-dilutive |
$ | $ | ||||||||||||||
June 30, 2023 |
||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
||||||||||||||
Cost |
Gains |
Losses |
Fair Value |
|||||||||||||
Available -for-sale |
(In thousands) | |||||||||||||||
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) |
$ | $ | $ | ( |
) | $ | ||||||||||
U.S. government agency securities |
( |
) | ||||||||||||||
Obligations of state and political subdivisions |
( |
) | ||||||||||||||
Small Business Association (SBA) securities |
||||||||||||||||
Subordinated debentures |
||||||||||||||||
Small business investment company securities |
( |
) | ||||||||||||||
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
December 31, 2022 |
||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
||||||||||||||
Cost |
Gains |
Losses |
Fair Value |
|||||||||||||
Available -for-sale |
(In thousands) | |||||||||||||||
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) |
$ | $ | $ | ( |
) | $ | ||||||||||
U.S. government agency securities |
( |
) | ||||||||||||||
Obligations of state and political subdivisions |
( |
) | ||||||||||||||
Small business investment company securities |
||||||||||||||||
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
Less than 12 Months |
More than 12 Months |
Total |
||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value |
Losses |
Value |
Losses |
Value |
Losses |
|||||||||||||||||||
June 30, 2023 |
(In thousands) | |||||||||||||||||||||||
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
U.S. government agency securities |
$ | ( |
) | ( |
) | |||||||||||||||||||
Obligations of state and political subdivisions |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
Small business investment company securities |
( |
) | ( |
) | ||||||||||||||||||||
Total |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
Less than 12 Months |
More than 12 Months |
Total |
||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value |
Losses |
Value |
Losses |
Value |
Losses |
|||||||||||||||||||
December 31, 2022 |
(In thousands) | |||||||||||||||||||||||
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
U.S. government agency securities |
( |
) | ( |
) | ||||||||||||||||||||
Obligations of state and political subdivisions |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||
Amortized |
||||||||
Cost |
Fair Value |
|||||||
| (In thousands) | ||||||||
Due in one year or less |
$ | $ | ||||||
Due after one year through five years |
||||||||
Due after five years through ten years |
||||||||
Due after ten years |
||||||||
Mortgage-backed securities (GSEs) |
||||||||
Small Business Association (SBA) securities |
||||||||
Subordinated debentures |
||||||||
SBIC securities |
||||||||
| $ | $ | |||||||
June 30, |
December 31, |
|||||||
2023 |
2022 |
|||||||
| (In thousands) | ||||||||
Commercial real estate |
$ | $ | ||||||
Commercial and industrial |
||||||||
Construction |
||||||||
Residential first-lien mortgage |
||||||||
Home equity/consumer |
||||||||
Total loans |
||||||||
Deferred fees and costs |
( |
) | ( |
) | ||||
Loans, net |
$ | $ | ||||||
June 30, |
December 31, |
|||||||
2023 |
2022 |
|||||||
| (In thousands) | ||||||||
Allowance for credit losses - loans |
$ | ( |
) | $ | ( |
) | ||
Allowance for credit losses - off balance sheet |
( |
) | ( |
) | ||||
| $ | ( |
) | $ | ( |
) | |||
June 30, 2023 |
December 31, 2022 |
|||||||||||||||
With a |
Without a |
With a |
Without a |
|||||||||||||
Related |
Related |
Related |
Related |
|||||||||||||
Allowance |
Allowance |
Allowance |
Allowance |
|||||||||||||
| (In thousands) | ||||||||||||||||
Commercial real estate |
$ | $ | $ | $ | ||||||||||||
Commercial and industrial |
||||||||||||||||
Construction |
||||||||||||||||
Residential first-lien mortgage |
||||||||||||||||
Total nonaccrual loans |
$ | $ | $ | $ | ||||||||||||
Loans |
||||||||||||||||||||||||||||
30-59 |
60-89 |
>90 |
Receivable |
|||||||||||||||||||||||||
Days |
Days |
Days |
Total |
Total |
>90 Days |
|||||||||||||||||||||||
Past |
Past |
Past |
Past |
Loans |
and |
|||||||||||||||||||||||
Due |
Due |
Due |
Due |
Current |
Receivable |
Accruing |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
Commercial real estate |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Commercial and industrial |
||||||||||||||||||||||||||||
Construction |
||||||||||||||||||||||||||||
Residential first-lien mortgage |
||||||||||||||||||||||||||||
Home equity/consumer |
||||||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Loans |
||||||||||||||||||||||||||||
30-59 |
60-89 |
Receivable |
||||||||||||||||||||||||||
Days |
Days |
Greater |
Total |
Total |
>90 Days |
|||||||||||||||||||||||
Past |
Past |
than |
Past |
Loans |
and |
|||||||||||||||||||||||
Due |
Due |
90 days |
Due |
Current |
Receivable |
Accruing |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
Commercial real estate |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Commercial and industrial |
||||||||||||||||||||||||||||
Construction |
||||||||||||||||||||||||||||
Residential first-lien mortgage |
||||||||||||||||||||||||||||
Home equity/Consumer |
||||||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
2023 |
2022 |
2021 |
2020 |
2019 |
Prior |
Revolving Loans |
Total |
|||||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||||||||||
Commercial real estate |
||||||||||||||||||||||||||||||||
Pass |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total commercial real estate |
||||||||||||||||||||||||||||||||
Commercial and industrial |
||||||||||||||||||||||||||||||||
Pass |
||||||||||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total commercial and industrial |
||||||||||||||||||||||||||||||||
Construction |
||||||||||||||||||||||||||||||||
Pass |
||||||||||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total construction |
||||||||||||||||||||||||||||||||
Residential first-lien mortgage |
||||||||||||||||||||||||||||||||
Performing |
||||||||||||||||||||||||||||||||
Nonperforming |
||||||||||||||||||||||||||||||||
Total residential first-lien mortgage |
||||||||||||||||||||||||||||||||
Home equity/consumer |
||||||||||||||||||||||||||||||||
Performing |
||||||||||||||||||||||||||||||||
Nonperforming |
||||||||||||||||||||||||||||||||
Total home equity/consumer |
||||||||||||||||||||||||||||||||
Current period gross charge-offs |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Current period recoveries |
||||||||||||||||||||||||||||||||
Total net-charge-off |
( |
) |
( |
) | ||||||||||||||||||||||||||||
Total |
||||||||||||||||||||||||||||||||
Pass |
||||||||||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total loans |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Special |
||||||||||||||||||||
Pass |
Mention |
Substandard |
Doubtful |
Total |
||||||||||||||||
| (In thousands) | ||||||||||||||||||||
Commercial real estate |
$ | $ | $ | $ | $ | |||||||||||||||
Commercial and industrial |
||||||||||||||||||||
Construction |
||||||||||||||||||||
Residential first-lien mortgage |
||||||||||||||||||||
Home equity/consumer |
||||||||||||||||||||
Total with no related allowance |
$ | $ | $ | $ | $ | |||||||||||||||
Commercial |
Commercial and |
Residential first-lien |
Home equity/ |
|||||||||||||||||||||||||
real estate |
industrial |
Construction |
mortgage |
consumer |
Unallocated |
Total |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||||||
| Beginning balance |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Non-purchased credit deteriorated loans |
||||||||||||||||||||||||||||
| Purchased credit deteriorated loans |
||||||||||||||||||||||||||||
| Provision 1 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
| Charge-offs |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
| Recoveries |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ending Balance: |
||||||||||||||||||||||||||||
| Individually evaluated |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Collectively evaluated |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial |
Residential |
|||||||||||||||||||||||||||
Commercial |
and |
first-lien |
Home equity/ |
|||||||||||||||||||||||||
real estate |
industrial |
Construction |
mortgage |
consumer |
Unallocated |
Total |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Loans: |
||||||||||||||||||||||||||||
| Ending balance: |
||||||||||||||||||||||||||||
| Individually evaluated |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Collectively evaluated |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ending balance |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ consumer |
Unallocated |
Total |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Allowance for loan losses: |
||||||||||||||||||||||||||||
| Beginning balance |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Provision |
( |
) | ( |
) | ||||||||||||||||||||||||
| Charge-offs |
( |
) | ( |
) | ||||||||||||||||||||||||
| Recoveries |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ consumer |
Unallocated |
Total |
||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||||||
| Beginning balance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| CECL adoption |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||
| CECL day 1 provision |
||||||||||||||||||||||||||||
| Purchased credit deteriorated loans |
||||||||||||||||||||||||||||
| Provision 1 |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||
| Charge-offs |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||||||||||||||
| Recoveries |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ consumer |
PPP |
Unallocated |
Total |
|||||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||||||
| Allowance for loan losses: |
||||||||||||||||||||||||||||||||
| Beginning balance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
| Provision |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
| Charge-offs |
( |
) |
( |
) | ||||||||||||||||||||||||||||
| Recoveries |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ consumer |
Unallocated |
Total |
||||||||||||||||||||||
(In thousands) |
||||||||||||||||||||||||||||
| Loans: |
||||||||||||||||||||||||||||
| Ending Balance: |
||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| Collectively evaluated for impairment |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ending balance |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Allowance for loan losses: |
||||||||||||||||||||||||||||
| Ending Balance: |
||||||||||||||||||||||||||||
| Individually evaluated for impairment |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||||||||
| Collectively evaluated for impairment |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ |
$ |
$ |
$ |
$ |
$ |
$ |
||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
June 30, |
December 31, |
|||||||||||||||
2023 |
2022 |
|||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Demand, non-interest-bearing checking |
$ | % | $ | % | ||||||||||||
Demand, interest-bearing checking |
% | % | ||||||||||||||
Savings |
% | % | ||||||||||||||
Money market |
% | % | ||||||||||||||
Time deposits, $250,000 and over |
% | % | ||||||||||||||
Time deposits, other |
% | % | ||||||||||||||
| $ | % | $ | % | |||||||||||||
(Level 1) Quoted Price in Active Markets for Identical Assets |
(Level 2) Significant Other Observable Inputs |
(Level 3) Significant Unobservable Inputs |
Total Fair Value June 30, 2023 |
|||||||||||||
Description |
(In thousands) | |||||||||||||||
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs) |
$ | — | $ | $ | — | $ | ||||||||||
U.S. government agency securities |
— | — | ||||||||||||||
Obligations of state and political subdivisions |
— | — | ||||||||||||||
Small Business Association (SBA) securities |
— | — | ||||||||||||||
Subordinated debentures |
— | — | ||||||||||||||
SBIC securities |
— | |||||||||||||||
Securities available-for-sale |
$ | — | $ | $ | $ | |||||||||||
(Level 1) Quoted Price in Active Markets for Identical Assets |
(Level 2) Significant Other Observable Inputs |
(Level 3) Significant Unobservable Inputs |
Total Fair Value December 31, 2022 |
|||||||||||||
Description |
(In thousands) | |||||||||||||||
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs) |
$ | — | $ | $ | — | $ | ||||||||||
U.S. government agency securities |
— | |||||||||||||||
Obligations of state and political subdivisions |
— | — | ||||||||||||||
SBIC securities |
— | |||||||||||||||
Securities available-for-sale |
$ | — | $ | $ | $ | |||||||||||
| Description |
(Level 1) Quoted Price in Active Markets for Identical Assets |
(Level 2) Significant Other Observable Inputs |
(Level 3) Significant Unobservable Inputs |
Total Fair Value June 30, 2023 |
||||||||||||
| (In thousands) | ||||||||||||||||
| Other real estate owned |
$ | $ | $ | $ | ||||||||||||
| Collateral dependent loan |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| $ | $ | $ | $ | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Description |
June 30, 2023 |
Valuation Technique |
Unobservable Input |
Range (Weighted Average) |
||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Discount | % | |||||||||||||||
| Other real estate owned 1 |
$ | Collateral | 2 |
adjustment | ( |
%) | ||||||||||
| Discount | % | |||||||||||||||
| Collateral dependent loan |
$ | Collateral | 3 |
adjustment | ( |
%) | ||||||||||
| Description |
(Level 1) Quoted Price in Active Markets for Identical Assets |
(Level 2) Significant Other Observable Inputs |
(Level 3) Significant Unobservable Inputs |
Total Fair Value December 31, 2022 |
||||||||||||
| (In thousands) | ||||||||||||||||
| Impaired loans |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| $ | $ | $ | $ | |||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Fair Value |
Range |
|||||||||||||||||||
December 31, |
Valuation |
Unobservable |
(Weighted |
|||||||||||||||||
| Description |
2022 |
Technique |
Input |
Average) |
||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Discount | % | |||||||||||||||||||
| Impaired loans |
$ | Collateral | 1 |
adjustment | ( |
%) | ||||||||||||||
June 30, 2023 |
||||||||||||||||||||
Carrying |
Estimated |
|||||||||||||||||||
Amount |
Fair Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||
| (In thousands) | ||||||||||||||||||||
Financial Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | $ | $ | $ | — | $ | — | |||||||||||||
Securities available-for-sale |
— | |||||||||||||||||||
Securities held-to-maturity |
— | — | ||||||||||||||||||
Loans receivable, net |
— | — | ||||||||||||||||||
Restricted investments in bank stock |
— | — | ||||||||||||||||||
Accrued interest receivable |
— | — | ||||||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Deposits |
$ | $ | $ | — | $ | $ | — | |||||||||||||
Accrued interest payable |
— | — | ||||||||||||||||||
December 31, 2022 |
||||||||||||||||||||
Carrying |
Estimated |
|||||||||||||||||||
Amount |
Fair Value |
Level 1 |
Level 2 |
Level 3 |
||||||||||||||||
| (In thousands) | ||||||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | $ | $ | $ | — | $ | — | |||||||||||||
Securities AFS |
— | |||||||||||||||||||
Securities HTM |
— | — | ||||||||||||||||||
Loans receivable, net |
— | — | ||||||||||||||||||
Restricted bank stock |
— | — | ||||||||||||||||||
Accrued interest receivable |
— | — | ||||||||||||||||||
Financial Liabilities |
||||||||||||||||||||
Deposits |
— | |||||||||||||||||||
Borrowings |
||||||||||||||||||||
Accrued interest payable |
— | — | ||||||||||||||||||
Statement of Financial Condition Location |
June 30, 2023 |
December 31, 2022 |
||||||||||
| (In thousands) | ||||||||||||
Operating Lease Right of Use Asset: |
||||||||||||
Gross carrying amount |
$ | $ | ||||||||||
Increased asset from new leases |
||||||||||||
Accumulated amortization |
( |
) | ( |
) | ||||||||
Net book value |
Operating lease right-of-use asset |
$ | |
$ | |
|||||||
Operating Lease Liability: |
||||||||||||
Lease liability |
Operating lease liability | $ | $ | |||||||||
Twelve months ended June 30, |
||||
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
2028 |
||||
Thereafter |
||||
Total future operating lease payment |
||||
Amounts representing interest |
( |
) | ||
Present value of net future lease payments |
$ | |
||
Three Months Ended |
Six Months Ended |
|||||||||||||||
June 30, |
June 30, |
|||||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
Lease cost: |
||||||||||||||||
Operating lease |
$ | |
$ | |
$ | |
$ | |
||||||||
Short-term lease cost |
||||||||||||||||
Total lease cost |
$ | $ | $ | $ | ||||||||||||
Other information: |
||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities |
$ | $ | $ | $ | ||||||||||||
Core Deposit |
||||||||
Goodwill |
Intangible |
|||||||
| (In thousands) | ||||||||
Balance at December 31, 2022 |
$ | $ | ||||||
Acquisition of Noah Bank |
— | |||||||
Amortization expense |
— | ( |
) | |||||
Balance at March 31, 2023 |
$ | $ | ||||||
2023 |
$ | |||
2024 |
||||
2025 |
||||
2026 |
||||
2027 |
||||
Thereafter |
||||
Total |
$ | |||
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our Form 10-K as of and for the year ended December 31, 2022.
Cautionary Statement Regarding Forward-Looking Statements
The Company may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission, in its reports to stockholders and in other communications by the Company (including this press release), which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Company’s control). The most significant factors that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages and additional interest rate increases by the Federal Reserve. Other factors that could cause actual results to differ materially from those indicated by forward-looking statements include, but are not limited to, the following factors: the impact of any future pandemics or other natural disasters; civil unrest, rioting, acts or threats of terrorism, or actions taken by the local, state and Federal governments in response to such events, which could impact business and economic conditions in our market area, the strength of the United States economy in general and the strength of the local economies in which the Company and Bank conduct operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; market volatility; the value of the Bank’s products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors’ products and services; the willingness of customers to substitute competitors’ products and services for the Bank’s products and services; credit risk associated with the Bank’s lending activities; risks relating to the real estate market and the Bank’s real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Company and the Bank; and the timing and nature of the regulatory response to any applications filed by the Company and the Bank; technological changes; acquisitions including the Company’s acquisition of Noah; difficulties and delays in integrating the businesses of Noah and the Bank or fully realizing cost savings and other benefits; changes in consumer spending and saving habits; those risks under the heading “Risk Factors” set forth in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A of our quarterly report on Form 10-Q for the quarter-ended March 31, 2023, and the success of the Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company, except as required by applicable law or regulation.
Throughout this document, references to “we,” “us,” or “our” refer to the Company and the Bank.
Executive Overview
Princeton Bancorp, Inc. is the holding company for The Bank of Princeton, a community bank founded in 2007. The Bank is a New Jersey state-chartered commercial bank with 22 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Fort Lee, Hamilton, Kingston, Lakewood, Lambertville, Lawrenceville, Monroe, New Brunswick, Palisades Park, Pennington, Piscataway, Princeton Junction, Quakerbridge and Sicklerville. There are also five branches in the Philadelphia, Pennsylvania area and three in the New York City metropolitan area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation (“FDIC”).
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The Company’s common stock trades on the “Nasdaq Global Select Market” under ticker symbol, “BPRN.”
Critical Accounting Policies and Estimates
Princeton Bancorp has chosen accounting policies that it believes are appropriate to accurately and fairly report its operating results and financial position, and the Company applies those accounting policies in a consistent manner. The Significant Accounting Policies are summarized in Note 1 to the consolidated financial statements included in the 2022 Annual Report on Form 10-K. Except the changes related to the Company’s adoption of CECL as noted in Note 1 and the changes related to the acquisition of Noah Bank as noted in Note 2 to the unaudited notes to the consolidated interim financial statements, there have been no changes to the Critical Accounting Estimates since the Company filed its Annual Report on Form 10-K for the year ended December 31, 2022.
New Accounting Pronouncements
Refer to Note 1 to the consolidated financial statements included in the 2022 Annual Report on Form 10-K and Note 1- Summary of Significant Accounting Policies in this document.
Economy
The US economy is showing signs of stress with inflation hitting a 40-year high, an increase in energy prices, specifically home-heating costs, higher interest rates set by the Federal Open Market Committee (impacting the real estate market) and uncertainties resulting from Russia’s war with Ukraine. However, the unemployment rate in New Jersey is below the national average.
Comparison of Financial Condition at June 30, 2023 and December 31, 2022
General
Total assets were $1.84 billion at June 30, 2023, an increase of $241.2 million, or 15.1% when compared to $1.60 billion at the end of 2022. The primary reason for the increase in total assets was the acquisition of Noah Bank on May 19, 2023, which had approximately $239.4 million in assets at closing. When looking at specific components of the balance sheet, including acquired assets, the Company recorded an increase in net loans of $129.3 million, an increase in cash and cash equivalents of approximately $89.7 million, an increase in its right of use asset of $7.3 million, an increase of $4.9 million due to Noah Bank’s deferred tax assets and an increase in other assets of $2.5 million. The increase in the Company’s net loans consisted of a $149.4 million increase in commercial real estate loans and a $17.2 million increase in commercial and industrial loans, partially offset by a decrease of $33.9 million in construction loans.
Cash and cash equivalents
Cash and cash equivalents increased $89.7 million, or 168.0%, to $143.0 million at June 30, 2023 compared to December 31, 2022. This increase was primarily due to a reduction in total loans of $58.5 million, not including the loans acquired in connection with the Noah transaction, and an increase in outstanding deposits of approximately $33.5, not including the deposits assumed from the Noah acquisition. The reduction in loans was related to loan payoffs during the period.
Investment securities
Total available-for-sale investment securities increased slightly to $87.2 million at June 30, 2023 compared to $83.4 million at December 31, 2022. This increase was primarily the result of approximately $6.5 million added to the available-for-sale securities portfolio due to the Noah acquisition.
Loans
Loans, net of deferred loan fees, increased $129.3 million to $1.50 billion at June 30, 2023 compared to $1.37 billion at December 31, 2022, or 9.4%. This increase was primarily due to the $186.0 million of loans acquired from Noah Bank, partially offset by payoffs and principal repayments. Including the loans acquired, the following changes occurred within individual loan segments: increases in commercial real estate loans of $149.4 million and commercial and industrial loans of $17.2 million, partially offset by a $33.9 million decrease in construction loans.
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Net charge-offs for the three-month and six-month periods ended June 30, 2023 were $1.8 million for both periods. For the three-month and six-month periods ended June 30, 2022, the Bank recorded net recoveries of $12 thousand and $46 thousand, respectively. With the adoption of CECL, the Bank recorded a one-time decrease, net of tax, in retained earnings of $284 thousand, a reduction to the allowance for credit losses of $301 thousand and an increase in the reserve for unfunded liabilities of $695 thousand. During the second quarter of 2023, the Bank reduced the reserve for unfunded liabilities by $240 thousand. The coverage ratio of the allowance for credit losses to period end loans was 1.20% at both June 30, 2023 and at December 31, 2022.
At June 30, 2023, non-performing assets totaled $9.8 million, an increase of $9.5 million, when compared to the amount at December 31, 2022. This increase was due to the delinquency of a $4.5 million commercial real estate loan after recording a $1.7 million charge-off, as well as $2.9 million of construction loans and $2.5 million of other non-performing loans acquired from Noah Bank. The $1.7 million charge-off of the $4.5 million commercial real estate loan’s balance was based on recent third party offers to purchase the note received by the Bank. The property securing this loan is located in New York City. Management took a conservative approach and reduced the loan balance although no formal commitment had been executed as of this date.
With the adoption of CECL, performing troubled debt restructurings (“TDRs”) are no longer reported for the current period. At December 31, 2022 there were three loans classified as TDR loans totaling $5.9 million and each of these loans was performing in accordance with the agreed-upon terms.
Deferred Taxes
Deferred taxes increased $5.1 million at June 30, 2023 compared to December 31, 2022. The increase was primarily due to purchase accounting entries and net operating loss carryforwards related to the Noah acquisition.
Deposits
Total deposits at June 30, 2023 increased $225.2 million, or 16.7%, when compared to December 31, 2022. The increase was primarily due to $191.7 million of deposits assumed from Noah Bank. When comparing deposit products, including deposits assumed, between the two periods, certificates of deposit increased $277.4 million and money market deposits increased $38.2 million. Partially offsetting these increases were decreases in interest-bearing demand deposits of $45.4 million and savings deposits of $38.0 million.
At June 30, 2023, the Company had approximately $393.9 million in uninsured deposits, consisting of $59.0 million in non-interest-bearing demand deposits, $3.7 million in interest-bearing demand deposits, $244.2 million in money market accounts, $19.5 million in savings deposits and $67.5 million in certificates of deposits.
Borrowings
The Company had no outstanding borrowings at June 30, 2023 compared to $10.0 million at December 31, 2022.
Stockholders’ equity
Total stockholders’ equity at June 30, 2023 increased $9.3 million or 4.2% when compared to the end of 2022. The increase was primarily due to the $8.8 million increase in retained earnings, consisting of $12.9 million in net income partially offset by $3.8 million of cash dividends recorded during the period. The ratio of equity to total assets at June 30, 2023 and at December 31, 2022, was 12.4% and 13.7%, respectively. The current period ratio decrease was primarily due to the Noah Bank acquisition.
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Liquidity
Our liquidity, represented by cash and cash equivalents, is a product of our operating, investing and financing activities. Our primary sources of funds are deposits, principal repayments of securities and outstanding loans, and funds provided from operations. In addition, we invest excess funds in short-term interest-earnings assets such as overnight deposits or U.S. agency securities, which provide liquidity to meet lending requirements. While scheduled payments from the amortization of loans and securities and short-term investments are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and repayments on loans and mortgage-backed securities.
As a member of the FHLB we are eligible to borrow funds in an aggregate amount of up to 50% of the Company’s total assets, subject to its collateral requirements. Based on available eligible securities and qualified real estate loan collateral, and a $60.0 million line of credit with the FHLB supporting municipal deposits, the Company had the ability to borrow $181.4 million as of June 30, 2023.
The Company is also a shareholder of Atlantic Community Bancshares, Inc., the parent company of Atlantic Community Bankers Bank (“ACBB”). As of June 30, 2023, the Company had available borrowing capacity with ACBB of $10.0 million to provide short-term liquidity generally for a period of not more than fourteen days. No amounts were outstanding under our line of credit with ACBB at June 30, 2023.
We believe that our current sources of funds provide adequate liquidity for our current cash flow needs.
Capital Resources
Regulatory Capital Requirements. Federally insured, state-chartered non-member banks are required to maintain minimum levels of regulatory capital. Current FDIC capital standards require these institutions to satisfy a common equity Tier 1 capital requirement and a Tier 1 capital requirement, a leverage capital requirement and a risk-based capital requirement.
In addition, in order to make capital distributions and pay discretionary bonuses to executive officers without restriction, an institution must also maintain additional common equity in excess of the minimum requirements. This excess is referred to as a capital conservation buffer. At June 30, 2023, the required capital conservation buffer is 2.50%.
Under the risk-based capital requirements, “total” capital (a combination of core and “supplementary” capital) must equal at least 8.0% of “risk-weighted” assets. The FDIC also is authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. Management believes, as of June 30, 2023, that the Bank meets all capital adequacy requirements to which it is subject and is “well capitalized” under applicable regulations.
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The Bank’s actual capital amounts and ratios and the regulatory requirements at June 30, 2023 and December 31, 2022 are presented below:
| To be well capitalized | ||||||||||||||||||||||||
| For capital conservation | under prompt corrective | |||||||||||||||||||||||
| Actual | buffer requirement | action provision | ||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| June 30, 2023: |
||||||||||||||||||||||||
| Total capital (to risk-weighted assets) |
$ | 244,868 | 14.604 | % | $ | 176,060 | 10.500 | % | $ | 167,676 | 10.000 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) |
$ | 226,898 | 13.532 | % | $ | 142,524 | 8.500 | % | $ | 134,141 | 8.000 | % | ||||||||||||
| Common equity tier 1 capital (to-risk weighted assets |
$ | 226,898 | 13.532 | % | $ | 117,373 | 7.000 | % | $ | 108,989 | 6.500 | % | ||||||||||||
| Tier 1 leverage capital (to average assets) |
$ | 226,898 | 13.426 | % | $ | 109,848 | 6.500 | % | $ | 84,499 | 5.000 | % | ||||||||||||
| December 31, 2022: |
||||||||||||||||||||||||
| Total capital (to risk-weighted assets) |
$ | 233,657 | 15.309 | % | $ | 160,256 | 10.500 | % | $ | 152,625 | 10.000 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) |
$ | 217,196 | 14.231 | % | $ | 129,731 | 8.500 | % | $ | 122,100 | 8.000 | % | ||||||||||||
| Common equity tier 1 capital (to-risk weighted assets |
$ | 217,196 | 14.231 | % | $ | 106,838 | 7.000 | % | $ | 99,206 | 6.500 | % | ||||||||||||
| Tier 1 leverage capital (to average assets) |
$ | 217,196 | 13.474 | % | $ | 104,775 | 6.500 | % | $ | 80,596 | 5.000 | % | ||||||||||||
Comparison of Operating Results for the Three Months Ended June 30, 2023 and 2022
General
The Company reported net income of $6.8 million, or $1.07 per diluted common share, for the second quarter of 2023, compared to net income of $6.3 million, or $0.98 per diluted common share, for the second quarter of 2022. The increase in net income for the second quarter of 2023 compared to the same period in 2022 was primarily due to an increase of $10.5 million in non-interest income and a $1.5 million decrease in income tax expense, partially offset by an $8.4 million increase in non-interest expense, a $2.5 million increase in the provision for credit losses and a $626 thousand decrease in net interest income.
Interest income
Interest income increased $5.6 million for the three months ended June 30, 2023 compared to the same period in 2022. Interest income on loans increased $4.7 million due to increases in both the average balance of loans of $40.7 million and the yield of 118 basis points. Other interest and dividend income increased $761 thousand due to an increase in the yield of 432 basis points, partially offset by a decrease in the average balance of $3.0 million, and interest on taxable available-for-sale securities increased $58 thousand due to an increase in yield of 70 basis points, partially offset by a decrease in the average balance of $3.9 million.
Interest expense
Interest expense on deposits increased $6.2 million to $7.3 million for the three-month period ended June 30, 2023, due to increases in both the rate paid on interest-bearing deposits of 203 basis points and in the average balance of interest-bearing deposits of $52.9 million over the same prior year period.
Interest expense on borrowings was $32 thousand during the three-month period ended June 30, 2023 and there was no interest expense on borrowings during the same period in 2022.
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Provision for credit losses
The Company recorded a provision for credit losses of $2.5 million during the three months ended June 30, 2023 and no provision for the three months ended June 30, 2022. The provision of $2.5 million recorded in the current quarter consisted of $2.7 million associated with the Company’s loan portfolio offset by a credit to the provision of $240 thousand associated with unfunded commitments. Included in the Company’s provision was $1.7 million related to non-purchased credit deteriorated loans resulting from the Noah Bank acquisition. Net charge-offs during the three-month period ended June 30, 2023 were $1.8 million.
Non-interest income
Total non-interest income of $11.6 million for the second quarter of 2023 increased $10.5 million, or by 940.0%, when compared to the quarter ended June 30, 2022. The increase over the second quarter of 2022 was primarily due to the $9.7 million gain on bargain purchase from the Noah Bank acquisition.
Non-interest expense
Total non-interest expense for the second quarter of 2023 increased $8.4 million, or 88.9%, when compared to the same period in 2022. This increase was primarily due to $7.0 million of acquisition-related expenses associated with the Noah transaction as well as increases in salaries and employee benefits of $868 thousand, occupancy and equipment expenses of $276 thousand and data processing and communications of $262 thousand.
Provision for income taxes
For the three-month period ended June 30, 2023, the Company recorded an income tax expense of $161 thousand, resulting in an effective tax rate of 2.3%, compared to an income tax expense of $1.6 million resulting in an effective tax rate of 20.6% for the three-month period ended June 30, 2022. The effective tax rate for the current period was substantially reduced as a result of the non-taxable bargain purchase gain related to the Noah acquisition.
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Average Balances, Net Interest Income, and Yields Earned and Rates Paid
The following table shows for the three-month period indicated the total dollar amount of interest earned from average interest earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.
| Three Months Ended June 30, | ||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||
| Balance | Interest | Yield/Rate | Balance | Interest | Yield/Rate | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans receivable |
$ | 1,432,680 | $ | 21,517 | 6.02 | % | $ | 1,391,937 | $ | 16,768 | 4.85 | % | ||||||||||||
| Securities |
||||||||||||||||||||||||
| Taxable available-for-sale |
44,669 | 292 | 2.63 | % | 48,590 | 234 | 1.93 | % | ||||||||||||||||
| Tax-exempt available-for-sale |
41,187 | 284 | 2.76 | % | 43,742 | 293 | 2.68 | % | ||||||||||||||||
| Held-to-maturity |
198 | 2 | 5.28 | % | 205 | 3 | 5.29 | % | ||||||||||||||||
| Federal funds sold |
65,383 | 842 | 5.16 | % | 72,786 | 135 | 0.74 | % | ||||||||||||||||
| Other interest-earning assets |
5,691 | 77 | 5.31 | % | 1,307 | 23 | 7.06 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-earning assets |
1,589,808 | $ | 23,014 | 5.81 | % | 1,558,567 | $ | 17,456 | 4.49 | % | ||||||||||||||
| Other non-earnings assets |
110,384 | 107,194 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total assets |
$ | 1,700,192 | $ | 1,665,761 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Interest-bearing liabilities |
||||||||||||||||||||||||
| Demand |
$ | 242,667 | $ | 835 | 1.38 | % | $ | 273,114 | $ | 174 | 0.26 | % | ||||||||||||
| Savings |
158,937 | 683 | 1.73 | % | 230,493 | 138 | 0.24 | % | ||||||||||||||||
| Money market |
285,021 | 2,113 | 2.97 | % | 368,704 | 264 | 0.29 | % | ||||||||||||||||
| Certificates of deposit |
516,252 | 3,690 | 2.87 | % | 277,621 | 593 | 0.86 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total deposits |
1,202,877 | 7,321 | 2.44 | % | 1,149,932 | 1,169 | 0.41 | % | ||||||||||||||||
| Borrowings |
2,482 | 32 | 5.08 | % | — | — | 0.00 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-bearing liabilities |
1,205,359 | $ | 7,353 | 2.45 | % | 1,149,932 | $ | 1,169 | 0.41 | % | ||||||||||||||
| Non-interest-bearing deposits |
235,423 | 278,963 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total cost of funds |
1,440,782 | 2.04 | % | 1,428,895 | 0.33 | % | ||||||||||||||||||
| Other liabilities |
32,232 | 23,534 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities |
1,473,014 | 1,452,429 | ||||||||||||||||||||||
| Stockholders’ equity |
227,178 | 213,332 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities and stockholder’s equity |
$ | 1,700,192 | $ | 1,665,761 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Net interest-earnings assets |
$ | 384,449 | $ | 408,635 | ||||||||||||||||||||
| Net interest income; interest rate spread |
$15,661 | 3.36 | % | $ | 16,287 | 4.08 | % | |||||||||||||||||
| Net interest margin |
3.95 | % | 4.19 | % | ||||||||||||||||||||
| Net interest margin FTE 1 |
3.99 | % | 4.24 | % | ||||||||||||||||||||
1 Includes federal and state tax effect of tax exempt securities and loans.
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Rate/Volume Analysis
The following table reflects the changes in our interest income and interest expense segregated into amounts attributable to changes in volume and in yields on interest-earning assets and interest-bearing liabilities during the periods indicated.
| Three Months Ended June 30, | ||||||||||||
| 2023 vs. 2022 | ||||||||||||
| Increase (Decrease) Due to | ||||||||||||
| Rate | Volume | Net | ||||||||||
| (In thousands) | ||||||||||||
| Interest and dividend income: |
||||||||||||
| Loans receivable, including fees |
$ | 1,610 | $ | 3,139 | $ | 4,749 | ||||||
| Securities available-for-sale |
||||||||||||
| Taxable |
147 | (89 | ) | 58 | ||||||||
| Tax-exempt |
17 | (26 | ) | (9 | ) | |||||||
| Securities held-to-maturity |
— | (1 | ) | (1 | ) | |||||||
| Federal funds sold |
900 | (193 | ) | 707 | ||||||||
| Other interest and dividend income |
(12 | ) | 66 | 54 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total interest and dividend income |
$ | 2,662 | $ | 2,896 | $ | 5,558 | ||||||
|
|
|
|
|
|
|
|||||||
| Interest expense |
||||||||||||
| Demand |
$ | 915 | $ | (254 | ) | $ | 661 | |||||
| Savings |
1,227 | (682 | ) | 545 | ||||||||
| Money markets |
2,822 | (973 | ) | 1,849 | ||||||||
| Certificates of deposit |
(5,134 | ) | 8,231 | 3,097 | ||||||||
| Borrowings |
— | 32 | 32 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total interest expense |
$ | (170 | ) | $ | 6,354 | $ | 6,184 | |||||
|
|
|
|
|
|
|
|||||||
| Change in net interest income |
$ | 2,832 | $ | (3,458 | ) | $ | (626 | ) | ||||
|
|
|
|
|
|
|
|||||||
Comparison of Operating Results for the Six Months Ended June 30, 2023 and 2022
General
For the six-month period ended June 30, 2023, the Company recorded net income of $12.9 million, or $2.02 per diluted common share, compared to $12.3 million, or $1.89 per diluted common share for the same period in 2022. Net income increased $537 thousand due to an increase in non-interest income of $10.8 million, a reduction in income tax expense of $1.2 million and an increase in net interest income of $181 thousand, partially offset by increases in non-interest expense of $8.9 million and provision for credit losses of $2.7 million.
Interest income
Interest income increased $9.1 million for the six months ended June 30, 2023 compared to the same period in 2022. Interest income on loans increased $8.2 million due to increases in both the average balance and yield earned on loans of $35.0 and 105 basis points, respectively. Interest on other interest and dividend income increased $857 thousand due to an increase in yield of 465 basis points, partially offset by a reduction in the average balance of $56.5 million. Interest on taxable available-for-sale securities increased $113 thousand due to an 80 basis point increase in yield and partially offset by a $6.9 million decrease in the average balance of taxable available-for-sale securities.
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Interest expense
Interest expense on deposits increased $8.8 million to $11.2 million for the six-month period ended June 30, 2023, due primarily to a 156 basis point increase in the rate on interest-bearing deposits, partially offset by a decrease in the average balance of interest-bearing deposits of $11.5 million over the same prior-year period.
Interest expense on borrowings was not significant during the six-month periods ended June 30, 2023 and 2022.
Provision for credit losses
The Company recorded a $2.7 million provision for credit losses for the six-month period ended June 30, 2023 and recorded no provision for credit losses for the six-month period ended June 30, 2022. The $2.7 million provision for the six months ended June 30, 2023 includes $1.7 million related to non-purchased credit deteriorated loans acquired in the Noah Bank acquisition and was also a result of loan charge-offs of $1.8 million recorded during the period. See the section titled “Financial Condition —Allowance for Loan Losses” in our Form 10-K for the year ended December 31, 2022 for a discussion of our allowance for credit losses methodology, including additional information regarding the determination of the provision for credit losses.
Non-interest income
For the six-month period ended June 30, 2023, non-interest income increased $10.8 million or 499.6%, from the same six-month period in 2022, primarily due to the $9.7 million bargain purchase gain from the Noah acquisition and an increase of $983 thousand in loan fees.
Non-interest expense
For the six-month period ended June 30, 2023, non-interest expense was $27.6 million, compared to $18.7 million for the same period in 2022. This increase was primarily due to acquisition-related expenses of $7.0 million and increases in salaries and employee benefits of $1.4 million and data processing and communications of $527 thousand associated with the Bank’s expansion strategy.
Provision for income taxes
For the six-month period ended June 30, 2023, the Bank recorded an income tax expense of $2.1 million, resulting in an effective tax rate of 13.8%, compared to an income tax expense of $3.3 million resulting in an effective tax rate of 20.9% for the six-month period ended June 30, 2022. The effective tax rate was substantially reduced as a result of the non-taxable bargain purchase gain related to the Noah acquisition.
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Average Balances, Net Interest Income, and Yields Earned and Rates Paid
The following table shows for the six-month period indicated the total dollar amount of interest earned from average interest earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.
| Six Months Ended June 30, | ||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||
| Average Balance |
Interest | Average Yield/Rate |
Average Balance |
Interest | Average Yield/Rate |
|||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans receivable |
$ | 1,404,421 | $ | 41,411 | 5.95 | % | $ | 1,369,460 | $ | 33,260 | 4.90 | % | ||||||||||||
| Securities |
||||||||||||||||||||||||
| Taxable available-for-sale |
43,459 | 570 | 2.63 | % | 50,396 | 457 | 1.83 | % | ||||||||||||||||
| Tax exempt available-for-sale |
41,409 | 568 | 2.75 | % | 46,160 | 596 | 2.60 | % | ||||||||||||||||
| Held-to-maturity |
199 | 5 | 5.28 | % | 206 | 6 | 5.32 | % | ||||||||||||||||
| Federal funds sold |
37,076 | 937 | 5.09 | % | 97,642 | 178 | 0.37 | % | ||||||||||||||||
| Other interest earning-assets |
5,348 | 135 | 5.06 | % | 1,330 | 37 | 5.61 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-earning assets |
1,531,912 | 43,626 | 5.74 | % | 1,565,194 | 34,534 | 4.45 | % | ||||||||||||||||
| Other non-earnings assets |
126,444 | 94,643 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total assets |
$ | 1,658,356 | $ | 1,659,837 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Interest-bearing liabilities |
||||||||||||||||||||||||
| Demand |
$ | 253,527 | $ | 1,386 | 1.10 | % | $ | 265,588 | $ | 334 | 0.25 | % | ||||||||||||
| Savings |
170,785 | 1,100 | 1.30 | % | 231,310 | 274 | 0.24 | % | ||||||||||||||||
| Money markets |
276,962 | 3,271 | 2.38 | % | 372,575 | 511 | 0.28 | % | ||||||||||||||||
| Certificates of deposit |
440,780 | 5,429 | 2.48 | % | 284,118 | 1,274 | 0.92 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total deposit |
1,142,054 | 11,186 | 1.98 | % | 1,153,591 | 2,393 | 0.42 | % | ||||||||||||||||
| Borrowings |
4,725 | 118 | 5.01 | % | — | — | 0.00 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-bearing liabilities |
1,146,779 | 11,304 | 1.99 | % | 1,153,591 | 2,393 | 0.42 | % | ||||||||||||||||
| Non-interest-bearing deposits |
239,098 | 278,269 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total cost of funds |
1,385,877 | 1.63 | % | 1,431,860 | 0.34 | % | ||||||||||||||||||
| Other liabilities |
46,991 | 15,565 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities |
1,432,868 | 1,447,425 | ||||||||||||||||||||||
| Stockholders’ equity |
225,488 | 212,412 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities and stockholder’s equity |
$ | 1,658,356 | $ | 1,659,837 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Net interest-earnings assets |
$ | 385,133 | $ | 411,603 | ||||||||||||||||||||
| Net interest income; interest rate spread |
3.76 | % | 4.03 | % | ||||||||||||||||||||
| Net interest margin |
$ | 32,322 | 4.25 | % | $ | 32,141 | 4.14 | % | ||||||||||||||||
| Net interest margin FTE 1 |
4.35 | % | 4.20 | % | ||||||||||||||||||||
1 Includes federal and state tax effect of tax exempt securities and loans.
37
Table of Contents
Rate/Volume Analysis
The following table reflects the changes in our interest income and interest expense segregated into amounts attributable to changes in volume and in yields on interest-earning assets and interest-bearing liabilities during the periods indicated.
| Six Months Ended June 30, 2023 vs. 2022 Increase (Decrease) Due to |
||||||||||||
| Rate | Volume | Net | ||||||||||
| (In thousands) | ||||||||||||
| Interest and dividend income: |
||||||||||||
| Loans receivable, including fees |
$ | 5,484 | $ | 2,667 | $ | 8,151 | ||||||
| Securities available-for-sale |
||||||||||||
| Taxable |
275 | (162 | ) | 113 | ||||||||
| Tax-exempt |
58 | (86 | ) | (28 | ) | |||||||
| Securities held-to-maturity |
— | (1 | ) | (1 | ) | |||||||
| Federal funds sold |
1,385 | (626 | ) | 759 | ||||||||
| Other interest and dividend income |
(7 | ) | 105 | 98 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total interest and dividend income |
$ | 7,195 | $ | 1,897 | $ | 9,092 | ||||||
|
|
|
|
|
|
|
|||||||
| Interest expense: |
||||||||||||
| Demand |
$ | 1,172 | $ | (120 | ) | $ | 1,052 | |||||
| Savings |
1,402 | (576 | ) | 826 | ||||||||
| Money market |
3,822 | (1,062 | ) | 2,760 | ||||||||
| Certificates of deposit |
(1,563 | ) | 5,718 | 4,155 | ||||||||
| Borrowings |
— | 118 | 118 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total interest expense |
$ | 4,833 | $ | 4,078 | $ | 8,911 | ||||||
|
|
|
|
|
|
|
|||||||
| Change in net interest income |
$ | 2,362 | $ | (2,181 | ) | $ | 181 | |||||
|
|
|
|
|
|
|
|||||||
How We Manage Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk which is inherent in our lending, investment and deposit gathering activities. To that end, management actively monitors and manages interest rate risk exposure. In addition to market risk, our primary risk is credit risk on our loan portfolio. We attempt to manage credit risk through our loan underwriting and oversight policies.
The principal objective of our interest rate risk management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given our business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with approved guidelines. We seek to manage our exposure to risks from changes in interest rates while at the same time trying to improve our net interest spread. We monitor interest rate risk as such risk relates to our operating strategies. We have established an Asset/Liability Committee which is comprised of both Management and members of the Board of Directors. The Asset/Liability Committee meets on a regular basis and is responsible for reviewing our asset/liability policies and interest rate risk position. Both the extent and direction of shifts in interest rates are uncertainties that could have a negative impact on future earnings.
38
Table of Contents
Gap Analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring the Company’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to affect adversely net interest income while a positive gap would tend to result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to affect adversely net interest income.
The table on the next page sets forth the amounts of our interest-earning assets and interest-bearing liabilities outstanding at June 30, 2023, which we expect, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the “GAP Table”). Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at June 30, 2023, based on contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and anticipated prepayments of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans.
39
Table of Contents
| (Dollars in thousands) | 3 Months or Less |
More than 3 Months to 1 Year |
More than 1 Year to 3 Years |
More than 3 Years to 5 Years |
More than 5 Years |
Non-Rate Sensitive |
Total Amount | |||||||||||||||||||||
| Interest-earning assets: (1) |
||||||||||||||||||||||||||||
| Investment securities |
$ | 10,377 | $ | 3,128 | $ | 7,616 | $ | 8,714 | $ | 67,879 | $ | (10,345 | ) | $ | 87,369 | |||||||||||||
| Loans receivable |
474,949 | 275,635 | 330,455 | 349,103 | 69,136 | (17,557 | ) | 1,481,721 | ||||||||||||||||||||
| Other interest-earnings assets (2) |
128,286 | — | — | — | — | 16,100 | 144,386 | |||||||||||||||||||||
| Other non-interest assets |
— | — | — | — | — | 129,550 | 129,550 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total interest-earning assets |
$ | 613,612 | $ | 278,763 | $ | 338,071 | $ | 357,817 | $ | 137,015 | $ | (11,802 | ) | $ | 1,843,026 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||||||
| Checking and savings accounts |
$ | 8,732 | $ | 368,291 | $ | — | $ | — | $ | — | $ | — | $ | 377,023 | ||||||||||||||
| Money market accounts |
17,477 | 304,363 | — | — | — | — | 321,840 | |||||||||||||||||||||
| Certificate accounts |
45,681 | 438,346 | 130,248 | 1,746 | — | — | 616,021 | |||||||||||||||||||||
| Borrowings |
— | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total interest-bearing liabilities |
$ | 71,890 | $ | 1,111,000 | $ | 130,248 | $ | 1,746 | $ | — | $ | — | $ | 1,314,884 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Interest-earning assets less interest-bearing liabilities |
$ | 541,722 | $ | (832,237 | ) | $ | 207,823 | $ | 356,071 | $ | 137,015 | $ | (11,802 | ) | $ | 528,142 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Cumulative interest-rate sensitivity gap (3) |
$ | 541,722 | $ | (290,515 | ) | $ | (82,692 | ) | $ | 273,379 | $ | 410,394 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Cumulative interest-rate gap as a percentage of total assets at June 30, 2023 |
29.39 | % | -15.76 | % | -4.49 | % | 14.83 | % | 22.27 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at June 30, 2023 |
853.54 | % | 75.44 | % | 93.70 | % | 120.79 | % | 131.21 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (1) | Interest-earnings assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments and contractual maturities. |
| (2) | Includes interest-bearing bank balances, FHLB Stock and Federal Funds Sold |
| (3) | Interest-rate sensitivity gap represents the difference between total interest-earning assets and total interest-bearing liabilities. |
Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their adjustable-rate loans may decrease in the event of an interest rate increase.
40
Table of Contents
Net Portfolio Value Analysis. Our interest rate sensitivity also is monitored by management through the use of a model which generates estimates of the changes in our net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The following table sets forth our NPV as of June 30, 2023 and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.
| Change in Interest Rates In Basis Points (Rate Shock) |
Net Portfolio Value | NPV as % of Portfolio Value of Assets |
||||||||||||||||||
| Amounts | $ Change | % Change | NPV Ratio | Change | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| 300 | $ | 311,394 | $ | (10,285 | ) | -3.20 | % | -6.53 | % | -5.37 | % | |||||||||
| 200 | $ | 322,677 | $ | 998 | 0.31 | % | -4.53 | % | -3.38 | % | ||||||||||
| 100 | $ | 325,872 | $ | 4,193 | 1.30 | % | -2.75 | % | -1.60 | % | ||||||||||
| Static | $ | 321,679 | $ | — | -1.16 | % | ||||||||||||||
| (100) | $ | 321,387 | $ | (292 | ) | -0.09 | % | 0.24 | % | 1.39 | % | |||||||||
As is the case with the GAP Table, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV require the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the models presented assume that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV model provides an indication of interest rate risk exposure at a particular point in time, such model is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company, such as the Company, is not required to provide the information by this Item. Certain market risk disclosure is set forth in Item 2 above under “How We Manage Market Risk.”
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Management, with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule l3a-l5 (e) promulgated under the Exchange Act) as of June 30, 2023. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of June 30, 2023 to ensure that the information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in FDIC rules and forms.
41
Table of Contents
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting identified during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II–OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes to the risk factors set forth under the Part I, Item 1.A. Risk Factors as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as amended by the risk factors set forth under the Part II, Item 1.A. Risk Factor set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the fiscal quarter ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.
42
Table of Contents
| Item 6. | Exhibits |
| Exhibit Number |
Description | |
| 10.1 | Amended and Restated Employment Agreement Between Princeton Bancorp, Inc.and Edward Dietzler Dated June 2023 | |
| 10.2 | Amended and Restated Employment Agreement Between Princeton Bancorp, Inc.and Daniel O’Donnell Dated June 2023 | |
| 10.3 | Amended and Restated Employment Agreement Between Princeton Bancorp, Inc.and George Rapp Dated June 2023 | |
| 10.4 | Amended and Restated Change in Control Agreement Between Princeton Bancorp, Inc.and Jeffrey Hanuscin Dated June 2023 | |
| 31.1 | Rule 13a-14(a) Certification on the Principal Executive Officer | |
| 31.2 | Rule 13a-14(a) Certification on the Principal Financial Officer | |
| 32 | Section 1350 Certifications | |
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
43
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Princeton Bancorp, Inc. | ||||||
| Date: August 14, 2023 | By: | /s/ Edward Dietzler | ||||
| Edward Dietzler | ||||||
| Chief Executive Officer and President | ||||||
| (Principal Executive Officer) | ||||||
| By: | /s/ George Rapp | |||||
| George Rapp | ||||||
| Executive Vice President and Chief Financial Officer | ||||||
| (Principal Financial and Accounting Officer) | ||||||
44
Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT originally entered into on the 6th day of December, 2018 by and between The Bank of Princeton (“TBOP”), a banking corporation organized under the laws of the state of New Jersey, and Edward Dietzler (the “EMPLOYEE”) and subsequently amended December 18, 2019, is hereby amended and restated in its entirety to add Princeton Bancorp, Inc., the parent bank holding company of TBOP (“Company”), as a party to this Agreement effective June 21, 2023 (“Effective Date”).
BACKGROUND
A. TBOP and the Company desire to continue to employ the EMPLOYEE and the EMPLOYEE is willing to serve on the terms and conditions herein provided.
B. In order to effect the foregoing, the parties hereto desire to enter into this employment agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Employment. TBOP and the Company hereby continue to employ the EMPLOYEE, and the EMPLOYEE hereby agrees to serve TBOP and the Company, on the terms and conditions set forth herein.
2. Term of Agreement.
(a) Except as otherwise provided herein, the term of this Agreement shall include: (i) the period commencing on the Effective Date and ending December 31, 2025, plus (ii) any and all extensions of the term made pursuant to paragraphs (b) and (c) of this Section 2 (the “Term”).
(b) Beginning on December 31, 2023, and on or around each December 31st thereafter, the term of this Agreement shall be extended by one (1) year, so that, at the time of such extension, the term of the Agreement shall be for a period of three (3) years. Notwithstanding the foregoing, TBOP, the Company or the EMPLOYEE may elect to terminate the automatic annual extension of the Term in this paragraph (b) by giving written notice of such election. Any notice given hereunder shall be effective as of the date such notice of nonrenewal is given and the Term shall be fixed at that time.
(c) Notwithstanding paragraph (b) of this Section 2, in the event of a Change in Control, the Term shall not end before the first anniversary of such Change of Control; provided, however, this sentence shall apply only to the first Change of Control to occur while this Agreement is in effect.
(d) Nothing in this Agreement shall mandate or prohibit a continuation of the EMPLOYEE’S employment following the expiration of the Term upon such terms and conditions as TBOP, the Company and the EMPLOYEE may mutually agree.
1
(e) Effective upon the termination of the EMPLOYEE’s employment with TBOP or the Company, the EMPLOYEE shall resign as a director of TBOP and the Company, unless continued service as a director of TBOP or the Company is requested in writing by the Board of Directors. For purposes of this Agreement, all references to Board of Directors shall mean both the Company and TBOP boards of directors.
3. Position and Duties. The EMPLOYEE shall serve as the President and Chief Executive Officer of TBOP and President and Chief Executive Officer of the Company. EMPLOYEE shall report directly to the respective boards of directors. In addition, the EMPLOYEE shall serve in such capacity, with respect to each Subsidiary or affiliated company, as the Board of Directors of each such Subsidiary or affiliated company shall designate from time to time. During the Term, EMPLOYEE shall devote substantially all of his working time and efforts to the business and affairs of TBOP, the Company and affiliated companies; provided, however, that nothing herein shall be construed as precluding him from devoting a reasonable amount of time to civic, charitable, trade association and similar activities, to the extent participation in these activities do not conflict with the EMPLOYEE’s obligations to TBOP and the Company or interfere with the EMPLOYEE’S responsibilities under this Agreement.
4. Compensation and Related Matters. Unless otherwise determined by the Company board of directors, all payments and benefits provided in this Agreement shall be paid or provided solely by TBOP. Notwithstanding anything in this Agreement to the contrary, no provision of this Agreement shall be construed so as to result in the duplication of any payment or benefit. Unless otherwise determined by the Company board of directors, the Company’s sole obligation under this Agreement shall be to unconditionally guarantee the payment and provision of all amounts and benefits due hereunder to EMPLOYEE, and the affirmative obligations of the Company as set forth at Section 18, herein, with respect to Indemnification, and, if such amounts and benefits due from TBOP are not timely paid or provided by TBOP, such amounts and benefits shall be paid or provided by the Company.
(a) Base Compensation. During the Term, TBOP shall pay to the EMPLOYEE annual base compensation at a rate not less than $600,000 (“Annual Salary”). The Board of Directors of TBOP or the Joint Compensation/HR Committee of the Board of Directors shall periodically review the EMPLOYEE’S employment performance, in accordance with policies generally in effect from time to time, for possible merit or cost-of-living increases and any and all such increases shall be deemed to constitute amendments to this Section 4(a) to reflect the increased amounts, effective as of the date established for such increases. Except for a reduction which is proportionate to a bank-wide reduction in officer pay, the annual base compensation paid to the EMPLOYEE in any period shall not be less than his Annual Salary as of the Effective Date. The frequency and manner of payment of the EMPLOYEE’S Annual Salary shall be in accordance with TBOP’s payroll practices from time to time in effect. Nothing herein shall be construed as precluding the EMPLOYEE from entering into any salary reduction or deferral plan or arrangement during the Term. The amounts set forth in the first sentence of this subparagraph (a) shall be pro-rated to the extent such period is less than a year.
2
(b) Incentive Compensation. During the Term, the EMPLOYEE shall be eligible to participate in all incentive plans, equity plans, and similar arrangements maintained by TBOP for its executive officers on a basis and at award levels consistent and commensurate with the EMPLOYEE’S position and duties hereunder.
(c) Employee Benefit Plans and Other Plans or Arrangements. The EMPLOYEE shall be eligible to participate in all Employee Benefit Plans of TBOP on the same basis as other executive officers of TBOP. In addition, the EMPLOYEE shall be eligible to participate in and enjoy any other plans and arrangements which provide for sick leave, vacation, sabbatical, or personal days, club memberships and dues, education payment or reimbursement, business-related seminars, and similar fringe benefits provided to or for the executive officers of TBOP from time to time.
(d) Expenses. During the Term, the EMPLOYEE shall be entitled to receive prompt reimbursement for all reasonable and customary expenses, including transportation expenses, incurred by him in performing services hereunder in accordance with the general policies and procedures established by TBOP.
5. Termination By Reason of Disability.
(a) In General. In the event the EMPLOYEE becomes unable to perform his duties on a full-time basis by reason of the occurrence of his Disability and, within 30 days after a Notice of Termination is given, he shall not have returned to the full-time performance of such duties, his employment may be terminated by TBOP or the Company, provided, however, that, if EMPLOYEE’S Disability occurs after EMPLOYEE delivers a Notice of Termination for Good Reason, EMPLOYEE shall nevertheless be absolutely entitled to receive all of the compensation and benefits provided in Section 9 hereof.
(b) Compensation and Benefits upon Expiration of Remaining Term. This Agreement shall terminate following the EMPLOYEE’S termination for Disability, provided, however, the EMPLOYEE shall be entitled to receive the compensation and benefits provided under the terms of any long-term disability plan of TBOP in effect on the Date of Termination.
6. Termination By Reason of Death. This Agreement shall terminate in the event of the EMPLOYEE’s death during the Term, provided, however, the EMPLOYEE’S beneficiary(ies) shall be entitled to such benefits as otherwise provided by TBOP as are effective on the date of his death, provided, however, that, if the EMPLOYEE dies after EMPLOYEE delivers a Notice of Termination for Good Reason, the EMPLOYEE’S estate shall nevertheless be absolutely entitled to receive all of the compensation and benefits provided in Section 9 hereof.
7. Termination by TBOP or the Company for Cause.
(a) In General. In the event TBOP or the Company terminates the EMPLOYEE’S employment for Cause, TBOP or the Company shall deliver a Notice of Termination to the EMPLOYEE which specifies a Date of Termination which, in the employer’s discretion, may be the same date as the Notice of Termination.
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(b) Compensation. On and after the Date of Termination, EMPLOYEE shall have no further rights under this Agreement, except that at the end of the payroll period after the EMPLOYEE’S termination under Subparagraph (a), TBOP shall pay him, in one lump sum, his accrued but unpaid base compensation and vacation time/paid time off earned through the Date of Termination.
8. Termination by the EMPLOYEE without Good Reason
(a) In General. In the event the EMPLOYEE terminates his employment without Good Reason, the EMPLOYEE shall deliver a Notice of Termination to TBOP and the Company which specifies a Date of Termination not less than 30 days following the date of such notice.
(b) Compensation. On and after the Date of Termination, the EMPLOYEE shall have no further rights under this Agreement, except that at the end of the payroll period after the EMPLOYEE’S termination under Subparagraph (a), TBOP shall pay him, in one lump sum, his accrued but unpaid base compensation and vacation time/paid time off earned through the Date of Termination.
9. Involuntary Termination without Disability or Cause or Voluntary Termination by the EMPLOYEE for Good Reason.
(a) In General. In the event TBOP or the Company terminates the EMPLOYEE’S employment for any reason other than Disability or Cause, TBOP or the Company shall deliver a Notice of Termination to the EMPLOYEE which specifies a Date of Termination not less than 30 days following the date of such notice. In the event that the EMPLOYEE intends to terminate his employment for Good Reason, then at the option of the EMPLOYEE, exercisable by him within ninety (90) days after the occurrence of the condition constituting Good Reason, the EMPLOYEE may resign from employment under this Agreement by delivering a Notice of Termination to TBOP, the Company or its successor which specifies a Date of Termination not less than 30 days following the date of such notice, provided, however, that TBOP, the Company or its successor shall be given thirty (30) days from the day it receives the Notice of Termination to remedy such condition.
(b) Compensation and Benefits after Termination. In the event of the termination of EMPLOYEE’S employment under Subparagraph (a), the EMPLOYEE shall be entitled to receive the following payments and benefits.
(i) The EMPLOYEE shall receive a lump sum cash payment equal to two (2) times: (A) the EMPLOYEE’S Annual Salary then in effect, plus (B) the average of the three (3) highest annual cash or stock bonuses paid to the EMPLOYEE under a short-term incentive program maintained by TBOP or the Company during the Term. A portion of the severance payment received in connection with a Change in Control which is classified as payment of reasonable compensation for purposes of Section 280G of the Code shall be allocated to the restrictive covenants noted in Section 13.
(ii) In addition to the cash payment provided under Subparagraph (b)(i) of this Section 9, the EMPLOYEE and his eligible dependents shall be entitled to continue to participate at the same aggregate benefit levels for eighteen (18) months and at no out-of-pocket or tax cost to the EMPLOYEE, in the medical
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benefit plan in which the EMPLOYEE was a participant immediately prior to the Date of Termination, to the extent permitted under the terms of such plans and applicable law. To the extent TBOP is unable to provide for continued participation in the medical benefit plan, it shall provide an equivalent benefit directly at no out-of-pocket or tax cost to the EMPLOYEE. For purposes of the preceding two sentences, TBOP shall be deemed to have provided a benefit at no tax cost to the EMPLOYEE if it pays an additional amount to the EMPLOYEE or on his behalf, with respect to those benefits which would otherwise be nontaxable to the EMPLOYEE.
(c) Earlier Cessation of Medical Benefits. Notwithstanding the provisions of Subparagraph 9(b), TBOP shall not be required to provide, at its cost, the medical benefits covered by Subparagraph 9(b)(ii) after the later of (i) the attainment by the EMPLOYEE and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan document for benefit termination (assuming that he was employed until the normal retirement date, if any, specified in such document).
(d) Death during Remaining Period of Payment. In the event the EMPLOYEE dies during the period of payment following the Date of Termination without Disability or Cause and the EMPLOYEE is survived by his spouse, the compensation and benefits required to be paid and provided under Subparagraph (b) shall be unaffected by his death and shall be paid and provided to the EMPLOYEE’S spouse or on her behalf; provided that TBOP shall not be required to provided continued medical benefits with respect to her deceased husband; and provided further, that in no event shall TBOP be required to provide, at its cost, the medical benefits described in Subparagraph 9(b)(ii) to such spouse and her eligible dependents after the earlier of (x) her death, or (y) the later of (I) her attainment of age 65, or (II) the date specified in the relevant plan document for benefit termination (assuming that the EMPLOYEE was employed until the normal retirement date, if any, specified in the document).
10. Change in Control Best Payment Determination.
Notwithstanding any contrary provisions in any plan, program or policy of TBOP or the Company, if all or any portion of the compensation or benefits payable under this Agreement, either alone or together with other payments and benefits that the EMPLOYEE receives or is entitled to receive from TBOP and the Company, would constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code. TBOP shall reduce the EMPLOYEE’S payments and benefits payable under this Agreement to the extent necessary so that no portion thereof, after the application of all reasonable exceptions permitted under the Code, shall be subject to the excise tax imposed by Section 4999 of the Code, but only if, by reason of such reduction, the net after-tax benefit to the EMPLOYEE shall exceed the net after-tax benefit if such reduction were not made. “Net after tax benefit” for these purposes shall mean the sum of (i) the total amount payable to the EMPLOYEE under this Agreement, plus (ii) all other payments and benefits which the EMPLOYEE receives or is then entitled to receive from TBOP or the Company that, alone or in combination with the payments and benefits payable under this Agreement, would constitute a “parachute payment” within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the
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foregoing shall be paid to the EMPLOYEE (based upon the rate in effect for such year as set forth in the Code at the time of the payment under this Agreement), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code. The parachute payments reduced shall first be the payments under Section 9, and then any other parachute payments. Within any of these categories, a reduction shall occur first with respect to amounts that are not deemed to constitute a “deferral of compensation” within the meaning of and subject to Code Section 409A (“Nonqualified Deferred Compensation”) and then with respect to amounts that are treated as Nonqualified Deferred Compensation, with such reduction being applied in each case to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments. All determinations required to be made under this Section 10 shall be made by an independent accounting firm, law firm or compensation consultant, agreed upon by the EMPLOYEE and TBOP. All fees and expenses incurred in connection with the calculation required under this Section 10 shall be borne solely by TBOP.
11. Withholding Taxes. All compensation and benefits provided for herein shall, to the extent required by law, be subject to federal, state, and local tax withholding.
12. Confidential Information. The EMPLOYEE agrees that during and subsequent to his employment with TBOP and the Company, he will not, at any time, communicate or disclose to any unauthorized person, without the written consent of TBOP or the Company, any proprietary or other confidential information concerning TBOP, the Company or any Subsidiary or affiliate thereof; provided, however, that the obligations under this paragraph shall not apply to the extent that such matters (a) are disclosed in circumstances where the EMPLOYEE is legally obligated to do so, or (b) become generally known to and available for use by the public otherwise than by his wrongful act or omission; and provided further, that he may disclose any knowledge of insurance, financial, legal and economic principles, concepts and ideas which are not solely and exclusively derived from the business plans and activities of TBOP and the Company.
13. Covenants Not to Compete or to Solicit.
(a) Noncompetition. During the Term and for a period of 6 months after the Date of Termination (the “Noncompetition Period”), the EMPLOYEE shall not, without the written consent in writing of the Boards of Directors , become an officer, employee, agent, partner, consultant, member, director, or a four and nine-tenths percent or greater shareholder or equity owner of any entity engaged in the banking or lending business within any county in which TBOP or the Company has a branch, administrative office or loan production office. If at the time of the enforcement of this paragraph a court holds that the duration, scope, or area restrictions stated herein are unreasonable under the circumstances then existing and, thus, unenforceable, TBOP, the Company and the EMPLOYEE agree that the maximum duration, scope, or area reasonable under such circumstances shall be substituted for the stated duration, scope, or area.
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(b) Nonsolicitation. During his employment and the Noncompetition Period, the EMPLOYEE shall not, whether on his own behalf or on behalf of any other individual or business entity, solicit, endeavor to entice away from TBOP, the Company a Subsidiary or any affiliated company, or otherwise interfere with the relationship of TBOP, the Company, a Subsidiary, or any affiliated company with any person who is, or was within the then most recent 12 month period, an employee or associate thereof.
(c) Extension of Noncompetition Period. The Noncompetition Period shall be automatically extended by the length of time (if any) in which the EMPLOYEE is in violation of any of the terms of this Paragraph 13.
14. Additional Equitable Remedy. The EMPLOYEE acknowledges and agrees that TBOP’s remedy at law for a breach or a threatened breach of the provisions of Paragraphs 12 and 13 would be inadequate; and, in recognition of this fact, in the event of such a breach or threatened breach by him, it is agreed that TBOP shall be entitled to request equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy which may then be available. Nothing in this paragraph shall be construed as prohibiting TBOP from pursuing any other remedy available under this Agreement for such a breach or threatened breach.
15. Legal Fees. TBOP shall reimburse the EMPLOYEE for all reasonable legal fees and expenses he may incur in seeking to obtain or enforce any right or benefit provided by this Agreement, but only with respect to such claim or claims upon which EMPLOYEE prevails. Such payments shall be made within fourteen (14) days after delivery of EMPLOYEE’s written request for payment accompanied with such evidence of fees and expenses incurred as TBOP may reasonably require.
16. Related Agreements. Except as may otherwise be provided herein, to the extent that any provision of any other agreement between TBOP, the Company and the EMPLOYEE shall limit, qualify, duplicate, or be inconsistent with any provision of this Agreement, the provision in this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.
17. Exclusive Rights and Remedy. Except for any explicit rights and remedies the EMPLOYEE may have under any other contract, plan or arrangement with TBOPand the Company, the compensation and benefits payable hereunder and the remedy for enforcement thereof shall constitute his exclusive rights and remedy in the event of his termination of employment.
18. Director and Officer Liability Insurance; Indemnification. TBOP and the Company shall provide the EMPLOYEE (including his heirs, executors, and administrators) with the maximum coverage permitted under its directors’ and officers’ liability insurance policy, at TBOP’s expense, and shall indemnify him (and his heirs, executors, and administrators) as an employee and/or officer of TBOP and the Company to the fullest extent permitted under Federal, Pennsylvania and New Jersey law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been an employee and/or officer of TBOP, the Company or any Subsidiary or affiliated company (whether or not he continues to be such an officer at the time of incurring such expenses or liabilities). Such expenses and liabilities shall include, but not be limited to, judgments, court costs, and attorneys’ fees, and the costs of reasonable settlements.
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19. Cooperation and Non-Disparagement. EMPLOYEE agrees that he shall not make any disparaging, negative or critical comments regarding TBOP, or any Subsidiary or affiliated company either during his employment by TBOP and the Company, or thereafter. The EMPLOYEE agrees to cooperate fully with TBOP and the Company in connection with any claims, suits, charges or causes of action that have been brought, or may be brought in the future, against TBOP or the Company in which EMPLOYEE possesses information relevant to such claims, suits, charges or causes of action, which shall include, but not be limited to, making himself available, within reason, for interviews, depositions and testimony, as needed or requested by TBOP or the Company.
20. Notices. Any notice required or permitted under this Agreement shall be sufficient if it is in writing and shall be deemed given (i) at the time of personal delivery to the addressee, or (ii) at the time sent certified mail, with return receipt requested, addressed as follows:
| If to the EMPLOYEE: | The address provided in the personnel file of TBOP. | |||
| If to TBOP: | The Bank of Princeton 183 Bayard Lane Princeton, NJ 08540 Attention: Chair, Board of Directors | |||
| If to Company: | Princeton Bancorp, Inc. 183 Bayard Lane Princeton, NJ 08540 Attention: Chair, Board of Directors | |||
The name or address of any addressee may be changed at any time and from time to time by notice similarly given.
21. No Waiver. The failure by any party to this Agreement at any time or times hereafter to require strict performance by any other party of any of the provisions, terms, or conditions contained in this Agreement shall not waive, affect, or diminish any right of the first party at any time or times thereafter to demand strict performance therewith and with any other provision, term, or condition contained in this Agreement. Any actual waiver of a provision, term, or condition contained in this Agreement shall not constitute a waiver of any other provision, term, or condition herein, whether prior or subsequent to such actual waiver and whether of the same or a different type. The failure of TBOP or the Company to promptly terminate the EMPLOYEE’Ss employment for Cause or the EMPLOYEE to promptly terminate his employment for Good Reason shall not be construed as a waiver of the right of termination, and such right may be exercised at any time following the occurrence of the event giving rise to such right.
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22. Survival. Notwithstanding the nominal termination of this Agreement and the EMPLOYEE’S employment hereunder, the provisions hereof which specify continuing obligations, compensation and benefits, and rights (including the otherwise applicable term hereof) shall remain in effect until such time as all such obligations are discharged, all such compensation and benefits are received, and no party or beneficiary has any remaining actual or contingent rights hereunder.
23. Severability. In the event any provision in this Agreement shall be held illegal or invalid for any reason, such illegal or invalid provision shall not affect the remaining provisions hereof, and this Agreement shall be construed, administered and enforced as though such illegal or invalid provision were not contained herein.
24. Binding Effect and Benefit. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of TBOP, the Company and the executors, personal representatives, surviving spouse, heirs, devisees, and legatees of the EMPLOYEE. TBOP or the Company may assign this Agreement in the event of a sale, merger, consolidation or transfer of all or substantially all of its business and assets.
25. Entire Agreement. This Agreement embodies the entire agreement among the parties with respect to the subject matter hereof, and it supersedes and replaces any prior written or oral agreements between the parties to this Agreement. .
26. Captions. The captions of the several paragraphs and subparagraphs of this Agreement have been inserted for convenience of reference only. They constitute no part of this Agreement and are not to be considered in the construction hereof.
27. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed one and the same instrument which may be sufficiently evidenced by any one counterpart.
28. Applicable Law. Except to the extent preempted by federal law, the provisions of this Agreement shall be construed, administered, and enforced in accordance with the domestic internal law of the State of New Jersey without reference to its laws regarding conflict of laws. Each party hereby agrees that the forum and venue for any legal or equitable action or proceeding arising out of, or in connection with, this Agreement will lie in the appropriate federal or state courts or arbitration proceeding in the State of New Jersey and specifically waives any and all objections to such jurisdiction and venue.
29. Regulatory Matters. The obligations of TBOP under this Agreement shall in all events be subject to any required limitations or restrictions imposed by or pursuant to the Federal Deposit Insurance Act as the same may be amended from time to time. For the avoidance of doubt, any payments made to EMPLOYEE pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.
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30. Code Section 409A.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the EMPLOYEE’S separation from service within the meaning of Section 409A of the Code, TBOP’s stock is publicly traded on an established securities market or otherwise and TBOP determines that the EMPLOYEE is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the EMPLOYEE becomes entitled to under this Agreement on account of the EMPLOYEE’S separation from service would be considered deferred compensation subject to the 20% additional tax imposed pursuant to Section 409A(a) of the IRC as a result of the application of Section 409A(a)(2)(B) (i) of the IRC, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six months and one day after the EMPLOYEE’S separation from service, or (ii) the EMPLOYEE’S death. The first installment payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which the date of separation from service occurs, from such date of separation from service until the payment. To the extent that the foregoing applies to the provision of any ongoing medical benefits to the EMPLOYEE that would not be required to be delayed if the premiums therefore were paid by the EMPLOYEE, the EMPLOYEE shall pay the full costs of premiums for such medical benefits during the six-month period and TBOP shall pay the EMPLOYEE an amount equal to the amount of such premiums paid by the EMPLOYEE during the six-month period within ten (10) days after the conclusion of such period.
(b) Solely for purposes of Section 409A of the IRC, each installment payment of severance is considered a separate payment.
(c) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by TBOP or incurred by the EMPLOYEE during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the IRC, and to the extent that such payment or benefit is payable upon the EMPLOYEE’S termination of employment, then such payments or benefits shall be payable only upon the EMPLOYEE’S “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation § 1.409A-l(h).
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated Agreement, or caused it to be executed, as of the Effective Date.
| /s/ Edward Dietzler | ||
| EDWARD DIETZLER | ||
| THE BANK OF PRINCETON | ||
| By: |
/s/ Richard Gillespie | |
| On behalf of the Board of Directors | ||
| PRINCETON BANCORP, INC. | ||
| By: |
/s/ Richard Gillespie | |
| On behalf of the Board of Directors | ||
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GLOSSARY
“Board of Directors” or “Board” means collectively the boards of directors of TBOP and the Company.
“Cause” means (i) a documented repeated and willful failure by the EMPLOYEE to perform his duties, but only after written demand, (ii) his final conviction of a felony, (iii) conduct by him which constitutes moral turpitude which is directly and materially injurious to TBOP or any Subsidiary or affiliated company, including but not limited to the Company, (iv) willful material violation of corporate policy, or (v) the issuance by the regulator of TBOP or any Subsidiary or affiliated company, including but not limited to the Company, of an unappealable order to the effect that he be permanently discharged.
For purposes of this definition, no act or failure to act on the part of the EMPLOYEE shall be considered “willful” unless done or omitted not in good faith and without reasonable belief that the action or omission was in the best interest of TBOP or any of their Subsidiaries or affiliated companies, including but not limited to the Company.
“Change in Control” means the occurrence of any of the following events:
(a) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more (the “CIC Percentage”) of the combined voting power of the Company’s then-outstanding securities; provided, however, that if such Person first obtains the approval of the Company board of directors to acquire the CIC Percentage, then no Change in Control shall be deemed to have occurred unless and until such Person obtains a CIC Percentage ownership of the combined voting power of the Company’s then-outstanding securities without having first obtained the approval of the Company board of directors; or
(b) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing greater than 50% of the combined voting power of the Company’s then-outstanding securities, whether or not the Company board of directors shall have first given its approval to such acquisition; or
(c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company board of directors (the “Incumbent Directors”) cease for any reason to constitute a majority of the Company board of directors; provided, however, that any new directors whose election, nomination for election by the Company’s stockholders or appointment was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the period or whose election, nomination or appointment was previously so approved shall be considered Incumbent Directors; and further provided, however, that no individual shall be considered an Incumbent Director if such individual’s election, nomination or appointment to the Company board of directors was in connection with an actual or threatened “election contest” (as described in Rule 14a-12(c) under the Exchange Act) with respect to the election or removal of directors (an “Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Company board of directors (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any such Election Contest or Proxy Contest; or
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(d) the consummation of a merger or consolidation of the Company with any other corporation; provided, however, a Change in Control shall not be deemed to have occurred: (i) if such merger or consolidation would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) either directly or indirectly more than 50% of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion as their ownership immediately prior to the merger or consolidation, or (ii) if the corporate existence of the Company is not affected and following the merger or consolidation, the directors of the Company prior to such merger or consolidation constitute at least a majority of the board of directors of the Company or the entity that directly or indirectly controls the Company after such merger or consolidation; or
(e) the sale or disposition by the Company of all or substantially all the Company’s assets provided, however, that in no event shall a reorganization of the Company or TBOP solely within its corporate structure constitute a Change in Control.
“Date of Termination” means:
(a) if the EMPLOYEE’S employment is terminated for Disability, 30 days after the Notice of Termination is given (provided that he shall not have returned to the performance of his duties on a full-time basis during such 30-day period);
(b) if the EMPLOYEE’S employment terminates by reason of his death, the date of his death;
(c) if the EMPLOYEE’S employment is terminated involuntarily for Cause, the date of termination specified in the Notice of Termination and determined in accordance with Paragraph 8(a);
(d) if the EMPLOYEE’S employment is terminated by him, the date of termination specified in the Notice of Termination and determined in accordance with Paragraph 9(a);
provided, however that the Date of Termination shall mean the actual date of termination in the event the parties mutually agree to a date other than that described above.“Disability” has the meaning ascribed to the term “permanent and total disability” in Section 22(e)(3) of the IRC.“Employee Benefit Plan” has the meaning ascribed to such term in Section 3(3) of ERISA.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as the same may be amended from time to time.
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“Good Reason” means the EMPLOYEE’S separation from service within two (2) years following the initial existence of one or more of the following conditions arising without the consent of the EMPLOYEE:
(a) A material diminution in the EMPLOYEE’S base compensation;
(b) A material diminution in the EMPLOYEE’S authority, duties, or responsibilities;
(c) A material diminution in the authority, duties, or responsibilities of the supervisor to whom the EMPLOYEE is required to report, including a requirement that the EMPLOYEE report to a corporate officer or employee instead of reporting directly to the board of directors of a corporation (or similar governing body with respect to an entity other than a corporation);
(d) A material diminution in the budget over which the EMPLOYEE retains authority; or
(e) A relocation of the EMPLOYEE’S principal office to a location more than 50 miles away from the location at which the EMPLOYEE must perform the services.
“Incumbent Board” means the Board of Directors of TBOP as constituted at any relevant time.
“IRC” or the “Code” means the Internal Revenue Code of 1986, as amended and as the same may be amended from time to time.
“Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the EMPLOYEE’S employment under the provision so indicated, and (iii) gives the required advance notice of termination.
“Person” has the same meaning as such term has for purposes of Sections 13(d) and 14(d) of the 1934 Act.“Subsidiary” means any business entity of which a majority of its voting power or its equity securities or equity interests is owned, directly or indirectly by the Company.
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Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT originally entered into on the 6th day of December, 2018, by and between The Bank of Princeton (“TBOP”), a banking corporation organized under the laws of the state of New Jersey, and Daniel O’Donnell (the “EMPLOYEE”) and subsequently amended December 18, 2019, is hereby amended and restated in its entirety to add Princeton Bancorp, Inc., the parent bank holding company of TBOP (“Company”), as a party to this Agreement effective June 21, 2023 (“Effective Date”)..
BACKGROUND
A. TBOP and the Company desire to continue to employ the EMPLOYEE and the EMPLOYEE is willing to serve on the terms and conditions herein provided.
B. In order to effect the foregoing, the parties hereto desire to enter into this employment agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Employment. TBOP and the Company hereby continue to employ the EMPLOYEE, and the EMPLOYEE hereby agrees to serve TBOP and the Company, on the terms and conditions set forth herein.
2. Term of Agreement.
(a) Except as otherwise provided herein, the term of this Agreement shall include: (i) the period commencing on the Effective Date and ending December 31, 2025, plus (ii) any and all extensions of the term made pursuant to paragraphs (b) and (c) of this Section 2 (the “Term”).
(b) Beginning on December 31, 2023, and on or around each December 31st thereafter, the term of this Agreement shall be extended by one (1) year, so that, at the time of such extension, the term of the Agreement shall be for a period of three (3) years. Notwithstanding the foregoing, TBOP, the Company or the EMPLOYEE may elect to terminate the automatic annual extension of the Term in this paragraph (b) by giving written notice of such election. Any notice given hereunder shall be effective as of the date such notice of nonrenewal is given and the Term shall be fixed at that time.
(c) Notwithstanding paragraph (b) of this Section 2, in the event of a Change in Control, the Term shall not end before the first anniversary of such Change of Control; provided, however, this sentence shall apply only to the first Change of Control to occur while this Agreement is in effect.
(d) Nothing in this Agreement shall mandate or prohibit a continuation of the EMPLOYEE’S employment following the expiration of the Term upon such terms and conditions as TBOP, the Company and the EMPLOYEE may mutually agree.
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(e) Effective upon the termination of the EMPLOYEE’S employment with TBOP or the Company, the EMPLOYEE shall resign as a director of TBOP and the Company, unless continued service as a director of TBOP or the Company is requested in writing by the Board of Directors. For purposes of this Agreement, all references to Board of Directors shall mean both the Company and TBOP boards of directors.
3. Position and Duties. The EMPLOYEE shall serve as the Executive Vice President, Chief Operating Officer and Assistant Secretary of TBOP and Executive Vice President, Chief Operating Officer and Assistant Secretary of the Company. EMPLOYEE shall report directly to the respective Boards of Directors. In addition, the EMPLOYEE shall serve in such capacity, with respect to each Subsidiary or affiliated company, as the Board of Directors of each such Subsidiary or affiliated company shall designate from time to time. During the Term, the EMPLOYEE shall devote substantially all of his working time and efforts to the business and affairs of TBOP, the Company and affiliated companies; provided, however, that nothing herein shall be construed as precluding him from devoting a reasonable amount of time to civic, charitable, trade association, and similar activities, to the extent participation in these activities do not conflict with the EMPLOYEE’S obligations to TBOP and the Company or interfere with the EMPLOYEE’S responsibilities under this Agreement.
4. Compensation and Related Matters. Unless otherwise determined by the Company board of directors, all payments and benefits provided in this Agreement shall be paid or provided solely by TBOP. Notwithstanding anything in this Agreement to the contrary, no provision of this Agreement shall be construed so as to result in the duplication of any payment or benefit. Unless otherwise determined by the Company board of directors, the Company’s sole obligation under this Agreement shall be to unconditionally guarantee the payment and provision of all amounts and benefits due hereunder to EMPLOYEE, and the affirmative obligations of the Company as set forth at Section 18, herein, with respect to Indemnification, and, if such amounts and benefits due from TBOP are not timely paid or provided by TBOP, such amounts and benefits shall be paid or provided by the Company.
(a) Base Compensation. During the Term, TBOP shall pay to the EMPLOYEE annual base compensation at a rate not less than $500,000 (“Annual Salary”). The Board of Directors of TBOP or the Joint Compensation/HR Committee of the Board of Directors shall periodically review the EMPLOYEE’S employment performance, in accordance with policies generally in effect from time to time, for possible merit or cost-of-living increases and any and all such increases shall be deemed to constitute amendments to this Section 4(a) to reflect the increased amounts, effective as of the date established for such increases. Except for a reduction which is proportionate to a bank-wide reduction in officer pay, the annual base compensation paid to the EMPLOYEE in any period shall not be less than his Annual Salary as of the Effective Date. The frequency and manner of payment of the EMPLOYEE’S Annual Salary shall be in accordance with TBOP’s payroll practices from time to time in effect. Nothing herein shall be construed as precluding the EMPLOYEE from entering into any salary reduction or deferral plan or arrangement during the Term. The amounts set forth in the first sentence of this subparagraph (a) shall be pro-rated to the extent such period is less than a year.
(b) Incentive Compensation. During the Term, the EMPLOYEE shall be eligible to participate in all incentive plans, equity plans, and similar arrangements maintained by TBOP for its executive officers on a basis and at award levels consistent and commensurate with the EMPLOYEE’S position and duties hereunder.
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(c) Employee Benefit Plans and Other Plans or Arrangements. The EMPLOYEE shall be eligible to participate in all Employee Benefit Plans of TBOP on the same basis as other executive officers of TBOP. In addition, the EMPLOYEE shall be entitled to participate in and enjoy any other plans and arrangements which provide for sick leave, vacation, sabbatical, or personal days, club memberships and dues, education payment or reimbursement, business-related seminars, and similar fringe benefits provided to or for the executive officers of TBOP from time to time.
(d) Expenses. During the Term, the EMPLOYEE shall be entitled to receive prompt reimbursement for all reasonable and customary expenses, including transportation expenses, incurred by him in performing services hereunder in accordance with the general policies and procedures established by TBOP.
5. Termination By Reason of Disability.
(a) In General. In the event the EMPLOYEE becomes unable to perform his duties on a full-time basis by reason of the occurrence of his Disability and, within 30 days after a Notice of Termination is given, he shall not have returned to the full-time performance of such duties, his employment may be terminated by TBOP or the Company, provided, however, that, if EMPLOYEE’S Disability occurs after EMPLOYEE delivers a Notice of Termination for Good Reason, EMPLOYEE shall nevertheless be absolutely entitled to receive all of the compensation and benefits provided in Section 9 hereof.
(b) Compensation and Benefits upon Expiration of Remaining Term. This Agreement shall terminate following the EMPLOYEE’S termination for Disability, provided, however, the EMPLOYEE shall be entitled to receive the compensation and benefits provided under the terms of any long-term disability plan of TBOP in effect on the Date of Termination.
6. Termination By Reason of Death. This Agreement shall terminate in the event of the EMPLOYEE’S death during the Term, provided, however, the EMPLOYEE’S beneficiary(ies) shall be entitled to such benefits as otherwise provided by TBOP as are effective on the date of his death, provided, however, that, if the EMPLOYEE dies after EMPLOYEE delivers a Notice of Termination for Good Reason, the EMPLOYEE’S estate shall nevertheless be absolutely entitled to receive all of the compensation and benefits provided in Section 9 hereof.
7. Termination by TBOP or the Company for Cause.
(a) In General. In the event TBOP or the Company terminates the EMPLOYEE’S employment for Cause, TBOP or the Company shall deliver a Notice of Termination to the EMPLOYEE which specifies a Date of Termination which, in the employer’s discretion, may be the same date as the Notice of Termination.
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(b) Compensation. On and after the Date of Termination, EMPLOYEE shall have no further rights under this Agreement, except that at the end of the payroll period after the EMPLOYEE’S termination under Subparagraph (a), TBOP shall pay him, in one lump sum, his accrued but unpaid base compensation and vacation time/paid time off earned through the Date of Termination.
8. Termination by the EMPLOYEE without Good Reason
(a) In General. In the event the EMPLOYEE terminates his employment without Good Reason, the EMPLOYEE shall deliver a Notice of Termination to TBOP and the Company which specifies a Date of Termination not less than 30 days following the date of such notice.
(b) Compensation. On and after the Date of Termination, the EMPLOYEE shall have no further rights under this Agreement, except that at the end of the payroll period after the EMPLOYEE’S termination under Subparagraph (a), TBOP shall pay him, in one lump sum, his accrued but unpaid base compensation and vacation time/paid time off earned through the Date of Termination.
9. Involuntary Termination without Disability or Cause or Voluntary Termination by the EMPLOYEE for Good Reason.
(a) In General. In the event TBOP or the Company terminates the EMPLOYEE’S employment for any reason other than Disability or Cause, TBOP or the Company shall deliver a Notice of Termination to the EMPLOYEE which specifies a Date of Termination not less than 30 days following the date of such notice. In the event that the EMPLOYEE intends to terminate his employment for Good Reason, then at the option of the EMPLOYEE, exercisable by him within ninety (90) days after the occurrence of the condition constituting Good Reason, the EMPLOYEE may resign from employment under this Agreement by delivering a Notice of Termination to TBOP, the Company or its successor which specifies a Date of Termination not less than 30 days following the date of such notice, provided, however, that TBOP, the Company or its successor shall be given thirty (30) days from the day it receives the Notice of Termination to remedy such condition.
(b) Compensation and Benefits after Termination. In the event of the termination of EMPLOYEE’S employment under Subparagraph (a), the EMPLOYEE shall be entitled to receive the following payments and benefits.
(i) The EMPLOYEE shall receive a lump sum cash payment equal to two (2) times: (A) the EMPLOYEE’S Annual Salary then in effect, plus (B) the average of the three (3) highest annual cash or stock bonuses paid to the EMPLOYEE under a short-term incentive program maintained by TBOP or the Company during the Term. A portion of the severance payment received in connection with a Change in Control which is classified as payment of reasonable compensation for purposes of Section 280G of the Code shall be allocated to the restrictive covenants noted in Section 13.
(ii) In addition to the cash payment provided under Subparagraph (b)(i) of this Section 9, the EMPLOYEE and his eligible dependents shall be entitled to continue to participate at the same aggregate benefit levels for eighteen (18) months and at no out-of-pocket or tax cost to the EMPLOYEE, in the medical
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benefit plan in which the EMPLOYEE was a participant immediately prior to the Date of Termination, to the extent permitted under the terms of such plans and applicable law. To the extent TBOP is unable to provide for continued participation in the medical benefit plan, it shall provide an equivalent benefit directly at no out-of-pocket or tax cost to the EMPLOYEE. For purposes of the preceding two sentences, TBOP shall be deemed to have provided a benefit at no tax cost to the EMPLOYEE if it pays an additional amount to the EMPLOYEE or on his behalf, with respect to those benefits which would otherwise be nontaxable to the EMPLOYEE.
(c) Earlier Cessation of Medical Benefits. Notwithstanding the provisions of Subparagraph 9(b), TBOP shall not be required to provide, at its cost, the medical benefits covered by Subparagraph 9(b)(ii) after the later of (i) the attainment by the EMPLOYEE and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan document for benefit termination (assuming that he was employed until the normal retirement date, if any, specified in such document).
(d) Death during Remaining Period of Payment. In the event the EMPLOYEE dies during the period of payment following the Date of Termination without Disability or Cause and the EMPLOYEE is survived by his spouse, the compensation and benefits required to be paid and provided under Subparagraph (b) shall be unaffected by his death and shall be paid and provided to the EMPLOYEE’S spouse or on her behalf; provided that TBOP shall not be required to provided continued medical benefits with respect to her deceased husband; and provided further, that in no event shall TBOP be required to provide, at its cost, the medical benefits described in Subparagraph 9(b)(ii) to such spouse and her eligible dependents after the earlier of (x) his death, or (y) the later of (I) his attainment of age 65, or (II) the date specified in the relevant plan document for benefit termination (assuming that the EMPLOYEE was employed until the normal retirement date, if any, specified in the document).
10. Limitations on Payments.
Notwithstanding any contrary provisions in any plan, program or policy of TBOP or the Company, if all or any portion of the compensation or benefits payable under this Agreement, either alone or together with other payments and benefits that the EMPLOYEE receives or is entitled to receive from TBOP and the Company, would constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code. TBOP shall reduce the EMPLOYEE’S payments and benefits payable under this Agreement to the extent necessary so that no portion thereof, after the application of all reasonable exceptions permitted under the Code, shall be subject to the excise tax imposed by Section 4999 of the Code, but only if, by reason of such reduction, the net after-tax benefit to the EMPLOYEE shall exceed the net after-tax benefit if such reduction were not made. “‘Net after-tax benefit” for these purposes shall mean the sum of (i) the total amount payable to the EMPLOYEE under this Agreement, plus (ii) all other payments and benefits which the EMPLOYEE receives or is then entitled to receive from TBOP or the Company that, alone or in combination with the payments and benefits payable under this Agreement, would constitute a “parachute payment” within the meaning of Section 280G of the Code, less (iii) the amount of federal income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the
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foregoing shall be paid to the EMPLOYEE (based upon the rate in effect for such year as set forth in the Code at the time of the payment under this Agreement), less (iv) the amount of excise taxes imposed with respect to the payments and benefits described in (i) and (ii) above by Section 4999 of the Code. The parachute payments reduced shall first be the payments under Section 9, and then any other parachute payments. Within any of these categories, a reduction shall occur first with respect to amounts that are not deemed to constitute a “deferral of compensation” within the meaning of and subject to Code Section 409A (“Nonqualified Deferred Compensation”) and then with respect to amounts that are treated as Nonqualified Deferred Compensation, with such reduction being applied in each case to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments. All determinations required to be made under this Section 10 shall be made by an independent accounting firm, law firm or compensation consultant, agreed upon by the EMPLOYEE and TBOP. All fees and expenses incurred in connection with the calculation required under this Section 10 shall be borne solely by TBOP.
11. Withholding Taxes. All compensation and benefits provided for herein shall, to the extent required by law, be subject to federal, state, and local tax withholding.
12. Confidential Information. The EMPLOYEE agrees that during and subsequent to his employment with TBOP and the Company, he will not, at any time, communicate or disclose to any unauthorized person, without the written consent of TBOP or the Company, any proprietary or other confidential information concerning TBOP, the Company or any Subsidiary or affiliate thereof; provided, however, that the obligations under this paragraph shall not apply to the extent that such matters (a) are disclosed in circumstances where the EMPLOYEE is legally obligated to do so, or (b) become generally known to and available for use by the public otherwise than by his wrongful act or omission; and provided further, that he may disclose any knowledge of insurance, financial, legal and economic principles, concepts and ideas which are not solely and exclusively derived from the business plans and activities of TBOP and the Company.
13. Covenants Not to Compete or to Solicit.
(a) Noncompetition. During the Term and for a period of 6 months after the Date of Termination (the “Noncompetition Period”), the EMPLOYEE shall not, without the written consent in writing of the Boards of Directors, become an officer, employee, agent, partner, consultant, member, director, or a four and nine-tenths percent or greater shareholder or equity owner of any entity engaged in the banking or lending business within any county in which TBOP or the Company has a branch, administrative office or loan production office. If at the time of the enforcement of this paragraph a court holds that the duration, scope, or area restrictions stated herein are unreasonable under the circumstances then existing and, thus, unenforceable, TBOP,the Company and the EMPLOYEE agree that the maximum duration, scope, or area reasonable under such circumstances shall be substituted for the stated duration, scope, or area.
(b) Nonsolicitation. During his employment and the Noncompetition Period, the EMPLOYEE shall not, whether on his own behalf or on behalf of any other individual or business entity, solicit, endeavor to entice away from TBOP, the Company a Subsidiary or any affiliated company, or otherwise interfere with the relationship of TBOP, the Company, a Subsidiary, or any affiliated company with any person who is, or was within the then most recent 12 month period, an employee or associate thereof.
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(c) Extension of Noncompetition Period. The Noncompetition Period shall be automatically extended by the length of time (if any) in which the EMPLOYEE is in violation of any of the terms of this Paragraph 13.
14. Additional Equitable Remedy. The EMPLOYEE acknowledges and agrees that TBOP’s remedy at law for a breach or a threatened breach of the provisions of Paragraphs 12 and 13 would be inadequate; and, in recognition of this fact, in the event of such a breach or threatened breach by him, it is agreed that TBOP shall be entitled to request equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy which may then be available. Nothing in this paragraph shall be construed as prohibiting TBOP from pursuing any other remedy available under this Agreement for such a breach or threatened breach.
15. Legal Fees. TBOP shall reimburse the EMPLOYEE for all reasonable legal fees and expenses he may incur in seeking to obtain or enforce any right or benefit provided by this Agreement, but only with respect to such claim or claims upon which EMPLOYEE prevails. Such payments shall be made within fourteen (14) days after delivery of EMPLOYEE’s written request for payment accompanied with such evidence of fees and expenses incurred as TBOP may reasonably require.
16. Related Agreements. Except as may otherwise be provided herein, to the extent that any provision of any other agreement between TBOP, the Company and the EMPLOYEE shall limit, qualify, duplicate, or be inconsistent with any provision of this Agreement, the provision in this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.
17. Exclusive Rights and Remedy. Except for any explicit rights and remedies the EMPLOYEE may have under any other contract, plan or arrangement with TBOP and the Company, the compensation and benefits payable hereunder and the remedy for enforcement thereof shall constitute his exclusive rights and remedy in the event of his termination of employment.
18. Director and Officer Liability Insurance; Indemnification. TBOP and the Company shall provide the EMPLOYEE (including his heirs, executors, and administrators) with the maximum coverage permitted under its directors’ and officers’ liability insurance policy, at TBOP’s expense, and shall indemnify him (and his heirs, executors, and administrators) as an employee and/or officer of TBOP and the Company to the fullest extent permitted under Federal, Pennsylvania and New Jersey law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been an e employee and/or officer of TBOP, the Company or any Subsidiary or affiliated company (whether or not he continues to be such an officer at the time of incurring such expenses or liabilities). Such expenses and liabilities shall include, but not be limited to, judgments, court costs, and attorneys’ fees, and the costs of reasonable settlements.
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19. Cooperation and Non-Disparagement. EMPLOYEE agrees that he shall not make any disparaging, negative or critical comments regarding TBOP, or any Subsidiary or affiliated company either during his employment by TBOP and the Company, or thereafter. EMPLOYEE agrees to cooperate fully with TBOP and the Company in connection with any claims, suits, charges or causes of action that have been brought, or may be brought in the future, against TBOP or the Company in which EMPLOYEE possesses information relevant to such claims, suits, charges or causes of action, which shall include, but not be limited to, making himself available, within reason, for interviews, depositions and testimony, as needed or requested by TBOP or the Company.
20. Notices. Any notice required or permitted under this Agreement shall be sufficient if it is in writing and shall be deemed given (i) at the time of personal delivery to the addressee, or (ii) at the time sent certified mail, with return receipt requested, addressed as follows:
| If to the EMPLOYEE: | The address provided in the personnel | |||
| file of TBOP. | ||||
| If to TBOP: | The Bank of Princeton | |||
| 183 Bayard Lane | ||||
| Princeton, NJ 08540 | ||||
| Attention: Chair, Board of Directors | ||||
| If to Company: | Princeton Bancorp, Inc. | |||
| 183 Bayard Lane | ||||
| Princeton, NJ 08540 | ||||
| Attention: Chair, Board of Directors | ||||
The name or address of any addressee may be changed at any time and from time to time by notice similarly given.
21. No Waiver. The failure by any party to this Agreement at any time or times hereafter to require strict performance by any other party of any of the provisions, terms, or conditions contained in this Agreement shall not waive, affect, or diminish any right of the first party at any time or times thereafter to demand strict performance therewith and with any other provision, term, or condition contained in this Agreement. Any actual waiver of a provision, term, or condition contained in this Agreement shall not constitute a waiver of any other provision, term, or condition herein, whether prior or subsequent to such actual waiver and whether of the same or a different type. The failure of TBOP or the Company to promptly terminate the EMPLOYEE’S employment for Cause or the EMPLOYEE to promptly terminate his employment for Good Reason shall not be construed as a waiver of the right of termination, and such right may be exercised at any time following the occurrence of the event giving rise to such right.
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22. Survival. Notwithstanding the nominal termination of this Agreement and the EMPLOYEE’S employment hereunder, the provisions hereof which specify continuing obligations, compensation and benefits, and rights (including the otherwise applicable term hereof) shall remain in effect until such time as all such obligations are discharged, all such compensation and benefits are received, and no party or beneficiary has any remaining actual or contingent rights hereunder.
23. Severability. In the event any provision in this Agreement shall be held illegal or invalid for any reason, such illegal or invalid provision shall not affect the remaining provisions hereof, and this Agreement shall be construed, administered and enforced as though such illegal or invalid provision were not contained herein.
24. Binding Effect and Benefit. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of TBOP, the Company and the executors, personal representatives, surviving spouse, heirs, devisees, and legatees of the EMPLOYEE. TBOP or the Company may assign this Agreement in the event of a sale, merger, consolidation or transfer of all or substantially all of its business and assets.
25. Entire Agreement. This Agreement embodies the entire agreement among the parties with respect to the subject matter hereof, and it supersedes and replaces any prior written or oral agreements between the parties to this Agreement.
26. Captions. The captions of the several paragraphs and subparagraphs of this Agreement have been inserted for convenience of reference only. They constitute no part of this Agreement and are not to be considered in the construction hereof.
27. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed one and the same instrument which may be sufficiently evidenced by any one counterpart.
28. Applicable Law. Except to the extent preempted by federal law, the provisions of this Agreement shall be construed, administered, and enforced in accordance with the domestic internal law of the State of New Jersey without reference to its laws regarding conflict of laws. Each party hereby agrees that the forum and venue for any legal or equitable action or proceeding arising out of, or in connection with, this Agreement will lie in the appropriate federal or state courts or arbitration proceeding in the State of New Jersey and specifically waives any and all objections to such jurisdiction and venue.
29. Regulatory Matters. The obligations of TBOP under this Agreement shall in all events be subject to any required limitations or restrictions imposed by or pursuant to the Federal Deposit Insurance Act as the same may be amended from time to time. For the avoidance of doubt, any payments made to EMPLOYEE pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.
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30. Code Section 409A.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the EMPLOYEE’S separation from service within the meaning of Section 409A of the Code, TBOP’s stock is publicly traded on an established securities market or otherwise and TBOP determines that the EMPLOYEE is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the EMPLOYEE becomes entitled to under this Agreement on account of the EMPLOYEE’s separation from service would be considered deferred compensation subject to the 20% additional tax imposed pursuant to Section 409A(a) of the IRC as a result of the application of Section 409A(a)(2)(B) (i) of the IRC, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six months and one day after the EMPLOYEE’s separation from service, or (ii) the EMPLOYEE’S death. The first installment payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which the date of separation from service occurs, from such date of separation from service until the payment. To the extent that the foregoing applies to the provision of any ongoing medical benefits to the EMPLOYEE that would not be required to be delayed if the premiums therefore were paid by the EMPLOYEE, the EMPLOYEE shall pay the full costs of premiums for such medical benefits during the six-month period and TBOP shall pay the EMPLOYEE an amount equal to the amount of such premiums paid by the EMPLOYEE during the six-month period within ten (10) days after the conclusion of such period.
(b) Solely for purposes of Section 409A of the IRC, each installment payment of severance is considered a separate payment.
(c) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by TBOP or incurred by the EMPLOYEE during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the IRC, and to the extent that such payment or benefit is payable upon the EMPLOYEE’S termination of employment, then such payments or benefits shall be payable only upon the EMPLOYEE’S “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation § 1.409A-l(h).
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated Agreement, or caused it to be executed, as of the date first above written.
| /s/ Daniel O’Donnell | ||
| DANIEL O’DONNELL | ||
| THE BANK OF PRINCETON | ||
| By: | /s/ Richard Gillespie | |
| On behalf of the Board of Directors | ||
| PRINCETON BANCORP, INC. | ||
| By: | /s/ Richard Gillespie | |
| On behalf of the Board of Directors | ||
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GLOSSARY
“Board of Directors” or “Board” means collectively the board of directors of TBOP and the Company.
“Cause” means (i) a documented repeated and willful failure by the EMPLOYEE to perform his duties, but only after written demand, (ii) his final conviction of a felony, (iii) conduct by him which constitutes moral turpitude which is directly and materially injurious to TBOP or any Subsidiary or affiliated company, including but not limited to the Company (iv) willful material violation of corporate policy, or (v) the issuance by the regulator of TBOP or any Subsidiary or affiliated company, including but not limited to the Company, of an unappealable order to the effect that he be permanently discharged.
For purposes of this definition, no act or failure to act on the part of the EMPLOYEE shall be considered “willful” unless done or omitted not in good faith and without reasonable belief that the action or omission was in the best interest of TBOP or any of their Subsidiaries or affiliated companies, including but not limited to the Company.
“Change in Control” means the occurrence of any of the following events:
(a) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more (the “CIC Percentage”) of the combined voting power of the Company’s then-outstanding securities; provided, however, that if such Person first obtains the approval of the Company board of directors to acquire the CIC Percentage, then no Change in Control shall be deemed to have occurred unless and until such Person obtains a CIC Percentage ownership of the combined voting power of the Company’s then-outstanding securities without having first obtained the approval of the Company board of directors; or
(b) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing greater than 50% of the combined voting power of the Company’s then-outstanding securities, whether or not the Company board of directors shall have first given its approval to such acquisition; or
(c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company board of directors (the “Incumbent Directors”) cease for any reason to constitute a majority of the Company board of directors; provided, however, that any new directors whose election, nomination for election by the Company’s stockholders or appointment was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the period or whose election, nomination or appointment was previously so approved shall be considered Incumbent Directors; and further provided, however, that no individual shall be considered an Incumbent Director if such individual’s election, nomination or appointment to the Company board of directors was in connection with an actual or threatened “election contest” (as described in Rule 14a-12(c) under the Exchange Act) with respect to the election or removal of directors (an “Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Company board of directors (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any such Election Contest or Proxy Contest; or
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(d) the consummation of a merger or consolidation of the Company with any other corporation; provided, however, a Change in Control shall not be deemed to have occurred: (i) if such merger or consolidation would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) either directly or indirectly more than 50% of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion as their ownership immediately prior to the merger or consolidation, or (ii) if the corporate existence of the Company is not affected and following the merger or consolidation, the directors of the Company prior to such merger or consolidation constitute at least a majority of the board of directors of the Company or the entity that directly or indirectly controls the Company after such merger or consolidation; or
(e) the sale or disposition by the Company of all or substantially all the Company’s assets provided, however, that in no event shall a reorganization of the Company or TBOP solely within its corporate structure constitute a Change in Control.
“Date of Termination” means:
(a) if the EMPLOYEE’S employment is terminated for Disability, 30 days after the Notice of Termination is given (provided that he shall not have returned to the performance of his duties on a full-time basis during such 30-day period);
(b) if the EMPLOYEE’S employment terminates by reason of his death, the date of his death;
(c) if the EMPLOYEE’S employment is terminated involuntarily for Cause, the date of termination specified in the Notice of Termination and determined in accordance with Paragraph 8(a);
(d) if the EMPLOYEE’S employment is terminated by him, the date of termination specified in the Notice of Termination and determined in accordance with Paragraph 9(a); provided, however that the Date of Termination shall mean the actual date of termination in the event the parties mutually agree to a date other than that described above.
“Disability” has the meaning ascribed to the term “permanent and total disability” in Section 22(e)(3) of the IRC.
“Employee Benefit Plan” has the meaning ascribed to such term in Section 3(3) of ERISA.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as the same may be amended from time to time.
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“Good Reason” means the EMPLOYEE’S separation from service within two (2) years following the initial existence of one or more of the following conditions arising without the consent of the EMPLOYEE:
(a) A material diminution in the EMPLOYEE’S base compensation;
(b) A material diminution in the EMPLOYEE’S authority, duties, or responsibilities;
(c) A material diminution in the authority, duties, or responsibilities of the supervisor to whom the EMPLOYEE is required to report, including a requirement that the EMPLOYEE report to a corporate officer or employee instead of reporting directly to the board of directors of a corporation (or similar governing body with respect to an entity other than a corporation);
(d) A material diminution in the budget over which the EMPLOYEE retains authority; or
(e) A relocation of the EMPLOYEE’S principal office to a location more than 50 miles away from the location at which the EMPLOYEE must perform the services.
“Incumbent Board” means the Board of Directors of TBOP as constituted at any relevant time.
“IRC” or the “Code” means the Internal Revenue Code of 1986, as amended and as the same may be amended from time to time.
“Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the EMPLOYEE’S employment under the provision so indicated, and (iii) gives the required advance notice of termination.
“Person” has the same meaning as such term has for purposes of Sections 13(d) and 14(d) of the 1934 Act.
“Subsidiary” means any business entity of which a majority of its voting power or its equity securities or equity interests is owned, directly or indirectly by the Company.
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Exhibit 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT originally entered into on the 25th day of January 2019 by and between The Bank of Princeton (“TBOP”), a banking corporation organized under the laws of the state of New Jersey, and George Rapp (the “EMPLOYEE is hereby amended and restated in its entirety to add Princeton Bancorp, Inc., the parent bank holding company of TBOP (“Company”), as a party to this Agreement effective June 21, 2023 (“Effective Date”).
BACKGROUND
A. TBOP and the Company desire to continue to employ the EMPLOYEE and the EMPLOYEE is willing to serve on the terms and conditions herein provided.
B. In order to effect the foregoing, the parties hereto desire to enter into this employment agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the respective covenants and agreements of the parties contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Employment. TBOP and the Company hereby continue to employ the EMPLOYEE, and the EMPLOYEE hereby agrees to serve TBOP and the Company, on the terms and conditions set forth herein.
2. Term of Agreement.
(a) Except as otherwise provided herein, the term of this Agreement shall include: (i) the period commencing on the Effective Date and ending December 31, 2024, plus (ii) any and all extensions of the term made pursuant to paragraphs (b) and (c) of this Section 2 (the “Term”).
(b) Beginning on December 31, 2023, and on each anniversary thereafter, the term of this Agreement shall be extended by one (1) year, so that, at the time of such extension, the term shall be for a period of two (2) years. Notwithstanding the foregoing, TBOP, the Company or the EMPLOYEE may elect to terminate the automatic annual extension of the Term in this paragraph (b) by giving written notice of such election. Any notice given hereunder shall be effective as of the date such notice of nonrenewal is given and the Term shall be fixed at that time.
(c) Notwithstanding paragraph (b) of this Section 2, in the event of a Change in Control, the Term shall not end before the first anniversary of such Change of Control; provided, however, this sentence shall apply only to the first Change of Control to occur while this Agreement is in effect.
(d) Nothing in this Agreement shall mandate or prohibit a continuation of the EMPLOYEE’S employment following the expiration of the Term upon such terms and conditions as TBOP, the Company and the EMPLOYEE may mutually agree.
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3. Position and Duties. The EMPLOYEE shall serve as the Executive Vice-President and Chief Financial Officer of TBOP and Executive Vice President and Chief Financial Officer of the Company. EMPLOYEE shall report directly to the Chief Executive Officer of the Company and TBOP, respectively. In addition, the EMPLOYEE shall serve in such capacity, with respect to each Subsidiary or affiliated company, as the Board of Directors of each such Subsidiary or affiliated company shall designate from time to time. During the Term, EMPLOYEE shall devote substantially all of his working time and efforts to the business and affairs of TBOP, the Company and affiliated companies; provided, however, that nothing herein shall be construed as precluding him from devoting a reasonable amount of time to civic, charitable, trade association, and similar activities, to the extent participation in these activities do not conflict with the EMPLOYEE’S obligations to TBOP and the Company or interfere with the EMPLOYEE’S responsibilities under this Agreement.
4. Compensation and Related Matters. Unless otherwise determined by the Company board of directors, all payments and benefits provided in this Agreement shall be paid or provided solely by TBOP. Notwithstanding anything in this Agreement to the contrary, no provision of this Agreement shall be construed so as to result in the duplication of any payment or benefit. Unless otherwise determined by the Company board of directors, the Company’s sole obligation under this Agreement shall be to unconditionally guarantee the payment and provision of all amounts and benefits due hereunder to EMPLOYEE, and the affirmative obligations of the Company as set forth at Section 18, herein, with respect to Indemnification, and, if such amounts and benefits due from TBOP are not timely paid or provided by TBOP, such amounts and benefits shall be paid or provided by the Company.
(a) Base Compensation. During the Term, TBOP shall pay to the EMPLOYEE annual base compensation at a rate not less than $250,000 (“Annual Salary”). The Board of Directors of TBOP or the Joint Compensation/HR Committee of the Board of Directors shall periodically review the EMPLOYEE’S employment performance, in accordance with policies generally in effect from time to time, for possible merit or cost-of-living increases, and any and all such increases shall be deemed to constitute amendments to this Section 4(a) to reflect the increased amounts, effective as of the date established for such increases. Except for a reduction which is proportionate to a bank-wide reduction in officer pay, the annual base compensation paid to the EMPLOYEE in any period shall not be less his Annual Salary as of the Effective Date. The frequency and manner of payment of the EMPLOYEE’S Annual Salary shall be in accordance with TBOP’s payroll practices from time to time in effect. Nothing herein shall be construed as precluding the EMPLOYEE from entering into any salary reduction or deferral plan or arrangement during the Term. The amounts set forth in the first sentence of this subparagraph (a) shall be pro-rated to the extent such period is less than a year.
(b) Incentive Compensation. During the Term, the EMPLOYEE shall be eligible to participate in all incentive plans, equity plans, and similar arrangements maintained by TBOP for its executive officers on a basis and at award levels consistent and commensurate with the EMPLOYEE’S position and duties hereunder.
(c) Employee Benefit Plans and Other Plans or Arrangements.
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The EMPLOYEE shall be eligible to participate in all Employee Benefit Plans of TBOP on the same basis as other executive officers of TBOP. In addition, the EMPLOYEE shall be eligible to participate in and enjoy any other plans and arrangements which provide for sick leave, vacation, sabbatical, or personal days, club memberships and dues, education payment or reimbursement, business-related seminars, and similar fringe benefits provided to or for the executive officers of TBOP from time to time.
(d) Expenses. During the Term, the EMPLOYEE shall be entitled to receive prompt reimbursement for all reasonable and customary expenses, including transportation expenses, incurred by him in performing services hereunder in accordance with the general policies and procedures established by TBOP.
5. Termination By Reason of Disability.
(a) In General. In the event the EMPLOYEE becomes unable to perform his duties on a full-time basis by reason of the occurrence of his Disability and, within 30 days after a Notice of Termination is given, he shall not have returned to the full-time performance of such duties, his employment may be terminated by TBOP or the Company, provided, however, that, if EMPLOYEE’S Disability occurs after EMPLOYEE delivers a Notice of Termination for Good Reason, EMPLOYEE shall nevertheless be absolutely entitled to receive all of the compensation and benefits provided in Section 9 hereof.
(b) Compensation and Benefits upon Expiration of Remaining Term. This Agreement shall terminate following the EMPLOYEE’S termination for Disability, provided, however, the EMPLOYEE shall be entitled to receive the compensation and benefits provided under the terms of any long-term disability plan of TBOP in effect on the Date of Termination.
6. Termination By Reason of Death. This Agreement shall terminate in the event of the EMPLOYEE’s death during the Term, provided, however, the EMPLOYEE’S beneficiary(ies) shall be entitled to such benefits as otherwise provided by TBOP as are effective on the date of his death, provided, however, that, if the EMPLOYEE dies after EMPLOYEE delivers a Notice of Termination for Good Reason, the EMPLOYEE’S estate shall nevertheless be absolutely entitled to receive all of the compensation and benefits provided in Section 9 hereof.
7. Termination by TBOP or the Company for Cause.
(a) In General. In the event TBOP or the Company terminates the EMPLOYEE’S employment for Cause, TBOP or the Company shall deliver a Notice of Termination to the EMPLOYEE which specifies a Date of Termination which, in the employer’s discretion, may be the same date as the Notice of Termination.
(b) Compensation. On and after the Date of Termination, EMPLOYEE shall have no further rights under this Agreement, except that at the end of the payroll period after the EMPLOYEE’S termination under Subparagraph (a), TBOP shall pay him, in one lump sum, his accrued but unpaid base compensation and vacation compensation earned through the Date of Termination.
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8. Termination by the EMPLOYEE without Good Reason.
(a) In General. In the event the EMPLOYEE terminates his employment without Good Reason, the EMPLOYEE shall deliver a Notice of Termination to TBOP and the Company which specifies a Date of Termination not less than 30 days following the date of such notice.
(b) Compensation. On and after the Date of Termination, the EMPLOYEE shall have no further rights under this Agreement, except that at the end of the payroll period after the EMPLOYEE’S termination under Subparagraph (a), TBOP shall pay him, in one lump sum, his accrued but unpaid base compensation and vacation time/paid time off earned through the Date of Termination.
9. Involuntary Termination without Disability or Cause or Voluntary Termination by the EMPLOYEE for Good Reason.
(a) In General. In the event TBOP or the Company terminates the EMPLOYEE’S employment for any reason other than Disability or Cause, TBOP or the Company shall deliver a Notice of Termination to the EMPLOYEE which specifies a Date of Termination not less than 30 days following the date of such notice. In the event that the EMPLOYEE intends to terminate his employment for Good Reason, then at the option of the EMPLOYEE, exercisable by him within ninety (90) days after the occurrence of the condition constituting Good Reason, the EMPLOYEE may resign from employment under this Agreement by delivering a Notice of Termination to TBOP, the Company or the successor to TBOP or the Company which specifies a Date of Termination not less than 30 days following the date of such notice, provided, however, that TBOP, Company or the successor to TBOP or the Company shall be given thirty (30) days from the day it receives the Notice of Termination to remedy such condition.
(b) Compensation and Benefits after Termination. In the event of the termination of EMPLOYEE’s employment under Subparagraph (a), the EMPLOYEE shall be entitled to receive the following payments and benefits.
(i) The EMPLOYEE shall receive a lump sum payment equal to one (1) times EMPLOYEE’S Annual Salary then in effect (two (2) times if the termination occurs within twenty-four (24) months of a Change in Control). A portion of the severance payment received in connection with a Change in Control which is classified as a payment of reasonable compensation for purposes of Section 280G of the Code shall be allocated to the restrictive covenants noted of Section 13.
(ii) In addition to the cash payment provided under subparagraph (b)(i) of this Section 9, the EMPLOYEE and his eligible dependents shall be entitled to continue to participate at the same aggregate benefit levels for eighteen (18) months and at no out-of- pocket or tax cost to the EMPLOYEE, in the medical benefit plan in which the EMPLOYEE was a participant immediately prior to the Date of Termination, to the extent permitted under the terms of such plans and applicable law. To the extent TBOP is unable to provide for continued participation in the medical benefit plan, it shall provide an equivalent benefit directly at no out- of-pocket or tax cost to the EMPLOYEE. For purposes of the preceding two sentences, TBOP shall be deemed to have provided a benefit at no tax cost to the EMPLOYEE if it pays an additional amount to the EMPLOYEE or on his behalf, with respect to those benefits which would otherwise be nontaxable to the EMPLOYEE.
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(c) Earlier Cessation of Medical Benefits. Notwithstanding the provisions of Subparagraph 9(b), TBOP shall not be required to provide, at its cost, the medical benefits covered by Subparagraph 9(b)(ii) after the later of (i) the attainment by the EMPLOYEE and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan document for benefit termination (assuming that he was employed until the normal retirement date, if any, specified in such document).
(d) Death during Remaining Period of Payment. In the event the EMPLOYEE dies during the period of payment following the Date of Termination without Disability or Cause and the EMPLOYEE is survived by his spouse, the compensation and benefits required to be paid and provided under Subparagraph (b) shall be unaffected by his death and shall be paid and provided to the EMPLOYEE’S spouse or on her behalf; provided that TBOP shall not be required to provided continued medical benefits with respect to her deceased husband; and provided further, that in no event shall TBOP be required to provide, at its cost, the medical benefits described in Subparagraph 9(b)(ii) to such spouse and her eligible dependents after the earlier of (x) her death, or (y) the later of (I) her attainment of age 65, or (II) the date specified in the relevant plan document for benefit termination (assuming that the EMPLOYEE was employed until the normal retirement date, if any, specified in the document).
10. Limitations on Payments. Notwithstanding anything in this Agreement to the contrary, in the event the payments and benefits payable hereunder to or on behalf of the EMPLOYEE (which the parties agree will not include any portion of payments allocated to the non-compete provisions of Section 13 which are classified as payments of reasonable compensation for purposes of Section 280G of the Code), when added to all other amounts and benefits payable to or on behalf of the EMPLOYEE, would result in the imposition of an excise tax under Section 4999 of the IRC, the amounts and benefits payable hereunder shall be reduced to such extent as may be necessary to avoid such imposition. All calculations required to be made under this subsection will be made by TBOP’s independent public accountants, subject to the right of the EMPLOYEE’S representative to review the same. The parties recognize that the actual implementation of the provisions of this subsection are complex and agree to deal with each other in good faith to resolve any questions or disagreements arising hereunder.
11. Withholding Taxes. All compensation and benefits provided for herein shall, to the extent required by law, be subject to federal, state, and local tax withholding.
12. Confidential Information. The EMPLOYEE agrees that during and subsequent to his employment with TBOP and the Company, he will not, at any time, communicate or disclose to any unauthorized person, without the written consent of TBOP and the Company, any proprietary or other confidential information concerning TBOP, the Company or any Subsidiary or affiliate thereof; provided, however, that the obligations under this paragraph shall not apply to the extent that such matters (a) are disclosed in circumstances where the EMPLOYEE is legally obligated to do so, or (b) become generally known to and available for use by the public otherwise than by his wrongful act or omission; and provided further, that he may disclose any knowledge of insurance, financial, legal and economic principles, concepts and ideas which are not solely and exclusively derived from the business plans and activities of TBOP and the Company.
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13. Covenants Not to Compete or to Solicit.
(a) Noncompetition. During the Term and for a period of 6 months after the Date of Termination (the “Noncompetition Period”), the EMPLOYEE shall not, without the written consent in writing of the Board of Directors , become an officer, employee, agent, partner, consultant, member, director, or a four and nine-tenths percent or greater shareholder or equity owner of any entity engaged in the banking or lending business within any county in which TBOP or the Company has a branch or loan production office. If at the time of the enforcement of this paragraph a court holds that the duration, scope, or area restrictions stated herein are unreasonable under the circumstances then existing and, thus, unenforceable, TBOP, the Company and the EMPLOYEE agree that the maximum duration, scope, or area reasonable under such circumstances shall be substituted for the stated duration, scope, or area.
(b) Nonsolicitation. During his employment and the Noncompetition Period, the EMPLOYEE shall not, whether on his own behalf or on behalf of any other individual or business entity, solicit, endeavor to entice away from TBOP, the Company, a Subsidiary or any affiliated company, or otherwise interfere with the relationship of TBOP, the Company, a Subsidiary, or any affiliated company with any person who is, or was within the then most recent 12 month period, an employee or associate thereof.
(c) Extension of Noncompetition Period. The Noncompetition Period shall be automatically extended by the length of time (if any) in which the EMPLOYEE is in violation of any of the terms of this Paragraph 13.
14. Additional Equitable Remedy. The EMPLOYEE acknowledges and agrees that TBOP’s remedy at law for a breach or a threatened breach of the provisions of Paragraphs 12 and 13 would be inadequate; and, in recognition of this fact, in the event of such a breach or threatened breach by him, it is agreed that TBOP shall be entitled to request equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, or any other equitable remedy which may then be available. Nothing in this paragraph shall be construed as prohibiting TBOP from pursuing any other remedy available under this Agreement for such a breach or threatened breach.
15. Legal Fees. TBOP shall reimburse the EMPLOYEE for all reasonable legal fees and expenses he may incur in seeking to obtain or enforce any right or benefit provided by this Agreement, but only with respect to such claim or claims upon which EMPLOYEE prevails. Such payments shall be made within fourteen (14) days after delivery of EMPLOYEE’s written request for payment accompanied with such evidence of fees and expenses incurred as TBOP may reasonably require.
16. Related Agreements. Except as may otherwise be provided herein, to the extent that any provision of any other agreement between TBOP , the Company and the EMPLOYEE shall limit, qualify, duplicate, or be inconsistent with any provision of this Agreement, the provision in this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.
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17. Exclusive Rights and Remedy. Except for any explicit rights and remedies the EMPLOYEE may have under any other contract, plan or arrangement with TBOP and the Company, the compensation and benefits payable hereunder and the remedy for enforcement thereof shall constitute his exclusive rights and remedy in the event of his termination of employment.
18. Director and Officer Liability Insurance; Indemnification. TBOP and the Company shall provide the EMPLOYEE (including his heirs, executors, and administrators) with the maximum coverage permitted under its directors’ and officers’ liability insurance policy, at TBOP’s expense, and shall indemnify him (and his heirs, executors, and administrators) as an employee and/or officer of TBOP and the Company to the fullest extent permitted under Federal, Pennsylvania and New Jersey law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been an employee and/or officer of TBOP, the Company or any Subsidiary or affiliated company (whether or not he continues to be such an officer at the time of incurring such expenses or liabilities). Such expenses and liabilities shall include, but not be limited to, judgments, court costs, and attorneys’ fees, and the costs of reasonable settlements.
19. Cooperation and Non-Disparagement. EMPLOYEE agrees that he shall not make any disparaging, negative or critical comments regarding TBOP, the Company or any Subsidiary or affiliated company either during his employment by TBOP or the Company, or thereafter. The EMPLOYEE agrees to cooperate fully with TBOP and the Company in connection with any claims, suits, charges or causes of action that have been brought, or may be brought in the future, against TBOP or the Company in which EMPLOYEE possesses information relevant to such claims, suits, charges or causes of action, which shall include, but not be limited to, making himself available, within reason, for interviews, depositions and testimony, as needed or requested by TBOP or the Company.
20. Notices. Any notice required or permitted under this Agreement shall be sufficient if it is in writing and shall be deemed given (i) at the time of personal delivery to the addressee, or (ii) at the time sent certified mail, with return receipt requested, addressed as follows:
| If to the EMPLOYEE: | The address provided in the personnel file of TBOP. | |||
| If to TBOP: | The Bank of Princeton 183 Bayard Lane Princeton, NJ 08540 Attention: Chair, Board of Directors | |||
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| If to the Company: | Princeton Bancorp, Inc. 183 Bayard Lane Princeton, NJ 08540 Attention: Chair, Board of Directors |
The name or address of any addressee may be changed at any time and from time to time by notice similarly given.
21. No Waiver. The failure by any party to this Agreement at any time or times hereafter to require strict performance by any other party of any of the provisions, terms, or conditions contained in this Agreement shall not waive, affect, or diminish any right of the first party at any time or times thereafter to demand strict performance therewith and with any other provision, term, or condition contained in this Agreement. Any actual waiver of a provision, term, or condition contained in this Agreement shall not constitute a waiver of any other provision, term, or condition herein, whether prior or subsequent to such actual waiver and whether of the same or a different type. The failure of TBOP or the Company to promptly terminate the EMPLOYEE’S employment for Cause or the EMPLOYEE to promptly terminate his employment for Good Reason shall not be construed as a waiver of the right of termination, and such right may be exercised at any time following the occurrence of the event giving rise to such right.
22. Survival. Notwithstanding the nominal termination of this Agreement and the EMPLOYEE’S employment hereunder, the provisions hereof which specify continuing obligations, compensation and benefits, and rights (including the otherwise applicable term hereof) shall remain in effect until such time as all such obligations are discharged, all such compensation and benefits are received, and no party or beneficiary has any remaining actual or contingent rights hereunder.
23. Severability. In the event any provision in this Agreement shall be held illegal or invalid for any reason, such illegal or invalid provision shall not affect the remaining provisions hereof, and this Agreement shall be construed, administered and enforced as though such illegal or invalid provision were not contained herein.
24. Binding Effect and Benefit. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of TBOP and the Company and the executors, personal representatives, surviving spouse, heirs, devisees, and legatees of the EMPLOYEE. TBOP or the Company may assign this Agreement in the event of a sale, merger, consolidation or transfer of all or substantially all of its business and assets.
25. Entire Agreement. This Agreement embodies the entire agreement among the parties with respect to the subject matter hereof, and it supersedes and replaces any prior written or oral agreements between the parties to this Agreement.
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26. Captions. The captions of the several paragraphs and subparagraphs of this Agreement have been inserted for convenience of reference only. They constitute no part of this Agreement and are not to be considered in the construction hereof.
27. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed one and the same instrument which may be sufficiently evidenced by any one counterpart.
28. Applicable Law. Except to the extent preempted by federal law, the provisions of this Agreement shall be construed, administered, and enforced in accordance with the domestic internal law of the State of New Jersey without reference to its laws regarding conflict of laws. Each party hereby agrees that the forum and venue for any legal or equitable action or proceeding arising out of, or in connection with, this Agreement will lie in the appropriate federal or state courts or arbitration proceeding in the State of New Jersey and specifically waives any and all objections to such jurisdiction and venue.
29. Regulatory Matters. The obligations of TBOP under this Agreement shall in all events be subject to any required limitations or restrictions imposed by or pursuant to the Federal Deposit Insurance Act as the same may be amended from time to time. For the avoidance of doubt, any payments made to EMPLOYEE pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.
30. Code Section 409A.
(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the EMPLOYEE’S separation from service within the meaning of Section 409A of the IRC, TBOP’s stock is publicly traded on an established securities market or otherwise and TBOP determines that the EMPLOYEE is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the IRC, then to the extent any payment or benefit that the EMPLOYEE becomes entitled to under this Agreement on account of the EMPLOYEE’S separation from service would be considered deferred compensation subject to the 20% additional tax imposed pursuant to Section 409A(a) of the IRC as a result of the application of Section 409A(a)(2)(B)(i) of the IRC, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six months and one day after the EMPLOYEE’S separation from service, or (ii) the EMPLOYEE’S death. The first installment payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which the date of separation from service occurs, from such date of separation from service until the payment. To the extent that the foregoing applies to the provision of any ongoing medical benefits to the EMPLOYEE that would not be required to be delayed if the premiums therefore were paid by the EMPLOYEE, the EMPLOYEE shall pay the full costs of premiums for such medical benefits during the six-month period and TBOP shall pay the EMPLOYEE an amount equal to the amount of such premiums paid by the EMPLOYEE during the six-month period within ten (10) days after the conclusion of such period.
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(b) Solely for purposes of Section 409A of the IRC, each installment payment of severance is considered a separate payment.
(c) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by TBOP or incurred by the EMPLOYEE during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the IRC, and to the extent that such payment or benefit is payable upon the EMPLOYEE’S termination of employment, then such payments or benefits shall be payable only upon the EMPLOYEE’S “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation § 1.409A-l(h).
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IN WITNESS WHEREOF, the parties have executed this Amended and Restated Agreement, or caused it to be executed, as of the Effective Date.
| /s/ George Rapp | ||
| GEORGE RAPP | ||
| THE BANK OF PRINCETON | ||
| By: | /s/ Richard Gillespie | |
| PRINCETON BANCORP, INC. | ||
| By: | /s/ Richard Gillespie | |
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GLOSSARY
“Board of Directors” or “Board” means collectively the boards of directors of TBOP and the Company.
“Cause” means (i) a documented repeated and willful failure by the EMPLOYEE to perform his duties, but only after written demand, (ii) his final conviction of a felony, (iii) conduct by him which constitutes moral turpitude which is directly and materially injurious to TBOP or any Subsidiary or affiliated company, including but not limited to the Company (iv) willful material violation of corporate policy, or (v) the issuance by the regulator of TBOP or any Subsidiary or affiliated company, including but not limited to the Company, of an unappealable order to the effect that he be permanently discharged.
For purposes of this definition, no act or failure to act on the part of the EMPLOYEE shall be considered “willful” unless done or omitted not in good faith and without reasonable belief that the action or omission was in the best interest of TBOP or any of their Subsidiaries or affiliated companies, including but not limited to the Company.
“Change in Control” means the occurrence of any of the following events:
(a) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more (the “CIC Percentage”) of the combined voting power of the Company’s then-outstanding securities; provided, however, that if such Person first obtains the approval of the Company board of directors to acquire the CIC Percentage, then no Change in Control shall be deemed to have occurred unless and until such Person obtains a CIC Percentage ownership of the combined voting power of the Company’s then-outstanding securities without having first obtained the approval of the Company board of directors; or
(b) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing greater than 50% of the combined voting power of the Company’s then-outstanding securities, whether or not the Company board of directors shall have first given its approval to such acquisition; or
(c) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company board of directors (the “Incumbent Directors”) cease for any reason to constitute a majority of the Company board of directors; provided, however, that any new directors whose election, nomination for election by the Company’s stockholders or appointment was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the period or whose election, nomination or appointment was previously so approved shall be considered Incumbent Directors; and further provided, however, that no individual shall be considered an Incumbent Director if such individual’s election, nomination or appointment to the Company board of directors was in connection with an actual or threatened “election contest” (as described in Rule 14a-12(c) under the Exchange Act) with respect to the election or removal of directors (an “Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Company board of directors (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any such Election Contest or Proxy Contest; or
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(d) the consummation of a merger or consolidation of the Company with any other corporation; provided, however, a Change in Control shall not be deemed to have occurred: (i) if such merger or consolidation would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) either directly or indirectly more than 50% of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion as their ownership immediately prior to the merger or consolidation, or (ii) if the corporate existence of the Company is not affected and following the merger or consolidation, the directors of the Company prior to such merger or consolidation constitute at least a majority of the board of directors of the Company or the entity that directly or indirectly controls the Company after such merger or consolidation; or
(e) the sale or disposition by the Company of all or substantially all the Company’s assets provided, however, that in no event shall a reorganization of the Company or TBOP solely within its corporate structure constitute a Change in Control.
“Date of Termination” means:
(a) if the EMPLOYEE’S employment is terminated for Disability, 30 days after the Notice of Termination is given (provided that he shall not have returned to the performance of his duties on a full-time basis during such 30-day period);
(b) if the EMPLOYEE’S employment terminates by reason of his death, the date of his death;
(c) if the EMPLOYEE’S employment is terminated involuntarily for Cause, the date of termination specified in the Notice of Termination and determined in accordance with Paragraph 8(a);
(d) if the EMPLOYEE’S employment is terminated by him, the date of termination specified in the Notice of Termination and determined in accordance with Paragraph 9(a); provided, however that the Date of Termination shall mean the actual date of termination in the event the parties mutually agree to a date other than that described above.
“Disability” has the meaning ascribed to the term “permanent and total disability” in Section 22(e)(3) of the IRC.
“Employee Benefit Plan” has the meaning ascribed to such term in Section 3(3) of ERISA.
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as the same may be amended from time to time.
“Good Reason” the EMPLOYEE’S separation from service within two (2) years following the initial existence of one or more of the following conditions arising without the consent of the EMPLOYEE:
(a) A material diminution in the EMPLOYEE’S base compensation;
(b) A material diminution in the EMPLOYEE’S authority, duties, or responsibilities;
(c) A material diminution in the authority, duties, or responsibilities of the supervisor to whom the EMPLOYEE is required to report, including a requirement that the EMPLOYEE report to a corporate officer or employee instead of reporting directly to the board of directors of a corporation (or similar governing body with respect to an entity other than a corporation); and
(d) A material diminution in the budget over which the EMPLOYEE retains authority; or
(e) A relocation of the EMPLOYEE’S principal office to a location more than 50 miles away from the location at which the EMPLOYEE must perform the services.
“Incumbent Board” means the Board of Directors of TBOP as constituted at any relevant time.
“IRC” or the “Code” means the Internal Revenue Code of 1986, as amended and as the same may be amended from time to time.
“Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the EMPLOYEE’S employment under the provision so indicated, and (iii) gives the required advance notice of termination.
“Person” has the same meaning as such term has for purposes of Sections 13(d) and 14(d) of the 1934 Act.
“Subsidiary” means any business entity of which a majority of its voting power or its equity securities or equity interests is owned, directly or indirectly by TBOP.
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Exhibit 10.4
AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”) was originally entered into on the 24th day of June, 2021, by and between The Bank of Princeton (“Employer” or “TBoP”), a banking corporation organized under the laws of the state of New Jersey with its principal office at 183 Bayard Lane, Princeton, NJ 08540; and Jeffrey T. Hanuscin, (“Employee”). This Agreement is hereby amended and restated effective June 21, 2023 (“Effective Date”) to add Princeton Bancorp, Inc., parent bank holding company of TBoP (the “Company”), as a party to this Agreement. As of the Effective Date the term “Employer” shall also include the Company.
BACKGROUND
WHEREAS, Employee, as of the Effective Date, is employed by Employer; and
WHEREAS, to continue to encourage Employee’s dedication to his assigned duties in the face of potential distractions arising from the prospect of a Change in Control, the Employer wishes to provide certain payments in the event Employee is terminated involuntarily without Cause or voluntarily for Good Reason within twelve (12) months of a Change in Control.
NOW, THEREFORE, for good and valuable consideration, which the parties to this Agreement acknowledge to be legally sufficient, Employer and Employee, intending to be legally bound, agree as follows:
1. Definitions.
(a) Cause. For purposes of this Agreement, “Cause”, with respect to the termination by Employer of Employee’s employment shall mean (i) the willful and continued failure by Employee to perform his or her duties for Employer under this Agreement after at least one warning in writing from the Board or its designee identifying specifically any such failure; (ii) willful misconduct of any type by Employee, including, but not limited to, the disclosure or improper use of Employer’s confidential information or proprietary data, which causes or may cause material injury to Employer, as specified in a written notice to Employee from the Board or its designee; (iii) Employee’s conviction of, or plea of guilty or nolo contendre to, a crime (other than a traffic violation); or (iv) Employee’s material violation of any published policy of Employer including, but not limited to, those policies which pertain to the use, possession, or being under the influence, of illegal drugs, alcohol, or any prescription drug which was not prescribed to Employee. No act or failure to act on the part of Employee shall be considered to have been willful for purposes of clause (i) or (ii) of this Section 1(a) unless done, or omitted to be done, by Employee without a reasonable belief that the action or omission was in the best interest of Employer.
(b) Change in Control: shall mean the occurrence of any of the following events:
(i) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more (the “CIC Percentage”) of the combined voting power of the Company’s then-outstanding securities; provided, however, that if such Person first obtains the approval of the Company board of directors to acquire the CIC Percentage, then no Change in Control shall be deemed to have occurred unless and until such Person obtains a CIC Percentage ownership of the combined voting power of the Company’s then-outstanding securities without having first obtained the approval of the Company board of directors; or
(ii) if any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing greater than 50% of the combined voting power of the Company’s then-outstanding securities, whether or not the Company board of directors shall have first given its approval to such acquisition; or
(iii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Company board of directors (the “Incumbent Directors”) cease for any reason to constitute a majority of the Company board of directors; provided, however, that any new directors whose election, nomination for election by the Company’s stockholders or appointment was approved by a vote of at least one-half of the directors then still in office who either were directors at the beginning of the period or whose election, nomination or appointment was previously so approved shall be considered Incumbent Directors; and further provided, however, that no individual shall be considered an Incumbent Director if such individual’s election, nomination or appointment to the Company board of directors was in connection with an actual or threatened “election contest” (as described in Rule 14a-12(c) under the Exchange Act) with respect to the election or removal of directors (an “Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Company board of directors (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any such Election Contest or Proxy Contest; or
(iv) the consummation of a merger or consolidation of the Company with any other corporation; provided, however, a Change in Control shall not be deemed to have occurred: (i) if such merger or consolidation would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) either directly or indirectly more than 50% of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation in substantially the same proportion as their ownership immediately prior to the merger or consolidation, or (ii) if the corporate existence of the Company is not affected and following the merger or consolidation, the directors of the Company prior to such merger or consolidation constitute at least a majority of the board of directors of the Company or the entity that directly or indirectly controls the Company after such merger or consolidation; or
(v) the sale or disposition by the Company of all or substantially all the Company’s assets provided, however, that in no event shall a reorganization of the Company or TBOP solely within its corporate structure constitute a Change in Control.
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(c) Good Reason: shall mean the occurrence of any of the following without the Employee’s advance written consent —
(i) a material diminution of the Employee’s base compensation,
(ii) a material diminution of the Employee’s authority, duties, or responsibilities,
(iii) a change by more than fifty (50) miles in the geographic location at which the Employee must perform services.
provided, however, that within ninety (90) days after the initial existence of such event, the Employer shall be given notice and an opportunity, not less than thirty (30) days, to effectuate a cure for such asserted “Good Reason” by the Employee. The Employee’s resignation hereunder for Good Reason shall not occur later than sixty (60) days following the initial date on which the event the Employee claims constitutes Good Reason occurred.
2. Termination after a Change in Control.
(a) Cash benefit. Notwithstanding any other provisions in this Agreement, if the Employee’s employment terminates involuntarily but without Cause (as defined in Section 1) or voluntarily but with Good Reason (as defined in Section 1), in either case within 12 months after a Change in Control, the Bank shall make a lump-sum cash payment equal to one (1) times the Employee’s base salary in effect at the time of the Change in Control or if higher his base salary at the time the Employee terminates employment following a Change in Control. Unless delayed under paragraph (b) below, the payment required under this Section 2 shall be made within five (5) business days after the Employee’s termination of employment.
(b) Payment of the cash benefit. If the Employee is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) at the time his employment terminates and the cash severance benefit under this Section is considered deferred compensation under Section 409A of the Code, and finally if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, payment of the benefit under this Section 2 shall be delayed and shall be made to the Employee in a single lump sum without interest on the first business day of the seventh (7th) month after the month in which the Employee’s employment terminates.
3. Non-Disclosure of Confidential Information.
(a) Non-Disclosure of Confidential Information. Except in the course of his employment with Employer and in pursuit of the business of Employer, Employee shall, at all times during and following the term of this Agreement abide by all policies of Employer which prohibit or control the disclosure or use for any purpose of any confidential information or proprietary data of Employer or any of its subsidiaries or affiliates. Employee agrees that, among other things and without limiting the definition of confidential information or proprietary data, all information concerning the identity of, and Employer’s relationships with, its customers, borrowers, and prospects is confidential and proprietary information.
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(b) Specific Performance. Employee agrees that Employer does not have an adequate remedy at law for the breach of this section reiterating Employee’s obligation to comply with all policies of Employer which prohibit or control the disclosure or use for any purpose of any confidential information or proprietary data of Employer or any of its subsidiaries or affiliates, and agrees that he shall be subject to injunctive relief and equitable remedies as a result of any breach of this section. The invalidity or unenforceability of any provision of this Agreement shall not affect the force and effect of the remaining valid portions.
(c) Survival. This Section 3 shall survive the termination of the Employee’s employment hereunder, the expiration of this Agreement.
4. Term and Effect Prior to Change in Control.
(a) Except as otherwise provided herein, the term of this Agreement shall include: (i) the period commencing on the Effective Date and ending December 31, 2023, plus (ii) any and all extensions of the term made pursuant to paragraphs (b) and (c) of this Section 4 (the “Term”).
(b) Beginning on December 31, 2023, and on each December 31st thereafter, the term of this Agreement shall be extended by one (1) year, so that, at the time of such extension, the term of the Agreement shall be for a period of two (2) years. Notwithstanding the foregoing, TBoP, the Company or the Employee may elect to terminate the automatic annual extension of the Term in this paragraph (b) by giving written notice of such election. Any notice given hereunder shall be effective as of the date such notice of nonrenewal is given and the Term shall be fixed at that time.
(c) Notwithstanding paragraph (b) of this Section 4, in the event of a Change in Control, the Term shall not end before the first anniversary of such Change of Control; provided, however, this sentence shall apply only to the first Change of Control to occur while this Agreement is in effect.
(d) Nothing in this Agreement shall mandate or prohibit a continuation of the Employee’s employment following the expiration of the Term upon such terms and conditions as TBoP and the Employee may mutually agree.
(e) This Agreement shall not, in any respect, affect any rights of the Employer or the Employee prior to a Change in Control or any rights of the Employee granted in any other agreement, plan or arrangements. The rights, duties and benefits provided hereunder shall only become effective upon the occurrence of a Change in Control, as defined in this Agreement. Despite anything in this Agreement to the contrary, the Employee shall be entitled to no benefits under this Agreement if the Employee’s employment terminates with Cause, if the Employee dies while actively employed by the Employer.
5. Section 280G. Notwithstanding any other provision of this Agreement to the contrary, if Employer determines in good faith that any payment or benefit received or to be received by Employee pursuant to this Agreement, or otherwise (with all such payments and benefits, including, without limitation, salary and bonus payments, being defined as “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code by reason of being considered to be “contingent on a change in ownership or control” of Employer within the
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meaning of Section 280G of the Code, then such Total Payments shall be reduced in the manner reasonably determined by Employer, in its sole discretion, to the extent necessary so that the Total Payments will be one dollar ($1.00) less than the amount which is three times Employee’s “base amount” (as defined in Section 280G(b)(3) of the Code).
6. Release in Favor of Employer as a Condition Precedent. As a condition precedent to the actual payment by Employer to Employee of any amount otherwise payable under Section 2 of this Agreement, Employee must execute; deliver and, if applicable, not revoke a full release in favor of Employer and its affiliates and subsidiaries, and their respective officers and directors, which release shall (i) be in form and content which is fully compliant with all of those provisions of law to which the release pertains, and reasonably satisfactory to counsel to Employer; (ii) cover all actual or potential claims arising from Employee’s employment by Employer and the termination of such employment; and (iii) be prepared, reviewed and executed in a manner which is consistent with all requirements of law, including if applicable the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act. Such release shall not affect (a) vested rights or interests; (b) claims arising under the release agreement, itself; or (c) claims not capable of release as a matter of law, including without limitation (i) workers compensation claims and (ii) claims for unemployment benefits.
7. Non-Solicitation. Employee agrees that for a period of six (6) months following his termination of employment he shall not (i) initiate contact so as to, or actually, solicit, induce, entice or persuade any actual, prospective or potential customer, client, or borrower of Employer to modify its, his relationship with Employer in any manner (including by termination) which is in any respect detrimental to Employer, or alter in any manner which is detrimental to Employer (including by termination) its, his or her course of dealing with Employer in anticipation of the establishment or expansion of a relationship with Employer, or (ii) solicit, entice or induce any person who, at any time during the one year period through such employment termination date was, or at any time during the period of six (6) months after such date is, either an employee of Employer in a senior managerial, operational or lending capacity, or a highly skilled employee with access to and responsibility for any confidential information, to become employed or engaged by Employee or any person, firm, company or association in which Employee has an interest; approach any such person for any such purpose; or authorize or knowingly approve the taking of such actions by any other person or entity. Employee acknowledges that the terms and conditions of this restrictive covenant are reasonable and necessary to protect Employer, and that Employer’s tender of performance under this Agreement is fair, adequate and valid consideration in exchange for his promises and performance under this Section 7. Employee further acknowledges that his or her knowledge, skills and abilities are sufficient to permit him or her to earn a satisfactory livelihood without violating the provisions of this Section 7. Employee agrees that, should Employer reasonably conclude that Employee has failed to fully comply with all of the terms of this Section 7, Employer may apply to a court of competent jurisdiction for such equitable relief as Employer believes to be necessary and effective, and may pursue a claim against Employee for damages. Employee further agrees that Employee shall reimburse Employer for all legal fees incurred by Employer in (i) applying for and securing such equitable relief as is granted under the preceding sentence, and (ii) asserting and pursuing a claim for damages under the preceding sentence which is adjudicated wholly or partially in favor of Employer.
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8. Severance Compensation and Benefits not in Derogation of Other Benefits. Subject only to those particular terms of this Agreement to the contrary, the payment or obligation to pay any monies, or the granting of any benefits, rights or privileges to Employee as provided in this Agreement shall not be in lieu or derogation of the rights and privileges that Employee now has or will have under any plans or programs of Employer including, but not limited to, any stock option plan, equity compensation plan, qualified retirement plan, 401(k) plan, or supplemental Employee retirement plan maintained by Employer.
9. Miscellaneous.
(a) General. This Agreement shall be the joint and several obligation of Employer and any acquiring entity which assumes Employer’s obligations under this Agreement. The terms of this Agreement shall be governed by, and interpreted and construed in accordance with the provisions of, the laws of New Jersey and, to the extent applicable, Federal and Pennsylvania law. Except as specifically set forth in this Agreement, this Agreement supersedes all prior agreements and understandings with respect to the matters covered hereby. The amendment or termination of this Agreement may be made only in a writing executed by Employer and Employee, and no amendment or termination of this Agreement shall be effective unless and until made in such a writing. This Agreement shall be binding to the extent of its applicability upon any successor (whether direct or indirect, by purchase, merge, consolidation, liquidation or otherwise) to the business, or all or substantially all of the assets of Employer. This Agreement is personal to the Employee, and the Employee may not assign any of his rights or duties hereunder. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. Employer shall, as part of any Change in Control involving an acquiring entity or successor to Employer, obtain an enforceable assumption in writing by (i) the entity which is the acquiring entity or successor to Employer in the Change in Control and (ii) if the acquiring entity or successor to Employer is a bank, the holding company parent of the acquiring entity or successor, of this Agreement and the obligations of Employer under this Agreement, and shall provide a copy of such assumption to the Employee prior to, or contemporaneous with, any Change in Control.
(b) Section 409A. Notwithstanding anything herein to the contrary, (i) if at the time of Employee’s termination of employment with Employer, Employee is a “specified employee” as defined in Section 409A of the Internal Revenue Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then Employer will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee) until the date which is six months following the termination of Employee’s employment with Employer (or the earliest date which is permitted under Section 409A of the Code), and (ii) if any other payments of money or other benefits due to Employee under this Agreement could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant
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under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner which is determined by the Employer in consultation with Employer’s professional advisers not to cause such an accelerated or additional tax. In the event that payments under this Agreement are deferred pursuant to this Section 9(b) in order to prevent any accelerated or additional tax under Section 409A of the Code, then such payments shall be paid at the time specified in this Section 9(b) without any interest. Employer shall consult with Employee in good faith regarding the implementation of this Section 9(b), PROVIDED, HOWEVER, that none of Employer, its directors, its employees or its advisors shall have any liability to Employee with respect to this paragraph (b).
(c) Regulatory Limitations. In no event shall the Employer be obligated to make any payment pursuant to this Agreement that is prohibited by Section 18(k) of the Federal Deposit Insurance Act (codified at 12 U.S.C. § 1828(k)), 12 C.F.R. Part 359, or any other applicable law.
10. This Agreement Is Not an Employment Contract. The parties hereto acknowledge and agree that (x) this Agreement is not a management or employment agreement and (y) nothing in this Agreement shall give the Employee any rights or impose any obligations to continued employment by the Employer or any subsidiary or successor of the Employer.
11. Withholding of Taxes. The Employer may withhold from any benefits payable under this Agreement all Federal, state, local or other taxes as may be required by law, governmental regulation, or ruling.
12. Captions and Counterparts. The headings and subheadings in this Agreement are included solely for convenience and shall not affect the interpretation of this Agreement. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same agreement.
13. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
IN WITNESS WHEREOF, Employer caused this Amended and Restated Change in Control Agreement to be signed by its duly authorized representative pursuant to the authority of its Board of Directors, and Employee has personally executed this Agreement, all as of Effective Date.
| /s/ Jeffrey T. Hanuscin |
| Jeffrey T. Hanuscin |
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| THE BANK OF PRINCETON | ||
| By: | /s/ Richard Gillespie | |
| PRINCETON BANCORP, INC. | ||
| By: | /s/ Richard Gillespie | |
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Exhibit 31.1
RULE 13A-14(a) CERTIFICATION
OF THE PRINCIPAL EXECUTIVE OFFICER
I, Edward Dietzler, Chief Executive Officer and President of Princeton Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Princeton Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 14, 2023
| /s/ Edward Dietzler |
| Edward Dietzler |
| Chief Executive Officer and President |
| (Principal Executive Officer) |
Exhibit 31.2
RULE 13A-14(a) CERTIFICATION
OF THE PRINCIPAL FINANCIAL OFFICER
I, George Rapp, Executive Vice President and Chief Financial Officer of Princeton Bancorp, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Princeton Bancorp, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: August 14, 2023 | /s/ George Rapp | |||||
| George Rapp | ||||||
| Executive Vice President and Chief Financial Officer | ||||||
| (Principal Financial and Accounting Officer) |
Exhibit 32
SECTION 1350 CERTIFICATIONS
In connection with the Quarterly Report of Princeton Bancorp, Inc. on Form 10-Q for the period ended June 30, 2023 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Princeton Bancorp, Inc.
| /s/ Edward Dietzler |
| Edward Dietzler Chief Executive Officer and President (Principal Executive Officer) |
| /s/ George Rapp |
| George Rapp Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
Date: August 14, 2023