Princeton Bancorp, Inc 10-Q for FY2024 Q2
Princeton Bancorp, Inc. (BPRN)
About this 10-Q
Princeton Bancorp, Inc filed this 10-Q on August 12, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).
Headline figures
Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $5.13M
- down 24.5% from net income of $6.79M a year earlier
- Diluted EPS
- $0.80
- down 25.2% from $1.07 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.) |
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
2
Table of Contents
June 30, 2024 |
December 31, 2023 |
|||||||
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 fees and costs |
||||||||
Less: allowance for credit losses |
( |
) | ( |
) | ||||
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 |
||||||||
Operating lease right-of-use |
||||||||
Equity method investments |
||||||||
Other assets |
||||||||
TOTAL ASSETS |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
LIABILITIES |
||||||||
Deposits: |
||||||||
Non-interest-bearing |
$ | $ | ||||||
Interest-bearing |
||||||||
Total deposits |
||||||||
Accrued interest payable |
||||||||
Operating lease liability |
||||||||
Other liabilities |
||||||||
TOTAL LIABILITIES |
||||||||
STOCKHOLDERS’ EQUITY: |
||||||||
Common stock, |
||||||||
Paid-in capital |
||||||||
Treasury stock, at cost of |
( |
) | ||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
TOTAL STOCKHOLDERS’ EQUITY |
||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | $ | ||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
INTEREST AND DIVIDEND INCOME |
||||||||||||||||
Loans receivable, including fees |
$ | $ | $ | $ | ||||||||||||
Securities available-for-sale: |
||||||||||||||||
Taxable |
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Tax-exempt |
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Securities held-to-maturity |
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Other interest and dividend income |
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TOTAL INTEREST AND DIVIDEND INCOME |
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INTEREST EXPENSE |
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Deposits |
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Borrowings |
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TOTAL INTEREST EXPENSE |
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NET INTEREST INCOME |
||||||||||||||||
Provision for (reversal of) credit losses |
( |
) | ||||||||||||||
NET INTEREST INCOME AFTER PROVISION FOR (REVERSAL OF) CREDIT LOSSES |
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NON-INTEREST INCOME |
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Income from bank-owned life insurance |
||||||||||||||||
Fees and service charges |
||||||||||||||||
Loan fees, including preypayment penalties |
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Gain on bargain purchase |
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Other |
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TOTAL NON-INTEREST INCOME |
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NON-INTEREST EXPENSE |
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Salaries and employee benefits |
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Occupancy and equipment |
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Professional fees |
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Data processing and communications |
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Federal deposit insurance |
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Advertising and promotion |
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Office expense |
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Other real estate expenses |
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Core deposit intangible |
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Acquisition-related expenses |
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Other |
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TOTAL NON-INTEREST EXPENSE |
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INCOME BEFORE INCOME TAX EXPENSE |
||||||||||||||||
INCOME TAX EXPENSE |
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NET INCOME |
$ | $ | $ | $ | ||||||||||||
Earnings per common share-basic |
$ | $ | $ | $ | ||||||||||||
Earnings per common share-diluted |
$ | $ | $ | $ | ||||||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| NET INCOME |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive income loss |
||||||||||||||||
| Unrealized losses arising during period on securities available-for-sale |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Net unrealized loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Tax effect |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total other comprehensive loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| |
|
|
|
|
|
|
|
|||||||||
| COMPREHENSIVE INCOME |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
Three Months Ended June 30, 2024 and 2023 |
Common Stock |
Paid-in Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total |
||||||||||||||||||
Balance, April 1, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | — | |||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Balance, April 1, 2024 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Treasury stock repurchases ( |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||
Stock options exercised ( |
— | — | — | |||||||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | — | |||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2024 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Six Months Ended June 30, 2024 and 2023 |
Common stock |
Paid-in Capital |
Treasury Stock |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total |
||||||||||||||||||
Balance, January 1, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Change in accounting principle |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Formation of Princeton Bancorp, Inc. |
( |
) | — | — | — | |||||||||||||||||||
Stock options exercised ( |
— | — | — | |||||||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | — | |||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Balance, January 1, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||
Treasury stock repurchases ( |
— | — | ( |
) | — | ( |
) | |||||||||||||||||
Stock options exercised ( |
— | — | — | |||||||||||||||||||||
Share redemption for tax withholding on restricted stock vesting |
— | ( |
) | — | — | — | ( |
) | ||||||||||||||||
Dividends declared $ |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Dividend reinvestment plan ( |
— | ( |
) | — | — | |||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | ||||||||||||||||||||
Balance, June 30, 2024 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||
Six Months Ended June 30, |
||||||||
2024 |
2023 |
|||||||
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 |
( |
) | ( |
) | ||||
Increase in cash surrender value of bank-owned life insurance |
( |
) | ( |
) | ||||
Deferred income tax |
( |
) | ||||||
Amortization of core deposit intangible |
||||||||
Bargain purchase gain |
( |
) | ||||||
(Increase) 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 and maturities on securities available-for-sale |
||||||||
Maturities, calls and principal repayments of securities held-to-maturity |
||||||||
Net (increase) decrease in loans |
( |
) | ||||||
Cash paid for acquisition |
( |
) | ||||||
Cash received from acquisition |
||||||||
Purchases of premises and equipment |
( |
) | ( |
) | ||||
Redemption (purchases) of restricted bank stock |
( |
) | ||||||
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES |
( |
) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Net increase in deposits |
||||||||
Proceeds from overnight borrowings |
( |
) | ||||||
Cash dividends |
( |
) | ( |
) | ||||
Share redemption for tax witholding on restricted stock vesting |
( |
) | ||||||
Purchase of treasury stock |
( |
) | ||||||
Proceeds from exercise of stock options |
||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
||||||||
NET INCREASE 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 |
$ | $ | ||||||
Net assets acquired from Noah Bank |
$ | $ | ||||||
Net liabilities assumed from Noah Bank |
$ | $ | ||||||
Three months ended June 30, |
||||||||
2024 |
2023 |
|||||||
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, |
||||||||
2024 |
2023 |
|||||||
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, |
||||||||||||||||
2024 |
2023 |
|||||||||||||||
Options |
Weighted Ave Exercise Price |
Options |
Weighted Ave Exercise Price |
|||||||||||||
Options to purchase |
$ | $ | ||||||||||||||
Anti-dilutive |
$ | $ | ||||||||||||||
Six months ended June 30, |
||||||||||||||||
2024 |
2023 |
|||||||||||||||
Options |
Weighted Ave Exercise Price |
Options |
Weighted Ave Exercise Price |
|||||||||||||
Options to purchase |
$ | $ | ||||||||||||||
Anti-dilutive |
$ | |||||||||||||||
June 30, 2024 |
||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
| (In thousands) | ||||||||||||||||
Available -for-sale |
||||||||||||||||
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 |
( |
) | ||||||||||||||
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
December 31, 2023 |
||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
| (In thousands) | ||||||||||||||||
Available -for-sale |
||||||||||||||||
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 |
( |
) | ||||||||||||||
Total |
$ | $ | $ | ( |
) | $ | ||||||||||
Less than 12 Months |
More than 12 Months |
Total |
||||||||||||||||||||||
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
June 30, 2024 |
||||||||||||||||||||||||
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 |
( |
) | ( |
) | ||||||||||||||||||||
Total |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
Less than 12 Months |
More than 12 Months |
Total |
||||||||||||||||||||||
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
December 31, 2023 |
||||||||||||||||||||||||
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 |
( |
) | ( |
) | ||||||||||||||||||||
| $ | |
$ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
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 |
||||||||
| $ | $ | |||||||
June 30, 2024 |
December 31, 2023 |
|||||||
| (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, 2024 |
December 31, 2023 |
|||||||
| (In thousands) | ||||||||
| Allowance for credit losses - loans |
$ | ( |
) | $ | ( |
) | ||
| Allowance for credit losses - off balance sheet |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| $ | ( |
) | $ | ( |
) | |||
| |
|
|
|
|||||
June 30, 2024 |
December 31, 2023 |
|||||||||||||||
With a Related Allowance |
Without a Related Allowance |
With a Related Allowance |
Without a Related Allowance |
|||||||||||||
| (In thousands) | ||||||||||||||||
| Commercial real estate |
$ | $ | $ | $ | ||||||||||||
| Commercial and industrial |
$ | |||||||||||||||
| Construction |
||||||||||||||||
| Residential first-lien mortgage |
||||||||||||||||
| Home equity/consumer |
||||||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
| Total nonaccrual loans |
$ | $ | $ | $ | ||||||||||||
| |
|
|
|
|
|
|
|
|||||||||
30-59 Days Past Due |
60-89 Days Past Due |
>90 Days Past Due |
Total Past Due |
Current |
Total Loans Receivable |
Loans Receivable >90 Days and Accruing |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
| Commercial real estate |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Commercial and industrial |
||||||||||||||||||||||||||||
| Construction |
||||||||||||||||||||||||||||
| Residential first-lien mortgage |
||||||||||||||||||||||||||||
| Home equity/consumer |
||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
30-59 Days Past Due |
60-89 Days Past Due |
>90 Days Past Due |
Total Past Due |
Current |
Total Loans Receivable |
Loans Receivable >90 Days and Accruing |
||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||||
Commercial real estate |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Commercial and industrial |
||||||||||||||||||||||||||||
Construction |
||||||||||||||||||||||||||||
Residential first-lien mortgage |
||||||||||||||||||||||||||||
Home equity/consumer |
||||||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Revolving Loans |
Total | |||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
Commercial real estate |
||||||||||||||||||||||||||||||||
Pass |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total commercial real estate |
||||||||||||||||||||||||||||||||
Current period gross charge-offs |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Commercial and industrial |
||||||||||||||||||||||||||||||||
Pass |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total commercial and industrial |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
Current period gross charge-offs |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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 |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Total |
||||||||||||||||||||||||||||||||
Pass |
||||||||||||||||||||||||||||||||
Special mention |
||||||||||||||||||||||||||||||||
Substandard |
||||||||||||||||||||||||||||||||
Total loans |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving Loans |
Total | |||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Commercial real estate |
||||||||||||||||||||||||||||||||
| Pass |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Special mention |
||||||||||||||||||||||||||||||||
| Substandard |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total commercial real estate |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Current period gross charge-offs |
||||||||||||||||||||||||||||||||
| Commercial and industrial |
||||||||||||||||||||||||||||||||
| Pass |
||||||||||||||||||||||||||||||||
| Special mention |
||||||||||||||||||||||||||||||||
| Substandard |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total commercial and industrial |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Current period gross charge-offs |
||||||||||||||||||||||||||||||||
| Construction |
||||||||||||||||||||||||||||||||
| Pass |
||||||||||||||||||||||||||||||||
| Special mention |
||||||||||||||||||||||||||||||||
| Substandard |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total construction |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Current period gross charge-offs |
||||||||||||||||||||||||||||||||
| Residential first-lien mortgage |
||||||||||||||||||||||||||||||||
| Performing |
||||||||||||||||||||||||||||||||
| Nonperforming |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total residential first-lien mortgage |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Current period gross charge-offs |
||||||||||||||||||||||||||||||||
| Home equity/consumer |
||||||||||||||||||||||||||||||||
| Performing |
||||||||||||||||||||||||||||||||
| Nonperforming |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total home equity/consumer |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
||||||||||||||||||||||||||||||||
| Pass/performing |
||||||||||||||||||||||||||||||||
| Special mention |
||||||||||||||||||||||||||||||||
| Substandard /nonperforming |
||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total loans |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ consumer |
Total |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||
| Beginning balance |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Provision (reversal) 1 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Charge-offs |
( |
) | ( |
) | ||||||||||||||||||||
| Recoveries |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 1 | The reversal of credit losses on the Consolidated Statement of Income is $ |
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ consumer |
Total |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
| Allowance for credit losses: |
||||||||||||||||||||||||
| Beginning balance |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Provision (reversal) 1 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
| Charge-offs |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Recoveries |
||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1 |
The provision for credit losses on the Consolidated Statement of Income is $ |
Commercial real estate |
Commercial and industrial |
Construction |
Residential first-lien mortgage |
Home equity/ 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 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
1 |
The provision for credit losses on the Consolidated Statement of Income is $ non-PCD loans acquired, a $ |
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 |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
1 |
The provision for credit losses on the Consolidated Statement of Income is $ non-PCD loans acquired, a $ |
June 30, 2024 |
December 31, 2023 |
|||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
Demand, non-interest-bearing checking |
$ | % | $ | % | ||||||||||||
Demand, interest-bearing checking |
% | % | ||||||||||||||
Savings |
% | % | ||||||||||||||
Money market |
% | % | ||||||||||||||
Time deposits, $250,000 and over |
% | % | ||||||||||||||
Time deposits, other |
% | % | ||||||||||||||
| $ | % | $ | % | |||||||||||||
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, 2024 |
||||||||||||
| (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 |
||||||||||||||||
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 December 31, 2023 |
||||||||||||
| (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 |
||||||||||||||||
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 December 31 2023 |
||||||||||||
| (In thousands) | ||||||||||||||||
Collateral dependent loan |
$ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
Description |
December 31, 2023 |
Valuation Technique |
Unobservable Input |
Range (Weighted Average) |
||||||||
| (Dollars in thousands) | ||||||||||||
| Discount | % | |||||||||||
Collateral dependent loan |
$ | Collateral 1 |
adjustment | ( |
%) | |||||||
1 |
Value based on third party offer to purchase note from the Bank. |
June 30, 2024 |
||||||||||||||||||||
Carrying Amount |
Estimated 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 |
— | — | ||||||||||||||||||
Equity method investments |
— | |||||||||||||||||||
Mortgage servicing rights |
— | — | ||||||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Deposits |
$ | $ | — | $ | $ | — | ||||||||||||||
Accrued interest payable |
— | — | ||||||||||||||||||
December 31, 2023 |
||||||||||||||||||||
Carrying Amount |
Estimated 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 |
— | — | ||||||||||||||||||
Equity method investments |
— | |||||||||||||||||||
Mortgage servicing rights |
— | — | ||||||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Deposits |
$ | $ | $ | — | $ | $ | — | |||||||||||||
Accrued interest payable |
— | — | ||||||||||||||||||
Statement of Financial Condition Location |
Six Months Ended June 30, 2024 |
Twelve Months Ended December 31, 2023 |
||||||||
| (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 June 30, |
Six Months Ended June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
| (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 |
$ | $ | $ | $ | ||||||||||||
Goodwill |
Core Deposit Intangible |
|||||||
| (In thousands) | ||||||||
Balance at December 31, 2023 |
$ | $ | ||||||
Amortization expense |
— | ( |
) | |||||
Balance at June 30, 2024 |
$ | $ | ||||||
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, 2023.
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 integration of the businesses of the Company and Cornerstone Financial Corporation (“Cornerstone”) following the completion of the business combination with Cornerstone, may be more difficult, time-consuming or costly than expected; the ability to complete the transaction on the expected timeframe may be more difficult, time-consuming or costly than expected; the global impact of the regional conflicts around the world, including the Ukraine and the Middle East; 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; market and monetary fluctuations; market volatility; the value of the Company’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 Company’s products and services; credit risk associated with the Company’s lending activities; risks relating to the real estate market and the Company’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; other acquisitions; changes in consumer spending and saving habits; those risks disclosed in the Company’s filings with the SEC, including under the heading “Risk Factors” set forth in the Company’s Annual Report on Form 10-K for the year ended December 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.
27
Table of Contents
Executive Overview
The Company is the holding company for The Bank of Princeton (the “Bank”), 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 two in the New York City metropolitan area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation (“FDIC”).
On January 18, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cornerstone Financial Corporation (“Cornerstone”), the New Jersey based bank holding company for Cornerstone Bank (“Cornerstone Bank”). Pursuant to the terms and conditions set forth in the Merger Agreement, Cornerstone will merge with and into the Company, with the Company surviving (the “Merger”). The Company plans to merge Cornerstone Bank with and into the Bank immediately after the Merger. The Company has received the requisite approvals of the Merger Agreement from the Federal Reserve, the Federal Deposit Insurance Corporation, and the New Jersey Department of Banking and Insurance. The Company anticipates that the Merger will close in August 2024.
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 2023 Annual Report on Form 10-K. 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, 2023.
New Accounting Pronouncements
Refer to Note 1 to the consolidated financial statements included in the 2023 Annual Report on Form 10-K and Note 1- Summary of Significant Accounting Policies in this document.
Economy
The US economy expanded at an annual rate of 2.8% over the three months ended June 30, 2024, lifted by consumer spending. Inflation has slowed after hitting a 40-year high, but households still grapple with a 20% increase in prices since 2021, an increase in energy prices, higher interest rates (impacting the real estate market) and uncertainties resulting from regional conflicts in around the world, including in Ukraine and the Middle East. U.S. unemployment, at 4.1%, is low but rising. The unemployment rate in New Jersey is 4.6% at June 30, 2024.
Comparison of Financial Condition at June 30, 2024 and December 31, 2023
General
Total assets were $1.98 billion on June 30, 2024, an increase of $67.4 million, or 3.52%, when compared to $1.92 billion at the end of 2023. The primary reasons for the increase in total assets were an increase in available for sale securities of $40.3 million and an increase in net loans of $25.0 million.
Cash and cash equivalents
Cash and cash equivalents increased $748 thousand, or 0.50%, to $151.3 million at June 30, 2024 compared to December 31, 2023.
28
Table of Contents
Investment securities
Total available-for-sale investment securities increased million $40.3, or 44.16%, to $131.7 million at June 30, 2024 compared to December 31, 2023. This increase was related to the purchase of mortgage-backed securities U.S. government sponsored enterprises and U.S government agency securities during the six-months ended June 30, 2024.
Loans
Loans, net of deferred loan fees and costs, increased $25.0 million, or 1.62%, to $1.57 billion at June 30, 2024 compared to December 31, 2023. The increase in the Company’s net loans consisted of a $51.4 million increase in commercial real estate loans, partially offset by a decrease of $22.9 million in construction loans, a decrease of $2.0 million in residential mortgage loans, a decrease of $671 thousand in commercial and industrial loans and a decrease of $498 thousand in HELOC/consumer loans.
The Company’s CRE loan portfolio, which includes multi-family, land, owner-occupied and nonowner-occupied CRE loans, was $1.19 billion or 75.8% of total loans of $1.57 billion at June 30, 2024. The Company’s CRE loan portfolio included $463.6 million or 38.8% of the total in multi-family loans, $352.5 million or 29.6% of the total in non-owner-occupied loans, $348.0 million or 29.1% of the total in owner-occupied loans and $30.3 million or 2.5% of the total in land loans. The Company’s non-owner-occupied portfolio by property type included $90.7 million in office buildings, $77.7 million in retail, $69.5 million in industrial warehousing, $43.6 million in mixed-use, $17.1 million in restaurants, $7.9 million in healthcare and $46.0 million in other. There were 585 loans in the Company’s CRE portfolio with an average and median loan size of $2.0 million and $0.6 million, respectively. Loan to Value (“LTV”) estimates are less than 70% for $1.10 billion or 92.3% of the CRE portfolio and less than 80% for $1.18 billion or 99.2% of the CRE portfolio.
The following table presents the commercial real estate portfolio by property type along with the weighted average loan to value for the periods presented (dollars in thousands):
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
| Commercial Real Estate | Balance | % of portfolio | Weighted Average LTV |
Balance | % of portfolio | Weighted Average LTV |
||||||||||||||||||
| Multi Family |
463,564 | 38.8 | % | 54.7 | % | 403,779 | 35.3 | % | 55.7 | % | ||||||||||||||
| Owner Occupied |
347,986 | 29.1 | % | 32.5 | % | 347,734 | 30.4 | % | 33.0 | % | ||||||||||||||
| Land |
30,259 | 2.5 | % | 77.5 | % | 30,280 | 2.6 | % | 79.6 | % | ||||||||||||||
| Non Owner Occupied |
||||||||||||||||||||||||
| Office Building |
90,713 | 7.6 | % | 42.0 | % | 91,968 | 8.0 | % | 42.9 | % | ||||||||||||||
| Retail |
77,657 | 6.5 | % | 40.6 | % | 67,862 | 5.9 | % | 40.7 | % | ||||||||||||||
| Industrial/Warehousing |
69,458 | 5.8 | % | 45.2 | % | 69,917 | 6.1 | % | 46.0 | % | ||||||||||||||
| Mixed Use |
43,631 | 3.7 | % | 41.9 | % | 48,684 | 4.3 | % | 42.9 | % | ||||||||||||||
| Restaurants |
17,116 | 1.4 | % | 34.1 | % | 15,361 | 1.3 | % | 33.3 | % | ||||||||||||||
| Healthcare |
7,870 | 0.7 | % | 49.8 | % | 11,448 | 1.0 | % | 48.7 | % | ||||||||||||||
| Other |
46,025 | 3.9 | % | 43.6 | % | 55,830 | 4.9 | % | 38.7 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total non owner occupied |
352,471 | 29.6 | % | 361,070 | 31.6 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total Commercial Real Estate |
1,194,279 | 100.0 | % | 1,142,864 | 100.0 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The following table presents the geographic markets of the commercial real estate portfolio for the periods presented (dollars in thousands):
| June 30, 2024 | December 31, 2023 | |||||||||||||||
| Balance | % of portfolio | Balance | % of portfolio | |||||||||||||
| Geographical Market |
||||||||||||||||
| New York |
591,304 | 49.5 | % | 533,991 | 46.7 | % | ||||||||||
| New Jersey |
421,312 | 35.3 | % | 408,368 | 35.7 | % | ||||||||||
| Pennslyvania |
160,186 | 13.4 | % | 172,848 | 15.1 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other |
21,477 | 1.8 | % | 27,657 | 2.5 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 1,194,279 | 100.00 | % | 1,142,864 | 100.00 | % | |||||||||||
29
Table of Contents
For the three-month and six-month periods ended June 30, 2024, charge-offs were $84 thousand and $367 thousand, and recoveries were $99 thousand and $206 thousand. For the three-month and six-month periods ended June 30, 2023, charge-offs were $1.9 million for both periods, and recoveries were $27 thousand and $30 thousand, respectively. The coverage ratio of the allowance for credit losses to period end loans was 1.17% at June 30, 2024 and 1.19% at December 31, 2023.
At June 30, 2024, non-performing assets totaled $3.2 million, a decrease of $3.5 million when compared to the amount at December 31, 2023. Non-performing assets as a percentage of total loans, net of deferred fees and costs, was 0.20% at June 30, 2024 and 0.43% at December 31, 2023.
Deposits
Total deposits at June 30, 2024 increased $63.3 million, or 3.87%, when compared to December 31, 2023. Money market deposits increased $49.9 million, and certificates of deposit increased $41.3 million, partially offset by decreases in interest-bearing demand deposits of $24.2 million and non-interest-bearing deposits of $4.2 million.
At June 30, 2024, the Company had approximately $505.0 million in uninsured deposits, consisting of $55.9 million in non-interest-bearing demand deposits, $147.4 million in interest-bearing demand deposits, $118.8 million in money market accounts, $21.1 million in savings deposits and $161.8 million in certificates of deposits.
Borrowings
The Company had no outstanding borrowings at June 30, 2024 and at December 31, 2023.
Stockholders’ equity
Total stockholders’ equity on June 30, 2024 increased $4.6 million or 1.93% when compared to December 31, 2023. The increase was primarily due to the $5.7 million increase in retained earnings, consisting of $9.5 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, 2024 and at December 31, 2023 was 12.34% and 12.53%, respectively.
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 $70.0 million line of credit with the FHLB supporting municipal deposits, the Company had the ability to borrow an additional $491.8 million as of June 30, 2024.
As of June 30, 2024, the Bank was eligible to use the Federal Reserve discount window for borrowings. Based on assets pledged as collateral as of the applicable date, the Bank’s borrowing availability was approximately $10.0 million at June 30, 2024. As of June 30, 2024, the Company had no outstanding advances from the discount window.
The Company is also a shareholder of Atlantic Community Bancshares, Inc., the parent company of Atlantic Community Bankers Bank (“ACBB”). As of June 30, 2024, 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, 2024.
We believe that our current sources of funds provide adequate liquidity for our current cash flow needs.
30
Table of Contents
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, 2024, 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, 2024, that the Bank meets all capital adequacy requirements to which it is subject and is “well capitalized” under applicable regulations.
The Bank’s actual capital amounts and ratios and the regulatory requirements at June 30, 2024 and December 31, 2023 are presented below:
| Actual | For capital conservation buffer requirement |
To be well capitalized under prompt corrective action provision |
||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| June 30, 2024: |
||||||||||||||||||||||||
| Total capital (to risk-weighted assets) |
$ | 258,927 | 14.663 | % | $ | 185,414 | 10.500 | % | $ | 176,585 | 10.000 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) |
$ | 240,463 | 13.617 | % | $ | 150,097 | 8.500 | % | $ | 141,268 | 8.000 | % | ||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) |
$ | 240,463 | 13.617 | % | $ | 123,610 | 7.000 | % | $ | 114,780 | 6.500 | % | ||||||||||||
| Tier 1 leverage capital (to average assets) |
$ | 240,463 | 12.120 | % | $ | 128,959 | 6.500 | % | $ | 99,199 | 5.000 | % | ||||||||||||
| December 31, 2023: |
||||||||||||||||||||||||
| Total capital (to risk-weighted assets) |
$ | 254,030 | 14.677 | % | $ | 181,740 | 10.500 | % | $ | 173,086 | 10.000 | % | ||||||||||||
| Tier 1 capital (to risk-weighted assets) |
$ | 235,538 | 13.608 | % | $ | 147,123 | 8.500 | % | $ | 138,469 | 8.000 | % | ||||||||||||
| Common equity tier 1 capital (to risk- weighted assets) |
$ | 235,538 | 13.608 | % | $ | 121,160 | 7.000 | % | $ | 112,506 | 6.500 | % | ||||||||||||
| Tier 1 leverage capital (to average assets) |
$ | 235,538 | 12.289 | % | $ | 124,583 | 6.500 | % | $ | 95,833 | 5.000 | % | ||||||||||||
31
Table of Contents
Comparison of Operating Results for the Three Months Ended June 30, 2024 and 2023
General
The Company reported net income of $5.1 million, or $0.80 per diluted common share, for the second quarter of 2024, compared to net income of $6.8 million, or $1.07 per diluted common share, for the second quarter of 2023. The $1.7 million decrease in net income for the second quarter of 2024 compared to the same period in 2023 was primarily due to acquisition-related items recorded in the second quarter of 2023 due to the Company’s acquisition of Noah Bank, resulting in a decrease in non-interest income of $9.5 million and an increase in income tax expense of $877 thousand, partially offset by a decrease in non-interest expenses of $5.8 million, a decrease in the provision for credit losses of $2.6 million and an increase in net interest income of $307 thousand when compared to the second quarter of 2023.
Interest income
Interest income increased $6.4 million for the three months ended June 30, 2024, compared to the same period in 2023. Interest income on loans increased $4.5 million due to increases in both the average balance of loans of $153.2 million and the yield of 58 basis points. Other interest and dividend income increased $1.2 million due to an increase in average balance of $81.6 million and an increase in the yield of 33 basis points. Interest on taxable available-for-sale securities increased $709 thousand due to a 185 basis point increase in yield and a $44.9 million increase in the average balance of taxable available-for-sale securities.
Interest expense
Interest expense on deposits increased $6.1 million to $13.4 million for the three-month period ended June 30, 2024, due to increases in both the rate paid on interest-bearing deposits of 120 basis points and in the average balance of interest-bearing deposits of $280.8 million over the same prior year period.
Provision for credit losses
The Company recorded a reversal of credit losses of $118 thousand during the three-months ended June 30, 2024, which consisted of $169 thousand decrease recorded to the allowance of credit losses, offset by an increase to the provision for credit losses of $51 thousand related to unfunded commitments, which are recorded in other liabilities on the Company’s statements of financial condition. Charge-offs were $84 thousand, and recoveries were $99 thousand, for the quarter ended June 30, 2024.
Non-interest income
Total non-interest income was $2.1 million for the three-months ended June 30, 2024, a decrease of $9.5 million or 82.0% when compared to the same prior year period. The decrease was primarily due to the bargain purchase gain of $9.7 million attributed to the acquisition of Noah Bank, which closed in May 2023.
Non-interest expense
Total non-interest expense was $12.0 million for the three-months ended June 30, 2024, a decrease of $5.8 million or 32.6% when compared to the same prior year period. The decrease was due primarily to $7.0 million in merger-related expenses recorded, $667 thousand more in salaries and benefits expense and $145 thousand more in occupancy and equipment expenses during the three-months ended June 30, 2023 that were all primarily associated with the Noah Bank acquisition in 2023.
Provision for income taxes
For the three months ended June 30, 2024, the Company recorded an income tax expense of $1.0 million, resulting in an effective tax rate of 16.8%, compared to an income tax expense of $161 thousand resulting in an effective tax rate of 2.32% for the quarter ended June 30, 2023. The effective tax rate in the second quarter of 2023 was lower than the current quarter’s rate because of the non-taxable $9.7 million bargain purchase gain from the Noah bank acquisition.
32
Table of Contents
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 loan receivables balances include non-accrual loans. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.
| Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | Change 2024 vs 2023 | ||||||||||||||||||||||||||||||
| Average Balances |
Income/ Expense |
Yield Rates |
Average Balances |
Income/ Expense |
Yield Rates |
Average Balances |
Yield Rates |
|||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||||||||||
| Loans receivable |
$ | 1,585,876 | $ | 26,035 | 6.60 | % | $ | 1,432,680 | $ | 21,517 | 6.02 | % | $ | 153,196 | 0.58 | % | ||||||||||||||||
| Securities |
||||||||||||||||||||||||||||||||
| Taxable available-for-sale |
89,547 | 1,002 | 4.47 | % | 44,669 | 292 | 2.63 | % | 44,878 | 1.84 | % | |||||||||||||||||||||
| Tax exempt available-for-sale |
39,756 | 286 | 2.88 | % | 41,187 | 284 | 2.76 | % | (1,431 | ) | 0.12 | % | ||||||||||||||||||||
| Held-to-maturity |
166 | 2 | 5.33 | % | 198 | 2 | 5.28 | % | (32 | ) | 0.05 | % | ||||||||||||||||||||
| Federal funds sold |
133,336 | 1,808 | 5.45 | % | 65,383 | 842 | 5.16 | % | 67,953 | 0.30 | % | |||||||||||||||||||||
| Other interest earning-assets |
19,338 | 278 | 5.78 | % | 5,691 | 77 | 5.31 | % | 13,647 | 0.47 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total interest-earning assets |
1,868,019 | $ | 29,410 | 6.33 | % | 1,589,808 | $ | 23,014 | 5.81 | % | 278,211 | 0.53 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Other non-earnings assets |
141,377 | 110,384 | 30,993 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total assets |
$ | 2,009,396 | $ | 1,700,192 | $ | 309,204 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Interest-bearing liabilities |
||||||||||||||||||||||||||||||||
| Demand |
$ | 231,895 | $ | 1,119 | 1.94 | % | $ | 242,667 | $ | 835 | 1.38 | % | $ | (10,772 | ) | 0.56 | % | |||||||||||||||
| Savings |
148,377 | 974 | 2.64 | % | 158,937 | 683 | 1.73 | % | (10,560 | ) | 0.91 | % | ||||||||||||||||||||
| Money markets |
390,019 | 3,873 | 3.99 | % | 285,021 | 2,113 | 2.97 | % | 104,998 | 1.02 | % | |||||||||||||||||||||
| Certificates of deposit |
713,433 | 7,477 | 4.22 | % | 516,252 | 3,690 | 2.87 | % | 197,181 | 1.35 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total deposit |
1,483,724 | 13,443 | 3.64 | % | 1,202,877 | 7,321 | 2.44 | % | 280,847 | 1.20 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Borrowings |
— | — | 0.00 | % | 2,482 | 32 | 5.08 | % | (2,482 | ) | -5.08 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total interest-bearing liabilities |
1,483,724 | $ | 13,443 | 3.64 | % | 1,205,359 | $ | 7,353 | 2.45 | % | 278,365 | 1.20 | % | |||||||||||||||||||
| Non-interest-bearing deposits |
243,248 | 235,423 | 7,825 | |||||||||||||||||||||||||||||
| Other liabilities |
40,874 | 32,232 | 8,642 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total liabilities |
1,767,846 | 1,473,014 | 294,832 | |||||||||||||||||||||||||||||
| Stockholders’ equity |
241,550 | 227,178 | 14,372 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total liabilities and stockholder’s equity |
$ | 2,009,396 | $ | 1,700,192 | $ | 309,204 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Net interest-earnings assets |
$ | 384,295 | $ | 384,449 | $ | (154 | ) | |||||||||||||||||||||||||
| Net interest income; interest rate spread |
2.69 | % | 3.36 | % | -0.67 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Net interest margin |
$ | 15,968 | 3.44 | % | $ | 15,661 | 3.95 | % | $ | 307 | -0.51 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
33
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.
| Three Months Ended June 30, 2024 vs . 2023 Increase (Decrease) Due to |
||||||||||||
| Rate | Volume | Net | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Interest and dividend income: |
||||||||||||
| Loans receivable, including fees |
$ | 238 | $ | 4,280 | $ | 4,518 | ||||||
| Investment securities |
||||||||||||
| Taxable available-for-sale |
395 | 315 | 710 | |||||||||
| Tax exempt available-for-sale |
23 | (21 | ) | 2 | ||||||||
| Held-to-maturity |
0 | 0 | 0 | |||||||||
| Federal funds sold |
94 | 872 | 966 | |||||||||
| Other interest-earning assets |
0 | 200 | 201 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total interest-earning assets |
$ | 750 | $ | 5,647 | $ | 6,396 | ||||||
|
|
|
|
|
|
|
|||||||
| Interest expense: |
||||||||||||
| Demand |
534 | (251 | ) | $ | 284 | |||||||
| Savings |
577 | (286 | ) | 291 | ||||||||
| Money market |
1,427 | 333 | 1,760 | |||||||||
| Certificates of deposit |
268 | 3,519 | 3,787 | |||||||||
| Borrowings |
— | (32 | ) | (32 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total interest expense |
$ | 2,806 | $ | 3,283 | $ | 6,089 | ||||||
|
|
|
|
|
|
|
|||||||
| Change in net interest income |
$ | (2,056 | ) | $ | 2,363 | $ | 307 | |||||
|
|
|
|
|
|
|
|||||||
Comparison of Operating Results for the Six Months Ended June 30, 2024, and 2023
General
The Company reported net income of $9.5 million, or $1.48 per diluted common share, for the six-month period ended June 30, 2024, compared to net income of $12.9 million, or $2.02 per diluted common share, for the same period in 2023. The decrease in net income for the six-month period ended June 30, 2024, compared to the same period in 2023, was primarily due to acquisition-related items recorded during 2023 due to the acquisition of Noah Bank. In addition, net interest income declined $906 thousand over the two periods for the reasons described below.
Interest income
Interest income increased $13.9 million for the six-months ended June 30, 2024, compared to the same period in 2023. Interest income on loans increased $9.6 million due to increases in both the average balance of loans of $164.1 million and the yield of 59 basis points. Other interest and dividend income increased $3.3 million due to an increase in average balance of $117.4 million and an increase in the yield of 40 basis points. Interest on taxable available-for-sale securities increased $995 thousand due to a 158 basis point increase in yield and a $30.7 million increase in the average balance of taxable available-for-sale securities.
34
Table of Contents
Interest expense
Interest expense on deposits increased $14.8 million to $26.1 million for the six-month period ended June 30, 2024, due to increases in both the rate paid on interest-bearing deposits of 162 basis points and in the average balance of interest-bearing deposits of $315.9 million over the same prior year period.
Provision for credit losses
The Company recorded a $68 thousand provision for credit losses for the six-month period ended June 30, 2024 and recorded $2.7 million provision for credit losses for the six-month period ended June 30, 2023. The decrease for the six-month period ended June 30, 2024, compared with the same prior year period, is primarily due to $1.7 million of the provision related to non-purchased credit deteriorated loans acquired in the Noah Bank acquisition and net charge-offs of $1.8 million recorded for the six-month period ended June 30, 2023. For the six-month periods ended June 30, 2024, charge-offs were $367 thousand, and recoveries were $206 thousand.
Non-interest income
For the six-month period ended June 30, 2024, non-interest income decreased $8.9 million or 68.5%, from the same six-month period in 2023, primarily due to the $9.7 million bargain purchase gain from the Noah acquisition recorded in the six-month period ended June 30, 2023.
Non-interest expense
For the six-month period ended June 30, 2024, non-interest expense was $23.8 million, compared to $27.6 million for the same period in 2023. This decrease was primarily due to acquisition-related expenses of $7.0 million in the prior year period, partially offset by increases in salaries and employee benefits of $1.8 million and occupancy and equipment expense of $833 thousand.
Provision for income taxes
For the six-month period ended June 30, 2024, the Bank recorded an income tax expense of $2.1 million, resulting in an effective tax rate of 18.2%, compared to an income tax expense of $2.1 million resulting in an effective tax rate of 13.8% for the six-month period ended June 30, 2023. The effective tax rate for the six-month period ended June 30, 2023 was substantially lower as a result of the non-taxable bargain purchase gain related to the Noah acquisition.
35
Table of Contents
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 loan receivables balances include non-accrual loans. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.
| Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
| 2024 | 2023 | Change 2024 vs 2023 | ||||||||||||||||||||||||||||||
| Average Balances |
Income/ Expense |
Yield Rates |
Average Balances |
Income/ Expense |
Yield Rates |
Average Balances |
Yield Rates |
|||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||||||||||
| Loans receivable |
$ | 1,568,541 | $ | 50,974 | 6.54 | % | $ | 1,404,421 | $ | 41,411 | 5.95 | % | $ | 164,120 | 0.59 | % | ||||||||||||||||
| Securities |
||||||||||||||||||||||||||||||||
| Taxable available-for-sale |
74,144 | 1,565 | 4.21 | % | 43,459 | 570 | 2.63 | % | 30,685 | 1.58 | % | |||||||||||||||||||||
| Tax exempt available-for-sale |
40,257 | 572 | 2.84 | % | 41,409 | 568 | 2.75 | % | (1,152 | ) | 0.09 | % | ||||||||||||||||||||
| Held-to-maturity |
174 | 5 | 5.21 | % | 199 | 5 | 5.28 | % | (25 | ) | -0.07 | % | ||||||||||||||||||||
| Federal funds sold |
140,703 | 3,816 | 5.45 | % | 37,076 | 937 | 5.09 | % | 103,627 | 0.37 | % | |||||||||||||||||||||
| Other interest earning-assets |
19,146 | 544 | 5.71 | % | 5,348 | 135 | 5.06 | % | 13,798 | 0.65 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total interest-earning assets |
1,842,965 | $ | 57,476 | 6.27 | % | 1,531,912 | $ | 43,626 | 5.74 | % | 311,053 | 0.53 | % | |||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| Other non-earnings assets |
141,019 | 126,444 | 14,575 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total assets |
$ | 1,983,984 | $ | 1,658,356 | $ | 325,628 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Interest-bearing liabilities |
||||||||||||||||||||||||||||||||
| Demand |
$ | 236,963 | $ | 2,312 | 1.96 | % | $ | 253,527 | $ | 1,386 | 1.10 | % | $ | (16,564 | ) | 0.86 | % | |||||||||||||||
| Savings |
148,024 | 1,895 | 2.57 | % | 170,785 | 1,100 | 1.30 | % | (22,761 | ) | 1.28 | % | ||||||||||||||||||||
| Money markets |
377,084 | 7,430 | 3.96 | % | 276,962 | 3,271 | 2.38 | % | 100,122 | 1.58 | % | |||||||||||||||||||||
| Certificates of deposit |
695,870 | 14,423 | 4.17 | % | 440,780 | 5,429 | 2.48 | % | 255,090 | 1.68 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total deposit |
1,457,941 | 26,060 | 3.59 | % | 1,142,054 | 11,186 | 1.98 | % | 315,887 | 1.62 | % | |||||||||||||||||||||
| Borrowings |
— | — | 0.00 | % | 4,725 | 118 | 5.01 | % | (4,725 | ) | -5.01 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Total interest-bearing liabilities |
1,457,941 | $ | 26,060 | 3.08 | % | 1,146,779 | $ | 11,304 | 1.99 | % | 311,162 | 1.09 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Non-interest-bearing deposits |
243,669 | 239,098 | 4,571 | |||||||||||||||||||||||||||||
| Other liabilities |
41,484 | 46,991 | (5,507 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total liabilities |
1,743,094 | 1,432,868 | 310,226 | |||||||||||||||||||||||||||||
| Stockholders’ equity |
240,890 | 225,488 | 15,402 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total liabilities and stockholder’s equity |
$ | 1,983,984 | $ | 1,658,356 | $ | 325,628 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Net interest-earnings assets |
$ | 385,024 | $ | 385,133 | $ | (109 | ) | |||||||||||||||||||||||||
| Net interest income; interest rate spread |
2.68 | % | 3.76 | % | -1.08 | % | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Net interest margin |
$ | 31,416 | 3.43 | % | $ | 32,322 | 4.25 | % | $ | (906 | ) | -0.83 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
36
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, 2024 vs . 2023 Increase (Decrease) Due to |
||||||||||||
| Rate | Volume | Net | ||||||||||
| (In thousands) | ||||||||||||
| Interest and dividend income: |
||||||||||||
| Loans receivable, including fees |
$ | 476 | $ | 9,087 | $ | 9,563 | ||||||
| Securities available-for-sale |
||||||||||||
| Taxable |
305 | 690 | 995 | |||||||||
| Tax-exempt |
17 | (13 | ) | 4 | ||||||||
| Securities held-to-maturity |
47 | (47 | ) | — | ||||||||
| Federal funds sold |
63 | 2,816 | 2,879 | |||||||||
| Other interest and dividend income |
1 | 408 | 409 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total interest and dividend income |
$ | 910 | $ | 12,940 | $ | 13,850 | ||||||
|
|
|
|
|
|
|
|||||||
| Interest expense: |
||||||||||||
| Demand |
1,017 | (91 | ) | $ | 926 | |||||||
| Savings |
993 | (198 | ) | 795 | ||||||||
| Money market |
1,923 | 2,236 | 4,159 | |||||||||
| Certificates of deposit |
608 | 8,387 | 8,994 | |||||||||
| Borrowings |
— | (118 | ) | (118 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total interest expense |
$ | 4,541 | $ | 10,215 | $ | 14,756 | ||||||
|
|
|
|
|
|
|
|||||||
| Change in net interest income |
$ | (3,631 | ) | $ | 2,725 | $ | (906 | ) | ||||
|
|
|
|
|
|
|
|||||||
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.
37
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, 2024, 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, 2024, 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.
| 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 | ||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||
| Interest-earning assets: (1) |
||||||||||||||||||||||||||||
| Investment securities |
$ | 11,622 | $ | 18,621 | $ | 22,505 | $ | 18,185 | $ | 73,071 | $ | (12,315 | ) | $ | 131,689 | |||||||||||||
| Loans receivable |
466,364 | 194,620 | 453,804 | 431,627 | 31,590 | (23,117 | ) | 1,554,888 | ||||||||||||||||||||
| Other interest-earnings assets (2) |
138,109 | — | — | — | — | 14,937 | 153,046 | |||||||||||||||||||||
| Other non-interest assets |
— | — | — | — | — | 144,318 | 144,318 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total interest-earning assets |
$ | 616,095 | $ | 213,241 | $ | 476,309 | $ | 449,812 | $ | 104,661 | $ | (20,495 | ) | $ | 1,983,941 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||||||
| Checking and savings accounts |
$ | 370,694 | $ | — | $ | — | $ | — | $ | — | $ | 370,694 | ||||||||||||||||
| Money market accounts |
403,926 | — | — | — | — | — | 403,926 | |||||||||||||||||||||
| Certificate accounts |
111,356 | 439,721 | 125,686 | 2,616 | — | — | 679,379 | |||||||||||||||||||||
| Borrowings |
— | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total interest-bearing liabilities |
$ | 885,976 | $ | 439,721 | $ | 125,686 | $ | 2,616 | $ | — | $ | — | $ | 1,453,999 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Interest-earning assets less interest-bearing liabilities |
$ | (269,881 | ) | $ | (226,480 | ) | $ | 350,623 | $ | 447,196 | $ | 104,661 | $ | (20,495 | ) | $ | 529,942 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Cumulative interest-rate sensitivity gap (3) |
$ | (269,881 | ) | $ | (496,361 | ) | $ | (145,738 | ) | $ | 301,458 | $ | 406,119 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Cumulative interest-rate gap as a percentage of total assets at June 30, 2024 |
-13.60 | % | -25.02 | % | -7.35 | % | 15.19 | % | 20.47 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at June 30, 2024 |
69.54 | % | 62.56 | % | 89.96 | % | 120.73 | % | 127.93 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (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. |
38
Table of Contents
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.
Net Portfolio Value Analysis. Our interest rate sensitivity is also 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, 2024, and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.
| Change in Interest Rates |
Net Portfolio Value | |||||||||||||||||||
| In Basis Points (Rate Shock) |
Amounts | $ Change | % Change | EVE/EVA1 | Change | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| 300 |
$ | 291,048 | $ | (10,472 | ) | -3.47 | % | 15.56 | % | 0.23 | ||||||||||
| 200 |
$ | 296,179 | $ | (5,341 | ) | -1.77 | % | 15.57 | % | 0.24 | ||||||||||
| 100 |
$ | 298,927 | $ | (2,593 | ) | -0.86 | % | 15.43 | % | 0.10 | ||||||||||
| Static |
$ | 301,520 | $ | — | 15.33 | % | ||||||||||||||
| (100) |
$ | 306,875 | $ | 5,355 | 1.78 | % | 15.36 | % | 0.03 | |||||||||||
| (200) |
$ | 308,278 | $ | 6,758 | 2.24 | % | 15.24 | % | (0.09 | ) | ||||||||||
| (300) |
$ | 302,800 | $ | 1,280 | 0.42 | % | 14.79 | % | (0.54 | ) | ||||||||||
| 1 | Economic Value of Equity (EVE) divded by Economic Value of Assets (EVA) |
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 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.
39
Table of Contents
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, 2024. 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, 2024 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.
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, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
40
Table of Contents
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, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company’s repurchase of shares of common stock for the three months ended June 30, 2024 were as follows:
| Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Program 1 |
Maximum Number of Shares that May Yet be Purchased Under Plans or Programs 1 |
|||||||||||||
| Period |
||||||||||||||||
| 295,000 | ||||||||||||||||
| April 1 - 30, 2024 |
1,500 | $ | 31.00 | 1,500 | 293,500 | |||||||||||
| May 1 - 31, 2024 |
7,000 | $ | 30.95 | 7,000 | 286,500 | |||||||||||
| June 1 - 30, 2024 |
— | $ | — | — | 286,500 | |||||||||||
| 8,500 | $ | 30.98 | 8,500 | |||||||||||||
| 1 | On August 10, 2023, the Company announced a stock repurchase program to repurchase up to 314,000 shares of common stock, approximately 5% of the Company's outstanding shares of common stock, over a period of time necessary to complete such repurchases. |
Item 4. Mine Safety Disclosures
Not applicable.
41
Table of Contents
Table of Contents
Item 6. Exhibits
| Exhibit |
Description | |
| 3.1 | Amended and Restated Articles of Incorporation of Princton Bancorp, Inc. | |
| 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 Label 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 12, 2024 | 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 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PRINCETON BANCORP, INC.
FIRST. The name of the corporation (the “Corporation”) is Princeton Bancorp, Inc.
SECOND. The location and post office address of the Corporation’s registered office in this Commonwealth is c/o Stevens & Lee, 111 North Sixth Street, Reading, Pennsylvania 19603.
THIRD. The purpose of the Corporation is and it shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under provisions of the Business Corporation Law of 1988, the Act approved December, 1988, P.L. 1444, as amended (the “Pennsylvania Business Corporation Law”).
FOURTH. The term of the Corporation’s existence is perpetual.
FIFTH. The aggregate number of shares of capital stock which the Corporation shall have authority to issue is 17,000,000 shares, divided into two classes consisting of 15,000,000 shares of common stock without par value (“Common Stock”), and 2,000,000 shares of preferred stock having such par value as the board of directors shall fix and determine, as provided in the paragraph below (“Preferred Stock”).”
The Preferred Stock may be issued from time to time as a class without series or, if so determined by the board of directors of the Corporation, either in whole or in part, in one or more series. There is hereby expressly granted to and vested in the board of directors of the Corporation authority to fix and determine (except as fixed and determined herein), by resolution, the par value, voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, including specifically, but not limited to, the dividend rights, conversion rights, redemption rights and liquidation preferences, if any, of any wholly unissued series of Preferred Stock (or the entire class of Preferred Stock if none of such shares have been issued), the number of shares constituting any such series and the terms and conditions of the issue thereof. Prior to the issuance of any shares of Preferred Stock, a statement setting forth a copy of each such resolution or resolutions and the number of shares of Preferred Stock of each such class or series shall be executed and filed in accordance with the Pennsylvania Business Corporation Law. Unless otherwise provided in any such resolution or resolutions, the number of shares of capital stock of any such class or series so set forth in such resolution or resolutions may thereafter be increased or decreased (but not below the number of shares then outstanding), by a statement likewise executed and filed setting forth a statement that a specified increase or decrease therein had been authorized and directed by a resolution or resolutions likewise adopted by the board of directors of the Corporation. In case the number of such shares shall be decreased, the number of shares so specified in the statement shall resume the status they had prior to the adoption of the first resolution or resolutions.
SIXTH. Each holder of record of Common Stock shall have the right to one vote for each share of Common Stock standing in such holder’s name on the books of the Corporation. No shareholder shall be entitled to cumulate any votes for the election of directors.
SEVENTH. Subsection 1. The management, control and government of the Corporation shall be vested in a board of directors consisting of not less than three (3) nor more than twenty-five (25) members in number, as fixed exclusively by the board of directors of the Corporation from time to time pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies on the Board of Directors. If, for any reason, a vacancy occurs on the board of directors of the Corporation, a majority of the remaining directors shall have the exclusive power to fill the vacancy by electing a director to hold office for the unexpired term in respect of which the vacancy occurred.
Subsection 2. The shareholders of the Corporation may remove from office the entire board of directors or any individual director only for cause (as hereinafter defined). Such removal shall be made by the vote of shareholders cast in favor of the resolution for the removal of such director for cause constituting at least a majority of the votes which all shareholders would be entitled to cast at an annual election of directors. If the board or any one or more directors is so removed for cause, new directors may be elected at the same meeting. “Cause” shall mean any one of the following: (i) there is a judicial declaration that the director is of unsound mind; (ii) the director is convicted of an offense punishable by imprisonment for a term of more than one year; (iii) the director breaches or fails to perform the statutory duties of that director’s office and the breach or failure constitutes self-dealing, willful misconduct or recklessness; or (iv) the Corporation is ordered by the Board of Governors of the Federal Reserve or its designee or the New Jersey Department of Banking and Insurance to remove the director. The shareholders shall not be permitted to remove the board, a class of the board or any one or more directors without Cause. The amendment or repeal of this subsection shall not apply to any incumbent director during the balance of the term for which the director was elected. The Board of Directors also may remove a director pursuant to the provisions set forth in the Bylaws.
EIGHTH. No holder of any class of capital stock of the Corporation shall have preemptive rights, and the Corporation shall have the right to issue and to sell to any person or persons any shares of its capital stock or any option, warrant or right to acquire capital stock, or any securities having conversion or option rights without first offering such shares, rights or securities to any holder of any class of capital stock of the Corporation.
NINTH. No action required to be taken or which may be taken at any annual or special meeting of shareholders of the Corporation may be taken without a meeting, and the power of the shareholders of the Corporation to consent in writing to action without a meeting is specifically denied. The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast shall constitute a quorum of shareholders at any annual or special meeting of shareholders of the Corporation.
TENTH. A special meeting of the shareholders of the Corporation may be called only by (i) the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies on the Board of Directors, (ii) shareholders entitled to cast at least 20% of the votes that all shareholders are entitled to cast at the particular meeting, or (iii) such officers as may be provided in the Bylaws.
ELEVENTH. The authority to make, amend, alter, change or repeal the By-Laws of the Corporation is hereby expressly and solely granted to and vested in the board of directors of the Corporation, subject always to the power of the shareholders to change such action by the affirmative vote of shareholders of the Corporation entitled to cast a majority of the votes which all shareholders are entitled to cast.
TWELFTH. A director of the Corporation shall not be personally liable to the Corporation or its shareholders or creditors for monetary damages for any action taken, or any failure to take any action, except to the extent such exemption from liability or limitation thereof is not permitted under the Pennsylvania Business Corporation Law as the same exists today or may hereafter be amended as provided in the last sentence of this Article TWELFTH. Any amendment, modification, repeal or adoption of any provision inconsistent with the foregoing sentence shall be prospective only, and neither the repeal or modification of this Article TWELFTH nor the adoption of any provision inconsistent with this Article TWELFTH shall adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification, repeal or adoption of such inconsistent provision. If the Pennsylvania Business Corporation Law is amended to authorize corporate action further eliminating or limiting personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Pennsylvania Business Corporation Law, as so amended.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in its Articles of Incorporation in the manner now or hereafter prescribed by statute and all rights conferred upon shareholders and directors herein are hereby granted subject to this reservation; provided, however, that the provisions set forth in Articles SIXTH through THIRTEENTH, inclusive, of these Articles of Incorporation
may not be repealed, altered or amended, in any respect whatsoever, unless such repeal, alteration or amendment is approved by the affirmative vote of shareholders of the Corporation entitled to cast a majority of the votes which all shareholders of the Corporation are then entitled to cast.
FOURTEENTH: Subsection 1. No Material Shareholder shall Acquire Voting Control of the Corporation, at any time, except in accordance with the provisions of Article FOURTEENTH. The terms “Acquire,” “Voting Control,” “Group Acting in Concert,” “Material Shareholder” and “Person” as used in this Article FOURTEENTH are defined in subsection 4 hereof.
Subsection 2. If shares of the outstanding common stock of the Corporation are acquired by a Material Shareholder which, but for the application of this Article FOURTEENTH, would cause the Material Shareholder to Acquire Voting Control of the Corporation in violation of this Article FOURTEENTH, all shares which would have caused the Material Shareholder to acquire Voting Control (i.e. all shares in excess of 9.9 percent (9.9%) of the issued and outstanding common stock of the Corporation) (as determined without regard to this Subsection 2) shall be considered from and after the time of acquisition by such Material Shareholder to be “excess shares” for purposes of this Article FOURTEENTH. All shares deemed to be excess shares shall thereafter no longer be entitled to vote on any matter or to take other shareholder action. If, after giving effect to the first two sentences of this Subsection 2, any Material Shareholder still shall be deemed to be in Voting Control of the Corporation based on the number of votes then entitled to be cast (rather than the number of issued and outstanding shares of common stock of the Corporation), then shares held in excess of one share less than the number of shares deemed to confer Voting Control upon such Material Shareholder also shall not be entitled to vote on any matter or take any other shareholder action. Subsequent reductions in voting rights in accordance with the foregoing shall be effected as many times as necessary to carry out the purposes of this Article. The provisions of this Subsection 2 deeming shares to be excess shares shall only apply for so long as such shares shall be beneficially owned by such Material Shareholder who has acquired Voting Control.
Subsection 3. The provisions of this Article FOURTEENTH shall be of no further force and effect after the consummation of a transaction in which another Person Acquires shares of capital stock of the Corporation entitled to cast eighty percent (80%) or more of the votes which all shareholders are entitled to cast (as determined without regard to the application of this Article FOURTEENTH) and such transaction was approved in advance by the board of directors of the Corporation.
Subsection 4. For purposes of this Article FOURTEENTH:
A. The term “Acquire” includes every type of acquisition, whether effected by purchase, exchange, operation of law or otherwise.
B. “Voting Control” means the sole or shared power to vote or to direct the voting of, or to dispose or to direct the disposition of, more than 9.9 percent (9.9%) of the issued and outstanding common stock of the Corporation; provided that (i) the solicitation, holding and voting of proxies obtained by the board of directors of the Corporation shall not constitute Voting Control, and (ii) any trustee or member of any administrative committee of a Tax-Qualified Employee Stock Benefit Plan shall not be deemed to have Voting Control of the Corporation as a result of their control of a Tax-Qualified Employee Stock Benefit Plan.
C. The term “Person” includes an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization or similar company.
D. The term “Tax-Qualified Employee Stock Benefit Plan” means any defined benefit plan or defined contribution plan of the Corporation or any subsidiary, such as an employee stock ownership plan, stock bonus plan, profit sharing plan or other plan, that, with its related trust, meets the requirements to be “qualified” under Section 401 of the Internal Revenue Code of 1986, as amended.
E. The term “Material Shareholder” means any Person who as of March 11, 2022 beneficially owned more than nine percent (9.0%) of the outstanding shares of common stock of The Bank of Princeton.
Subsection 5. The board of directors of the Corporation shall have the power and duty to determine, for purposes of this Article FOURTEENTH, on the basis of information known to the Board, if and when A material Shareholder has acquired Voting Control of the Corporation, and/or if any transaction is similar to, or has a similar effect as, any of the transactions identified in this Article FOURTEENTH. Any such determination shall be conclusive and binding for all purposes of this Article FOURTEENTH. The board of directors of the Corporation also shall have the power, by a two-thirds (2/3) or greater vote, to render the terms of this Article FOURTEENTH inapplicable to any Material Shareholder, which determination by the Board shall be irrevocable.
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 12, 2024 | /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 12, 2024 | /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, 2024 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 12, 2024 | ||||||