Equibles

10-Q

Princeton Bancorp, Inc. (BPRN)

10-Q 2024-08-12 For: 2024-06-30
View Original
Added on April 08, 2026
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20429

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June

30, 2024

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-41589

PRINCETON BANCORP, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania 88-4268702
(State or other jurisdiction of<br>incorporation or organization) (I.R.S. Employer<br><br>Identification No.)

183 Bayard Lane, Princeton, New Jersey 08540

(Address of principal executive offices) (Zip Code)

(609) 921-1700

(Registrant’s telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class Trading<br>Symbol(s) Name of each exchange<br>on which registered
Common stock, no par value BPRN The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒

Yes

☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒

Yes

☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated<br> filer ☐ Smaller reporting company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes

☐ No

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 9, 2024, there were 6,349,603 outstanding shares of the issuer’s common stock, no par value.

Table of Contents

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Unaudited Consolidated Statements of Financial Condition - June 30, 2024 and December 31, 2023 3
Unaudited Consolidated Statements of Income - Three and Six Months Ended June 30, 2024 and 2023 4
Unaudited Consolidated Statements of Comprehensive Income - Three and Six Months Ended June 30, 2024 and 2023 5
Unaudited Consolidated Statements of Changes in Stockholders’ Equity - Three and Six Months Ended June 30, 2024 and 2023 6
Unaudited Consolidated Statements of Cash Flows - Six Months Ended June 30, 2024 and 2023 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
Item 3 Quanitative and Qualitative Disclosure about Market Risk 40
Item 4 Controls and Procedures 40
PART II OTHER INFORMATION
Item 1 Legal Proceedings 41
Item 1A Risk Factors 41
Item 2 Unregistered Sale of Equity Securities and Use of Proceeds 41
Item 4 Mine Safety Disclosures 41
Item 5 Other Information 42
Item 6 Exhibits 43

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PART I–FINANCIAL INFORMATION

Item 1. Financial Statements.

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)

December 31,<br> 2023
ASSETS
Cash and due from banks 14,937 $ 17,156
Interest-earning bank balances 18,584 17,376
Federal funds sold 117,784 116,025
Total cash and cash equivalents 151,305 150,557
Securities available-for-sale, at fair value 131,689 91,352
Securities held-to-maturity (fair value 166 and 200, at June 30, 2024 and December 31, 2023, respectively) 165 193
Loans receivable, net of deferred fees and costs 1,573,352 1,548,335
Less: allowance for credit losses (18,464 ) (18,492 )
Loan receivable, net 1,554,888 1,529,843
Bank-owned life insurance 59,629 58,860
Premises and equipment, net 14,082 14,453
Accrued interest receivable 7,052 6,089
Restricted investment in bank stock 1,741 1,410
Deferred taxes, net 11,096 11,512
Goodwill 8,853 8,853
Core deposit intangible 1,191 1,422
Operating lease right-of-use asset 22,058 23,398
Equity method investments 9,426 8,296
Other assets 10,766 10,259
TOTAL ASSETS 1,983,941 $ 1,916,497
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest-bearing 245,073 $ 249,282
Interest-bearing 1,453,999 1,386,459
Total deposits 1,699,072 1,635,741
Accrued interest payable 11,048 9,162
Operating lease liability 23,015 24,280
Other liabilities 5,965 7,103
TOTAL LIABILITIES 1,739,100 1,676,286
STOCKHOLDERS’ EQUITY:
Common stock, no par value; 15,000,000 shares authorized, 6,349,603 shares issued and outstanding at June 30, 2024; 6,299,331 shares issued and outstanding at December 31, 2023
Paid-in capital 99,179 98,291
Treasury stock, at cost of 27,500 shares at June 30, 2024 (842 ) —
Retained earnings 155,083 149,414
Accumulated other comprehensive loss (8,579 ) (7,494 )
TOTAL STOCKHOLDERS’ EQUITY 244,841 240,211
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 1,983,941 $ 1,916,497

All values are in US Dollars.

See accompanying notes to unaudited consolidated financial statements.

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PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share data)

Three Months Ended<br> June 30, Six Months Ended<br> June 30,
2024 2023 2024 2023
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees $ 26,034 $ 21,517 $ 50,974 $ 41,411
Securities <br>available-for-sale:
Taxable 1,001 292 1,565 570
Tax-exempt 286 284 572 568
Securities <br>held-to-maturity 3 2 5 5
Other interest and dividend income 2,086 919 4,360 1,072
TOTAL INTEREST AND DIVIDEND INCOME 29,410 23,014 57,476 43,626
INTEREST EXPENSE
Deposits 13,442 7,321 26,060 11,186
Borrowings — 32 — 118
TOTAL INTEREST EXPENSE 13,442 7,353 26,060 11,304
NET INTEREST INCOME 15,968 15,661 31,416 32,322
Provision for (reversal of) credit losses (118 ) 2,463 68 2,728
NET INTEREST INCOME AFTER PROVISION FOR (REVERSAL OF) CREDIT LOSSES 16,086 13,198 31,348 29,594
NON-INTEREST<br> INCOME
Income from bank-owned life insurance 388 295 769 585
Fees and service charges 465 464 897 912
Loan fees, including preypayment penalties 937 1,030 1,661 1,381
Gain on bargain purchase — 9,696 — 9,696
Other 297 80 745 365
TOTAL <br>NON-INTEREST<br> INCOME 2,087 11,565 4,072 12,939
NON-INTEREST<br> EXPENSE
Salaries and employee benefits 6,443 5,776 12,963 11,175
Occupancy and equipment 1,850 1,705 3,879 3,046
Professional fees 602 556 1,126 1,021
Data processing and communications 1,404 1,318 2,564 2,618
Federal deposit insurance 279 253 552 443
Advertising and promotion 156 126 298 236
Office expense 155 178 274 275
Other real estate expenses — 1 — 1
Core deposit intangible 111 127 231 262
Acquisition-related expenses — 7,026 — 7,026
Other 1,009 748 1,958 1,483
TOTAL <br>NON-INTEREST<br> EXPENSE 12,009 17,814 23,845 27,586
INCOME BEFORE INCOME TAX EXPENSE 6,164 6,949 11,575 14,947
INCOME TAX EXPENSE 1,038 161 2,104 2,062
NET INCOME $ 5,126 $ 6,788 $ 9,471 $ 12,885
Earnings per common share-basic $ 0.81 $ 1.08 $ 1.50 $ 2.06
Earnings per common share-diluted $ 0.80 $ 1.07 $ 1.48 $ 2.02

See accompanying notes to unaudited consolidated financial statements.

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PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

Three Months Ended<br> June 30, Six Months Ended<br> June 30,
2024 2023 2024 2023
NET INCOME $ 5,126 $ 6,788 $ 9,471 $ 12,885
Other comprehensive income loss
Unrealized losses arising during period on securities <br>available-for-sale (1,110 ) (2,074 ) (2,001 ) (335 )
Net unrealized loss (1,110 ) (2,074 ) (2,001 ) (335 )
Tax effect 316 592 916 94
Total other comprehensive loss (794 ) (1,482 ) (1,085 ) (241 )
COMPREHENSIVE INCOME $ 4,332 $ 5,306 $ 8,386 $ 12,644

See accompanying notes to unaudited consolidated financial statements.

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PRINCETON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share data)

Three Months Ended June 30, 2024 and 2023 Paid-in<br><br> Capital Treasury<br> Stock Retained<br> Earnings Accumulated<br> Other<br> Comprehensive<br> Loss Total
Balance, April 1, 2023 — $ 96,880 $ — $ 135,425 $ (7,032 ) $ 225,273
Net income — — — 6,788 — 6,788
Other comprehensive loss — — — — (1,482 ) (1,482 )
Dividends declared 0.30 per share — — — (1,876 ) — (1,876 )
Dividend reinvestment plan (1,083 shares) — 27 — (27 ) — —
Stock-based compensation expense — 196 — — — 196
Balance, June 30, 2023 — $ 97,103 $ — $ 140,310 $ (8,514 ) $ 228,899
Balance, April 1, 2024 — $ 98,312 $ (579 ) $ 151,860 $ (7,785 ) $ 241,808
Net income — — — 5,126 — 5,126
Other comprehensive loss — — — — (794 ) (794 )
Treasury stock repurchases (8,500 shares) — — (263 ) — — (263 )
Stock options exercised (40,050 shares) — 556 — — — 556
Dividends declared 0.30 per share — — — (1,868 ) — (1,868 )
Dividend reinvestment plan (1,141 shares) — 35 — (35 ) — —
Stock-based compensation expense — 276 — — — 276
Balance, June 30, 2024 — $ 99,179 $ (842 ) $ 155,083 $ (8,579 ) $ 244,841

All values are in US Dollars.

Six Months Ended June 30, 2024 and 2023 Paid-in<br><br> Capital Treasury<br> Stock Retained<br> Earnings Accumulated<br> Other<br> Comprehensive<br> Loss Total
Balance, January 1, 2023 34,547 $ 81,291 $ (19,452 ) $ 131,488 $ (8,273 ) $ 219,601
Net income — — — 12,885 — 12,885
Other comprehensive loss — — — — (241 ) (241 )
Change in accounting principle — — — (284 ) — (284 )
Formation of Princeton Bancorp, Inc. (34,547 ) 15,095 19,452 — — —
Stock options exercised (16,307 shares) — 272 — — — 272
Dividends declared 0.60 per share — — — (3,719 ) — (3,719 )
Dividend reinvestment plan (3,343 shares) — 60 — (60 ) — —
Stock-based compensation expense — 385 — — — 385
Balance, June 30, 2023 — $ 97,103 $ — $ 140,310 $ (8,514 ) $ 228,899
Balance, January 1, 2024 — $ 98,291 $ — $ 149,414 $ (7,494 ) $ 240,211
Net income — — — 9,471 — 9,471
Other comprehensive loss — — — — (1,085 ) (1,085 )
Treasury stock repurchases (27,500 shares) — — (842 ) — (842 )
Stock options exercised (42,500 shares) — 590 — — — 590
Share redemption for tax withholding on restricted stock vesting — (249 ) — — — (249 )
Dividends declared 0.60 per share — — — (3,734 ) — (3,734 )
Dividend reinvestment plan (2,159 shares) — 68 — (68 ) — —
Stock-based compensation expense — 479 — — — 479
Balance, June 30, 2024 — $ 99,179 $ (842 ) $ 155,083 $ (8,579 ) $ 244,841

All values are in US Dollars.

See accompanying notes to unaudited consolidated financial statements.

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PRINCETON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Six Months Ended June 30,
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,471 $ 12,885
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 68 2,728
Depreciation and amortization 817 670
Stock-based compensation expense 479 385
Amortization of premiums and accretion of discount on securities 99 19
Accretion of net deferred loan fees and costs (721 ) (1,005 )
Increase in cash surrender value of bank-owned life insurance (769 ) (585 )
Deferred income tax 1,252 (752 )
Amortization of core deposit intangible 231 262
Bargain purchase gain — (9,696 )
(Increase) decrease in accrued interest receivable and other assets (1,275 ) 10,310
(Decrease) in accrued interest payable and other liabilities (518 ) (2,416 )
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,134 12,805
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of <br>available-for-sale<br> securities (49,331 ) (345 )
Principal repayments and maturities on securities <br>available-for-sale 6,894 4,028
Maturities, calls and principal repayments of securities <br>held-to-maturity 28 4
Net (increase) decrease in loans (24,296 ) 56,082
Cash paid for acquisition — (25,414 )
Cash received from acquisition — 23,181
Purchases of premises and equipment (446 ) (1,069 )
Redemption (purchases) of restricted bank stock (331 ) 357
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES (67,482 ) 56,824
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 63,331 33,468
Proceeds from overnight borrowings — (10,000 )
Cash dividends (3,734 ) (3,719 )
Share redemption for tax witholding on restricted stock vesting (249 ) —
Purchase of treasury stock (842 ) —
Proceeds from exercise of stock options 590 272
NET CASH PROVIDED BY FINANCING ACTIVITIES 59,096 20,021
NET INCREASE IN CASH AND CASH EQUIVALENTS 748 89,650
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 150,557 53,351
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 151,305 $ 143,001
SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid $ 24,174 $ 6,157
Income taxes paid $ 1,279 $ 3,455
Net assets acquired from Noah Bank $ — $ 239,451
Net liabilities assumed from Noah Bank $ — $ 204,341

See accompanying notes to unaudited consolidated financial statements.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 1 – Summary of Significant Accounting Policies

Organization and Nature of Operations

The Bank of Princeton (the “Bank”) was incorporated on March 5, 2007 , under the laws of the State of New Jersey and is a New Jersey state-chartered banking institution. The Bank was granted its bank charter on April 17, 2007 , commenced operations on April 23, 2007 , and is a full-service bank providing personal and business lending and deposit services. As a state-chartered bank, the Bank is subject to regulation by the New Jersey Department of Banking and Insurance and the Federal Deposit Insurance Corporation (“FDIC”). The area served by the Bank, through its 29 branches, is generally an area within an approximate 50-mile radius of Princeton, NJ, including parts of Burlington, Camden, Gloucester, Hunterdon, Mercer, Middlesex, Ocean, and Somerset Counties in New Jersey, and additional areas in portions of Philadelphia, Montgomery, and Bucks Counties in Pennsylvania. The Bank also has two retail branches and conducts loan origination activities in select areas of New York.

The Bank offers traditional retail banking services, one-to-four-family residential mortgage loans, multi-family and commercial mortgage loans, construction loans, commercial business loans and consumer loans, including home equity loans and lines of credit.

On January 10, 2023, Princeton Bancorp, Inc., a Pennsylvania corporation formed by the Bank (the “Company”), acquired all the outstanding stock of the Bank in a corporate reorganization. As a result, the Bank became the sole direct subsidiary of the Company, the Company became the holding company for the Bank and the stockholders of the Bank became stockholders of the Company. As of June 30, 2024, the Company had 212 total employees and 210 full-time equivalent employees.

On May 19, 2023, the Company completed the acquisition of Noah Bank, a Pennsylvania chartered state bank headquartered in Elkins Park, Pennsylvania that primarily served the Philadelphia, North New Jersey, and New York City markets. On that date, the Company acquired 100% of the outstanding common stock of Noah Bank for cash, and Noah Bank was merged with and into the Bank.

On January 18, 2024, the Company announced that it has entered into a definitive agreement and plan of merger pursuant to which the Company will acquire Cornerstone Financial Corporation (“Cornerstone”), the parent company of Cornerstone Bank, Mount Laurel, New Jersey in a transaction valued at approximately $17.9 million. Under the terms of the merger agreement, which has been approved by the boards of directors of both companies, Cornerstone will merge with, into and under the charter of the Company. In the merger, each share of Cornerstone common stock outstanding will be exchanged for 0.24 shares of the Company, subject to adjustment, having a value of $8.16 per share based on the $34.00 closing price of the Company common stock on January 17, 2024. Each share of Cornerstone’s preferred stock outstanding will be exchanged for its stated value of $1,000 per share. The transaction received Cornerstone stockholder approval and all applicable regulatory approvals, and is expected to close on August 23, 2024.

Basis of Financial Statement Presentation

The unaudited consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, the Bank, and the Bank’s wholly owned subsidiaries: Bayard Lane, LLC, Bayard Properties, LLC, 112 Fifth Avenue, LLC, TBOP Delaware Investment Company and TBOP REIT, Inc. All significant inter-company accounts and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission and the FDIC. Accordingly, they do not include all the information and disclosures required by GAAP for annual financial statements. In management’s opinion, the unaudited consolidated financial statements contain all adjustments, which include normal and recurring adjustments necessary for a fair presentation of the financial position and results of operations for the interim periods presented. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 1 – Summary of Significant Accounting Policies (continued)

Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Because of uncertainties associated with estimating the amounts, timing and likelihood of possible outcomes, actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, the valuation of acquired assets and liabilities, and evaluation of the potential impairment of goodwill.

Management believes that the allowance for credit losses is adequate as of June 30, 2024. While management uses current information to recognize losses on loans, future additions to the allowance for credit losses may be necessary based on changes in economic conditions in the market area or other factors.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. Such agencies may require the Company to effect certain changes that result in additions to the allowance based on their judgments about information available to them at the time of their examinations.

Reclassifications

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the current year’s presentation.

Recent Accounting Pronouncements Not Yet Adopted

The Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 in November 2023, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. Early adoption is permitted. The company has only one reportable segment, ASU 2023-07 is not expected to have a significant impact on the Company’s consolidated financial statements.

ASU No. 2023-09 In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in the ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the consolidated financial statements.

ASU 2023-06, “Disclosure improvements” amends disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. The effective dates will depend, in part, on whether an entity is already subject to the SEC’s current disclosure requirements. This ASU is not expected to have a material impact on the Company’s consolidated financial statements.

Note 2 - Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income by the weighted average number of common shares outstanding for the period adjusted to include the effect of outstanding stock options, if dilutive, using the treasury stock method. Shares issued during any period are weighted for the portion of the period they were outstanding.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 - Earnings Per Share (continued)

The following schedule presents earnings per share data for the three-month periods ended June 30, 2024, and 2023 (in thousands, except per share data):

Three months ended<br> June 30,
2024 2023
Net income applicable to common stock $ 5,126 $ 6,788
Weighted average number of common shares outstanding 6,332 6,270
Basic earnings per share $ 0.81 $ 1.08
Net income applicable to common stock $ 5,126 $ 6,788
Weighted average number of common shares outstanding 6,332 6,270
Dilutive effect on common shares outstanding 85 95
Weighted average number of diluted common shares outstanding 6,417 6,365
Diluted earnings per share $ 0.80 $ 1.07

The following schedule presents earnings per share data for the six-month periods ended June 30, 2024, and 2023 (in thousands, except per share data):

Six months ended<br> June 30,
2024 2023
Net income applicable to common stock $ 9,471 $ 12,885
Weighted average number of common shares outstanding 6,330 6,263
Basic earnings per share $ 1.50 $ 2.06
Net income applicable to common stock $ 9,471 $ 12,885
Weighted average number of common shares outstanding 6,330 6,263
Dilutive effect on common shares outstanding 79 112
Weighted average number of diluted common shares outstanding 6,410 6,375
Diluted earnings per share $ 1.48 $ 2.02

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 - Earnings Per Share (concluded)

The following schedule presents stock options granted but not exercised and the amount of share that were anti-dilutive because the weighted average exercise price equaled or exceeded the estimated fair value of our common stock for the three- and six-months period ended June 30, 2024, and 2023:

Three months ended June 30,
2024 2023
Options Weighted Ave<br>Exercise Price Options Weighted Ave<br>Exercise Price
Options to purchase 310,582 $ 32.61 276,704 $ 19.56
Anti-dilutive — $ — 95,750 $ 32.45
Six months ended June 30,
--- --- --- --- --- --- --- --- ---
2024 2023
Options Weighted Ave<br>Exercise<br><br>Price Options Weighted Ave<br>Exercise Price
Options to purchase 321,403 $ 24.61 280,732 $ 19.49
Anti-dilutive — — 95,750 $ 32.45

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 – Investment Securities

The following summarizes the amortized cost and fair value of securities available-for-sale at June 30, 2024 and December 31, 2023 with gross unrealized gains and losses therein:

June 30, 2024
Amortized<br> Cost Gross<br> Unrealized<br> Gains Gross<br> Unrealized<br> Losses Fair Value
(In thousands)
Available <br>-for-sale
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) $ 86,106 $ 154 $ (6,652 ) $ 79,608
U.S. government agency securities 11,260 — (1,130 ) 10,130
Obligations of state and political subdivisions 44,052 1 (4,365 ) 39,688
Small business association (SBA) securities 2,256 8 (1 ) 2,263
Total $ 143,674 $ 163 $ (12,148 ) $ 131,689
December 31, 2023
--- --- --- --- --- --- --- --- --- ---
Amortized<br> Cost Gross<br> Unrealized<br> Gains Gross<br> Unrealized<br> Losses Fair<br> Value
(In thousands)
Available <br>-for-sale
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) $ 48,399 $ 219 $ (5,984 ) $ 42,634
U.S. government agency securities 6,260 — (969 ) 5,291
Obligations of state and political subdivisions 44,059 12 (3,262 ) 40,809
Small business association (SBA) securities 2,617 2 (1 ) 2,618
Total $ 101,335 $ 233 $ (10,216 ) $ 91,352

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 – Investment Securities (continued)

The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of related securities available-for-sale at June 30, 2024 and December 31, 2023 are as follows:

Less than 12 Months More than 12 Months Total
Fair<br> Value Unrealized<br> Losses Fair<br> Value Unrealized<br> Losses Fair<br> Value Unrealized<br> Losses
(In thousands)
June 30, 2024
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) $ 14,751 $ (164 ) $ 29,187 $ (6,488 ) $ 43,938 $ (6,652 )
U.S. government agency securities 4,945 (55 ) 5,185 (1,075 ) 10,130 (1,130 )
Obligations of state and political subdivisions 3,369 (71 ) 34,019 (4,294 ) 37,388 (4,365 )
Small business association (SBA) securities — — 577 (1 ) 577 (1 )
Total $ 23,065 $ (290 ) $ 68,968 $ (11,858 ) $ 92,033 $ (12,148 )
Less than 12 Months More than 12 Months Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Fair<br> Value Unrealized<br> Losses Fair<br> Value Unrealized<br> Losses Fair<br> Value Unrealized<br> Losses
(In thousands)
December 31, 2023
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs) $ 2,858 $ (14 ) $ 31,398 $ (5,970 ) $ 34,256 $ (5,984 )
U.S. government agency securities — — 5,291 (969 ) 5,291 (969 )
Obligations of state and political subdivisions 5,117 (102 ) 30,646 (3,160 ) 35,763 (3,262 )
Small business association (SBA) securities 723 (1 ) — — 723 (1 )
$ 8,698 $ (117 ) $ 67,335 $ (10,099 ) $ 76,033 $ (10,216 )

The amortized cost and fair value of securities available-for-sale at June 30, 2024 by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties:

Amortized<br> Cost Fair Value
(In thousands)
Due in one year or less $ 1,814 $ 1,809
Due after one year through five years 4,794 4,633
Due after five years through ten years 38,000 34,636
Due after ten years 10,704 8,740
Mortgage-backed securities (GSEs) 86,106 79,608
Small business association (SBA) securities 2,256 2,263
$ 143,674 $ 131,689

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 – Investment Securities (concluded)

Proceeds from calls and maturities of securities available-for-sale were not significant for the three and six-month period ended June 30, 2024.

The Company uses a defined CECL methodology for allowance for credit losses on its investment securities available-for-sale. The Company did not have an allowance for credit losses on its investment securities available-for-sale as of June 30, 2024.

The Company’s securities primarily consist of the following types of instruments; U.S. guaranteed mortgage-backed securities, U.S guaranteed agency bonds, state and political subdivision issued bonds and mortgage related securities guaranteed by the SBA. We believe it is reasonable to expect that the securities with a credit guarantee of the U.S. government will have a zero-credit loss. Therefore, no reserve was recorded for U.S. guaranteed securities or bonds at June 30, 2024. The state and political subdivision securities carry a minimum investment rating of A by either Moody’s or Standard and Poor. Some of the smaller municipalities also have insurance to cover the Company in the event of default. Therefore, the Company did not project a credit loss and therefore no reserve was recorded as of June 30, 2024.

At June 30, 2024, the Company’s available-for-sale securities portfolio consisted of approximately 234 securities, of which 174 available-for-sale securities were in an unrealized loss position for more than twelve months and 21 available-for-sale securities were in a loss position for less than twelve months. The available-for-sale securities in a loss position for more than twelve months consisted of 106 municipal securities aggregating $34.0 million with a loss of $4.3 million, 60 mortgage-backed securities-GSE aggregating $29.2 million with a loss of $6.5 million and 8 agency securities aggregating $5.8 million with a loss of $1.1 million. The Company does not intend to sell these securities, and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. Unrealized losses primarily relate to interest rate fluctuations and not credit concerns.

There are no securities pledged as of June 30, 2024, and December 31, 2023.

Note 4 – Loans Receivable

Loans receivable, net at June 30, 2024 and December 31, 2023 were comprised of the following:

June 30,<br> 2024 December 31,<br> 2023
(In thousands)
Commercial real estate $ 1,194,279 $ 1,142,864
Commercial and industrial 50,290 50,961
Construction 287,290 310,187
Residential first-lien mortgage 36,075 38,040
Home equity/consumer 7,583 8,081
Total loans 1,575,517 1,550,133
Deferred fees and costs (2,165 ) (1,798 )
Loans, net $ 1,573,352 $ 1,548,335

Except for the Noah Bank acquisition during the three-month period ended June 30, 2023, the Company did not purchase any loans during the three and six months ended June 30, 2024, and 2023, respectively.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The Company uses the discounted cash flow methodology in determining the appropriate quantitative adjustments, which projects future losses, based on historical and peer loss data, as part of the allowance for credit losses (“ACL”) reserve. Qualitative adjustments include and consider changes in national, regional, and local economic and business conditions, an assessment of the lending environment, including underwriting standards, and other factors affecting credit quality. There were no significant changes to the Company’s ACL methodology for the quarter ended June 30, 2024.

The following table presents the components of the allowance for credit losses:

June 30,<br> 2024 December 31,<br> 2023
(In thousands)
Allowance for credit losses - loans $ (18,464 ) $ (18,492 )
Allowance for credit losses - off balance sheet (524 ) (589 )
$ (18,988 ) $ (19,081 )

The following table presents nonaccrual loans by segment of the loan portfolio as of June 30, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023
With a<br> Related<br> Allowance Without a<br> Related<br> Allowance With a<br> Related<br> Allowance Without a<br> Related<br> Allowance
(In thousands)
Commercial real estate $ — $ 2,150 $ — $ 4,485
Commercial and industrial 32 $ 885 — 2,116
Construction — — — —
Residential first-lien mortgage — 127 — 107
Home equity/consumer — 24 — —
Total nonaccrual loans $ 32 $ 3,186 $ — $ 6,708

The calculation of the allowance for credit losses does not include any accrued interest receivable. The Company’s policy is to write off any interest not collected after 90 days. During the six-month period ended June 30, 2024, the Company wrote off $666 thousand in accrued interest receivable for loans, compared to $228 thousand for the six-month period ended June 30, 2023. Accrued interest receivable related to loans, at June 30, 2024, and December 30, 2023, was $6.1 million and $5.5 million, respectively. The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loan receivables by the length of time a recorded payment is past due. The following table presents the segments of the loan portfolio, summarized by the past due status as of June 30, 2024:

30-59<br><br> Days<br> Past<br> Due 60-89<br><br> Days<br> Past<br> Due >90<br> Days<br> Past<br> Due Total<br> Past<br> Due Current Total<br><br> <br>Loans<br> Receivable Loans<br> Receivable<br> >90 Days<br> and<br> Accruing
(In thousands)
Commercial real estate $ 1,831 $ — $ 2,150 $ 3,981 $ 1,190,298 $ 1,194,279 $ —
Commercial and industrial — 245 885 1,130 49,160 50,290 —
Construction — — — — 287,290 287,290 —
Residential first-lien mortgage 17 101 127 245 35,830 36,075 —
Home equity/consumer — — 24 24 7,559 7,583 —
Total $ 1,848 $ 346 $ 3,186 $ 5,380 $ 1,570,137 $ 1,575,517 $ —

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The following table presents the segments of the loan portfolio summarized by the past due status as of December 31, 2023:

30-59<br><br> Days<br> Past<br> Due 60-89<br><br> Days<br> Past<br> Due >90<br> Days<br> Past<br> Due Total<br> Past<br> Due Current Total Loans<br> Receivable Loans<br> Receivable<br> >90 Days<br> and<br> Accruing
(In thousands)
Commercial real estate $ 159 $ — $ 4,485 $ 4,644 $ 1,138,220 $ 1,142,864 $ —
Commercial and industrial 303 — 2,116 2,419 48,542 50,961 —
Construction — — — — 310,187 310,187 —
Residential first-lien mortgage — — 107 107 37,933 38,040 —
Home equity/consumer 29 — — 29 8,052 8,081 —
Total $ 491 $ — $ 6,708 $ 7,199 $ 1,542,934 $ 1,550,133 $ —

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation and current economic trends, among other factors. The Company evaluates risk ratings on an ongoing basis and assigns one of the following ratings: pass, special mention, substandard and doubtful. The Company engages a third party to review its assessment on a semiannual basis. The Company classifies residential and consumer loans as either performing or nonperforming based on payment status.

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of June 30, 2024. Gross charge-offs are included for the six months ended June 30, 2024.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

2024 2023 2022 2021 2020 Prior Revolving<br> Loans Total
(Dollars in thousands)
Commercial real estate
Pass $ 65,889 $ 131,199 $ 243,186 $ 114,346 $ 61,325 $ 571,458 $ 2,061 $ 1,189,464
Special mention — — — — — 2,665 — 2,665
Substandard — — — — — 2,150 — 2,150
Total commercial real estate 65,889 131,199 243,186 114,346 61,325 576,273 2,061 1,194,279
Current period gross<br><br>charge-offs (237 ) (237 )
Commercial and industrial
Pass 3,224 (1,429 ) 3,425 11,491 (1,087 ) (15,366 ) 49,008 48,752
Special mention — — — — — 653 — 653
Substandard — — — — — 885 — 885
Total commercial and industrial 3,224 (1,429 ) 3,425 11,491 (1,087 ) (13,828 ) 49,008 50,290
Current period gross charge-offs (130 ) (130 )
Construction
Pass (28,493 ) 20,506 55,100 117,590 16,064 259 106,263 287,290
Special mention — — — — — — — —
Substandard — — — — — — — —
Total construction (28,493 ) 20,506 55,100 117,590 16,064 259 106,263 287,290
Residential first-lien mortgage
Performing — — 952 3,756 2,793 28,426 — 35,948
Nonperforming — — — — — 127 — 127
Total residential first-lien mortgage — — 952 3,756 2,793 28,553 — 36,075
Home equity/consumer
Performing 431 1,203 632 (284 ) (384 ) 1,457 4,435 7,559
Nonperforming — — 24 — — — — 24
Total home equity/consumer 431 1,203 656 (284 ) (384 ) 1,457 4,435 7,583
Total
Pass 41,051 151,479 303,295 246,899 78,711 586,234 161,767 1,569,013
Special mention — — — — — 3,318 — 3,318
Substandard — — 24 — — 3,162 — 3,186
Total loans $ 41,051 $ 151,479 $ 303,319 $ 246,899 $ 78,711 $ 592,714 $ 161,767 $ 1,575,517

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of December 31, 2023. Gross charge-offs are included for the year-ended December 31, 2023.

2023 2022 2021 2020 2019 Prior Revolving<br> Loans Total
(Dollars in thousands)
Commercial real estate
Pass $ 132,834 $ 233,436 $ 116,836 $ 53,574 $ 175,991 $ 417,417 $ 5,551 $ 1,135,639
Special mention — — — — — 2,740 — 2,740
Substandard — — — — — 4,485 — 4,485
Total commercial real estate 132,834 233,436 116,836 53,574 175,991 424,642 5,551 1,142,864
Current period gross charge-offs 1,718 1,718
Commercial and industrial
Pass 2,098 2,304 11,925 1,962 1,133 13,954 15,045 48,421
Special mention — — — — — 500 — 500
Substandard — — — — — 2,040 — 2,040
Total commercial and industrial 2,098 2,304 11,925 1,962 1,133 16,494 15,045 50,961
Current period gross charge-offs 55 55
Construction
Pass 5,832 18,379 91,774 19,216 — 8,484 166,502 310,187
Special mention — — — — — — — —
Substandard — — — — — — — —
Total construction 5,832 18,379 91,774 19,216 — 8,484 166,502 310,187
Current period gross charge-offs 148 148
Residential first-lien mortgage
Performing — 979 4,792 2,839 1,545 27,778 — 37,933
Nonperforming — — — — — 107 — 107
Total residential first-lien mortgage — 979 4,792 2,839 1,545 27,885 — 38,040
Current period gross charge-offs 2 2
Home equity/consumer
Performing 1,153 1,016 1,172 — — 1,606 3,134 8,081
Nonperforming — — — — — — — —
Total home equity/consumer 1,153 1,016 1,172 — — 1,606 3,134 8,081
Total
Pass/performing 141,917 256,114 226,499 77,591 178,669 469,239 190,232 1,540,261
Special mention — — — — — 3,240 — 3,240
Substandard /nonperforming — — — — — 6,632 — 6,632
Total loans $ 141,917 $ 256,114 $ 226,499 $ 77,591 $ 178,669 $ 479,111 $ 190,232 $ 1,550,133

The following table presents the allowance for credit losses on loans receivable at and for the three months ended June 30, 2024:

Commercial<br> real estate Commercial<br> and<br> industrial Construction Residential<br> first-lien<br> mortgage Home equity/<br> consumer Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 16,446 $ 513 $ 1,021 $ 572 $ 66 $ 18,618
Provision (reversal)<br>1 106 (80 ) (277 ) 88 (6 ) (169 )
Charge-offs — (84 ) — — — (84 )
Recoveries 71 28 — — — 99
Total $ 16,623 $ 377 $ 744 $ 660 $ 60 $ 18,464
1 The reversal of credit losses on the Consolidated Statement of Income is $<br>118<br> thousand comprising of a $<br>169<br> thousand decrease to the allowance for credit losses on loans and a $<br>51<br> thousand increase to the reserve for unfunded liabilities.
--- ---

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The following table presents the allowance for credit losses on loans receivable at and for the six months ended June 30, 2024:

Commercial<br> real estate Commercial<br> and<br> industrial Construction Residential<br> first-lien<br> mortgage Home equity/<br> consumer Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 16,047 $ 488 $ 1,145 $ 725 $ 87 $ 18,492
Provision (reversal)<br>1 737 (111 ) (401 ) (65 ) (27 ) 133
Charge-offs (237 ) (130 ) — — — (367 )
Recoveries 76 130 — — — 206
Total $ 16,623 $ 377 $ 744 $ 660 $ 60 $ 18,464
1 The provision for credit losses on the Consolidated Statement of Income is $<br>68<br> thousand comprising of a $<br>133<br> thousand increase to the allowance for credit losses on loans and a $<br>65<br> thousand reduction to the reserve for unfunded liabilities.
--- ---

The following table presents the allowance for credit losses on loans receivable at and for the three months ended June 30, 2023:

Commercial<br> real estate Commercial<br> and<br> industrial Construction Residential<br> first-lien<br> mortgage Home equity/<br> consumer Unallocated Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 10,037 $ 214 $ 5,349 $ 654 $ 253 $ — $ 16,507
Non-purchased<br> credit deteriorated loans 1,586 105 — 16 — — 1,707
Purchased credit deteriorated loans 498 103 — — — — 601
Provision<br>1 1,697 (19 ) (672 ) (7 ) (3 ) — 996
Charge-offs (1,718 ) — (148 ) (2 ) — — (1,868 )
Recoveries 23 4 — — — — 27
Total $ 12,123 $ 407 $ 4,529 $ 661 $ 250 $ — $ 17,970
1 The provision for credit losses on the Consolidated Statement of Income is $<br>2.5<br> million comprising $<br>1.7<br> million related to <br>non-PCD<br> loans acquired, a $996 thousand increase to the allowance for credit losses on loans and a $<br>240<br> thousand reduction to the reserve for unfunded liabilities.
--- ---

The following table presents the allowance for credit losses on loans receivable at and for the six months ended June 30, 2023:

Commercial<br> real estate Commercial<br> and<br> industrial Construction Residential<br> first-lien<br> mortgage Home equity/<br> consumer Unallocated Total
(In thousands)
Allowance for credit losses:
Beginning balance $ 8,654 $ 271 $ 6,289 $ 236 $ 45 $ 966 $ 16,461
CECL adoption 1,384 (73 ) (1,269 ) 428 195 (966 ) (301 )
CECL day 1 provision 1,586 105 — 16 — — 1,707
Purchased credit deteriorated loans 498 103 — — — — 601
Provision<br>1 1,693 (3 ) (343 ) (17 ) 10 — 1,340
Charge-offs (1,718 ) — (148 ) (2 ) — — (1,868 )
Recoveries 26 4 — — — — 30
Total $ 12,123 $ 407 $ 4,529 $ 661 $ 250 $ — $ 17,970
1 The provision for credit losses on the Consolidated Statement of Income is $<br>2.7<br> million comprising $<br>1.7<br> million related to <br>non-PCD<br> loans acquired, a $1.3 million increase to the allowance for credit losses on loans and a $<br>319<br> thousand reduction to the reserve for unfunded liabilities.
--- ---

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (concluded)

As of June 30, 2024, the Company had thirteen loans totaling $3.2 million that were individually analyzed for potential credit loss and all the loans have real estate as credit support. As of December 31, 2023, the Company had nine loans totaling $6.7 million that were individually analyzed for potential credit loss.

Occasionally, the Company will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss, proactively work with borrowers in financial difficulty, or to comply with regulations regarding the treatment of certain bankruptcy filing and discharge situations. Typically, such concessions may consist of a reduction in interest rate to a below market rate, taking into account the credit quality of the note, extension of additional credit base on receipt of adequate collateral, or a deferment or reduction of payments (principal or interest) which materially alters the Company’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. When principal forgiveness is provided, the amount forgiven is charged off against the allowance for credit losses on loans.

There were no modifications to borrowers with financial difficulties and no loans that defaulted for the six-month periods ended June 30, 2024, and June 30, 2023.

Note 5 – Deposits

The components of deposits were as follows:

December 31,<br><br> <br>2023
Demand, non-interest-bearing checking 245,073 14.42 % $ 249,282 15.24 %
Demand, interest-bearing checking 223,759 13.17 % 247,939 15.16 %
Savings 146,935 8.65 % 146,484 8.96 %
Money market 403,926 23.77 % 354,005 21.64 %
Time deposits, 250,000 and over 187,699 11.05 % 173,614 10.61 %
Time deposits, other 491,680 28.94 % 464,417 28.39 %
1,699,072 100.00 % $ 1,635,741 100.00 %

All values are in US Dollars.

Note 6 – Borrowings

At June 30, 2024, and December 31, 2023, the Company had no borrowings outstanding.

Note 7 – Fair Value Measurements and Disclosures

The Company follows the guidance on fair value measurements now codified as FASB ASC Topic 820, Fair Value Measurement (“Topic 820”) . Fair value measurements are not adjusted for transaction costs. Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments, however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective period-end and have not been reevaluated or updated for the purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different from the amounts reported at each period-end.

The fair value measurement hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (continued)

Level

1 : Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level

2 : Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level

3 : Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2024 were as follows:

Description (Level 1)<br> Quoted Price<br> in Active<br> Markets for<br> Identical<br> Assets (Level 2)<br> Significant<br> Other<br> Observable<br> Inputs (Level 3)<br> Significant<br> Unobservable<br> Inputs Total Fair<br> Value<br> June 30,<br> 2024
(In thousands)
Mortgage-backed securities <br>-<br> U.S. government sponsored enterprise (GSEs) $ — $ 79,608 $ — $ 79,608
U.S. government agency securities — 10,130 — 10,130
Obligations of state and political subdivisions — 39,688 — 39,688
Small Business Association (SBA) securities — 2,263 — 2,263
Securities <br>available-for-sale<br> at fair value $ — $ 131,689 $ — $ 131,689

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy, used at December 31, 2023 were as follows:

Description (Level 1)<br> Quoted Price<br> in Active<br> Markets for<br> Identical<br> Assets (Level 2)<br> Significant<br> Other<br> Observable<br> Inputs (Level 3)<br> Significant<br> Unobservable<br> Inputs Total Fair<br> Value<br> December 31,<br> 2023
(In thousands)
Mortgage-backed securities <br>-<br> U.S. government sponsored enterprise (GSEs) $ — $ 42,634 $ — $ 42,634
U.S. government agency securities 5,291 — 5,291
Obligations of state and political subdivisions — 40,809 — 40,809
Small Business Association (SBA) securities — 2,618 — 2,618
Securities <br>available-for-sale<br> at fair value $ — $ 91,352 $ — $ 91,352

There were no assets or liabilities measured at fair value on a nonrecurring basis, at June 30, 2024.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (continued)

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2023, were as follows:

Description (Level 1)<br> Quoted Price<br> in Active<br> Markets for<br> Identical<br> Assets (Level 2)<br> Significant<br> Other<br> Observable<br> Inputs (Level 3)<br> Significant<br> Unobservable<br> Inputs Total Fair<br> Value<br> December 31<br> 2023
(In thousands)
Collateral dependent loan $ — $ — $ 4,485 $ 4,485
$ — $ — $ 4,485 $ 4,485

The following table presents quantitative information using Level 3 fair value measurements at December 31, 2023.

Description December 31,<br> 2023 Valuation<br> Technique Unobservable<br> Input Range<br> (Weighted<br> Average)
(Dollars in thousands)
Discount 0.0 %
Collateral dependent loan $ 4,485 Collateral<br>1 adjustment (0.0 %)
1 Value based on third party offer to purchase note from the Bank.
--- ---

There were no transfers between fair value hierarchy levels during the three months ended June 30, 2024 or 2023. The Company’s policy is to recognize transfers between levels as of the end of the reporting period.

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Investment Securities

The fair value of securities available-for-sale (carried at fair value) and held-to-maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. Level 2 debt securities are valued by a third-party pricing service commonly used in the banking industry, and not adjusted by management. Level 2 fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, live trading levels, trade execution date, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

Individual evaluated loans (generally carried at fair value)

Individual loans carried at fair value are those loans in which the Company has measured for a reserve and are generally based on the fair value of the related loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds, discounted for estimated selling costs or other factors the Company determines will impact collection of proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (continued)

The carrying amounts and estimated fair value of financial instruments at June 30, 2024 are as follows:

June 30, 2024
Carrying<br> Amount Estimated<br> Fair Value Level 1 Level 2 Level 3
(In thousands)
Financial Assets:
Cash and cash equivalents $ 151,305 $ 151,305 $ 151,305 $ — $ —
Securities <br>available-for-sale<br> at fair value 131,689 131,689 — 131,689 —
Securities <br>held-to-maturity 165 165 — 165 —
Loans receivable, net 1,554,888 1,497,979 — — 1,497,979
Restricted investments in bank stock 1,741 1,741 — 1,741 —
Accrued interest receivable 7,052 7,052 — 7,052 —
Equity method investments 9,426 9,426 — 5,900 3,526
Mortgage servicing rights 1,216 1,216 — 1,216 —
Financial Liabilities:
Deposits $ 1,699,072 1,632,808 $ — $ 1,632,808 $ —
Accrued interest payable 11,048 11,048 — 11,048 —

The carrying amounts and estimated fair value of financial instruments at December 31, 2023 are as follows:

December 31, 2023
Carrying<br> Amount Estimated<br> Fair Value Level 1 Level 2 Level 3
(In thousands)
Financial assets:
Cash and cash equivalents $ 150,557 $ 150,557 $ 150,557 $ — $ —
Securities <br>available-for-sale<br> at fair value 91,352 91,352 — 91,352 —
Securities <br>held-to-maturity 193 192 — 192 —
Loans receivable, net 1,529,843 1,425,814 — — 1,425,814
Restricted investments in bank stock 1,410 1,410 — 1,410 —
Accrued interest receivable 6,089 6,089 — 6,089 —
Equity method investments 8,296 8,296 — 5,900 2,396
Mortgage servicing rights 1,562 1,562 — 1,562 —
Financial Liabilities:
Deposits $ 1,635,741 $ 1,581,762 $ — $ 1,581,762 $ —
Accrued interest payable 9,162 9,162 — 9,162 —

The fair value of cash and cash equivalents, restricted bank stock, accrued interest receivable, equity method investments, and accrued interest payable are measured at the Company’s carrying amount.

The fair value of loans, deposits and borrowings are measured on a discounted basis using similar rates and terms.

The Mortgage servicing rights are carried at the lower of cost or estimated fair value. The estimated fair value of MSR is obtained through independent third-party valuations.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (concluded)

Limitations

The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that could be realized if all or substantially all the financial instruments were offered for sale. This is due to the fact that no market exists for a sizable portion of the loan, deposit and off-balance sheet instruments.

In addition, the fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be practical due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

Note 8 – Leases

Leases (Topic 842) establishes a right of use model that requires a lessee to record a right of use asset (“ROU”) and a lease liability for all leases with terms longer than 12 months. The Company is obligated under 26 operating lease agreements for 25 branches and its corporate offices with terms extending through 2039. The Company’s lease agreements include options to renew at the Company’s discretion. The extensions are reasonably certain to be exercised, therefore they were considered in the calculations of the ROU asset and lease liability.

The following table represents the classification of the Company’s right of use and lease liability.

Statement of Financial<br><br>Condition Location Six Months Ended<br> June 30, 2024 Twelve Months Ended<br> December 31, 2023
(In thousands)
Operating Lease Right of Use Asset:
Gross carrying amount $ 22,726 $ 16,026
Increased asset from new leases — 9,799
Accumulated amortization (668 ) (2,427 )
Net book value Operating lease right-of-use asset $ 22,058 $ 23,398
Operating Lease Liability:
Lease liability Operating lease liability $ 23,015 $ 24,280

As of June 30, 2024, the weighted-average remaining lease terms for operating leases was 11.3 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.49%. The Company used FHLB fixed rate advances or at the time the lease was placed in service for the term most closely aligning with remaining lease term.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Leases (concluded)

Future minimum payments under operating leases with terms longer than 12 months are as follows at June 30, 2024 (in thousands):

Twelve months ended June 30,
2024 $ 3,505
2025 3,410
2026 3,208
2027 2,957
2028 2,609
Thereafter 15,182
Total future operating lease payment 30,871
Amounts representing interest (7,856 )
Present value of net future lease payments $ 23,015
Three Months Ended<br> June 30, Six Months Ended<br> June 30,
--- --- --- --- --- --- --- --- ---
2024 2023 2024 2023
(In thousands) (In thousands)
Lease cost:
Operating lease $ 976 $ 930 $ 1,962 $ 1,595
Short-term lease cost 17 63 65 65
Total lease cost $ 993 $ 993 $ 2,027 $ 1,660
Other information:
Cash paid for amounts included in the measurement of lease liabilities $ 871 $ 696 $ 1,751 $ 1,281

Note 9 – Goodwill and Core Deposit Intangible

In accordance with ASC 805, the Company recorded $8.9 million of goodwill along with a core deposit intangible asset of $4.2 million for the five branches acquired in 2019. The Noah Bank acquisition that occurred in 2023 did not generate any goodwill, but the Bank recorded $98 thousand in core deposit intangible asset. The core deposit intangible asset is being amortized over 10 years, using the sum of the year’s digits. Except as set forth below, GAAP requires that goodwill be tested for impairment annually (with the Company’s annual evaluation occurring on May 31 of each year) or more frequently if impairment indicators arise. The reporting unit was determined to be our community banking operations, which is our only operating segment.

ASC Topic 350-20 guidance requires an annual review of the fair value of a Reporting Unit that has goodwill in order to determine if it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a Reporting Unit is less than its carrying amount, including goodwill. A quantitative factor test can be performed to determine whether it is necessary to perform a quantitative goodwill impairment test. If this qualitative test determines it is not more likely than not (less than 50% probability) that the fair value of the Reporting Unit is less than the Carrying Value, then the Company does not have to perform a quantitative test and goodwill can be considered not impaired. The Company performed its annual review at May 31, 2024 and determined that it was more than 50% probable the fair value of the Reporting Unit exceeds the then Carrying Value, therefore a quantitative test was not required as of May 31, 2024.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 9 – Goodwill and Core Deposit Intangible (concluded)

The changes in the carrying amount of goodwill and core deposit intangible assets are summarized as follows:

Goodwill Core Deposit<br> Intangible
(In thousands)
Balance at December 31, 2023 $ 8,853 $ 1,422
Amortization expense — (231 )
Balance at June 30, 2024 $ 8,853 $ 1,191

As of June 30, 2024, the remaining current fiscal year and future fiscal periods amortization for the core deposit intangible is (in thousands):

2024 204
2025 353
2026 274
2027 195
Thereafter 165
Total $ 1,191

Note 10 – Subsequent Events

On July 24, 2024, the Board of Directors declared a cash dividend of $0.30 per share of common stock to shareholders of record on August 9, 2024, payable on August 30, 2024.

On July 25, 2024, the Company announced it received the necessary approvals from shareholders and all applicable regulatory authorities in connection with its acquisition of Cornerstone Financial Corporation, which is expected to close on August 23, 2024 .

Note 11 – Risk and Uncertainties

The occurrence of events which adversely affect the global, national, and regional economies may have a negative impact on our business. Like other financial institutions, our business relies upon the ability and willingness of our customers to transact business with us, including banking, borrowing and other financial transactions. A strong and stable economy at each of the local, federal, and global levels is often a critical component of consumer confidence and typically correlates positively with our customers’ ability and willingness to transact certain types of business with us. Local and global events outside of our control which disrupt the New Jersey, Pennsylvania, New York, United States and/or global economy may therefore negatively impact our business and financial condition.

Government economic programs intended to backstop and bolster the economy through the pandemic have ended, and the nation’s economy has entered an inflationary phase. The Consumer Price Index has risen to levels not experienced since the 1980s while the labor market remains very tight, contributing additional inflationary pressure. To address the inflation problem, the Federal Reserve has reversed course on its previously accommodative monetary policies and aggressively increased short-term interest rates. These actions are intended to slow overall economic activity and risk entering the economy into a recession. Regional conflicts around the world, including between Russia and Ukraine, have exacerbated pandemic-related supply chain issues, upset numerous global markets including energy and certain raw materials, and generally added to economic uncertainty and geopolitical instability. Any or all could have negative downstream effects on the Company’s operating results, the extent of which is indeterminable at this time.

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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.

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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.

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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<br>LTV Balance % of portfolio Weighted Average<br>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 %

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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.

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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<br>conservation buffer<br>requirement To be well capitalized<br>under prompt corrective<br>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 %

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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.

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Average Balances, Net Interest Income, and Yields Earned and Rates Paid

The following table shows for the three-month period indicated the total dollar amount of interest earned from average interest earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average 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<br>Balances Income/<br>Expense Yield<br>Rates Average<br>Balances Income/<br>Expense Yield<br>Rates Average<br>Balances Yield<br>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 %

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Rate/Volume Analysis

The following table reflects the changes in our interest income and interest expense segregated into amounts attributable to changes in volume and in yields on interest-earning assets and interest-bearing liabilities during the periods indicated.

Three Months Ended June 30,<br>2024 vs . 2023<br>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.

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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.

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Average Balances, Net Interest Income, and Yields Earned and Rates Paid

The following table shows for the three-month period indicated the total dollar amount of interest earned from average interest earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average 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<br>Balances Income/<br>Expense Yield<br>Rates Average<br>Balances Income/<br>Expense Yield<br>Rates Average<br>Balances Yield<br>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 %

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Rate/Volume Analysis

The following table reflects the changes in our interest income and interest expense segregated into amounts attributable to changes in volume and in yields on interest-earning assets and interest-bearing liabilities during the periods indicated.

Six Months Ended<br>June 30, 2024 vs . 2023<br>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.

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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<br>Less More than 3<br>Months to 1<br>Year More than 1<br>Year to 3 Years More than 3<br>Years to 5<br>Years More than 5<br>Years Non-Rate<br>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.
--- ---

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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<br> <br>Interest Rates Net Portfolio Value
In Basis Points<br> <br>(Rate Shock) Amounts Change % Change EVE/EVA^1^ Change
(Dollars in thousands)
300 $ 291,048 ) -3.47 % 15.56 % 0.23
200 $ 296,179 ) -1.77 % 15.57 % 0.24
100 $ 298,927 ) -0.86 % 15.43 % 0.10
Static $ 301,520 15.33 %
(100) $ 306,875 1.78 % 15.36 % 0.03
(200) $ 308,278 2.24 % 15.24 % (0.09 )
(300) $ 302,800 0.42 % 14.79 % (0.54 )

All values are in US Dollars.

^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.

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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.

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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<br>Number of<br>Shares<br>Purchased Average<br>Price<br>Paid Per<br>Share Total Number of<br>Shares Purchased<br>as Part of Publicly<br>Announced Plans or<br>Program ^1^ Maximum Number<br>of Shares that May<br>Yet be Purchased<br>Under Plans or<br>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.

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Item 5. Other Information

During the fiscal quarter ended June 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule

10b5-1 trading arrangement”.

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Item 6. Exhibits

Exhibit<br>Number 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

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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

EX-3.1

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.

EX-31.1

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;

  1. 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)

EX-31.2

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;

  1. 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)

EX-32

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

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