The Bank of Princeton 10Q 2024 Q1 Quarterly report

The Bank of Princeton (BPRN) 10-Q2024 Q1 Quarterly report

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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 March

31, 2024

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

For the transition period from

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 incorporation or organization)		(I.R.S. Employer 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 Symbol(s)	Name of each exchange 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.

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 May 10, 2024, there were 6,319,361 outstanding shares of the issuer’s common stock, no par value.

TABLE OF CONTENTS


PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Unaudited Consolidated Statements of Financial Condition - March 31, 2024 and December 31, 2023			F-1
Unaudited Consolidated Statements of Income - Three Months Ended March 31, 2024 and 2023			F-2
Unaudited Consolidated Statements of Comprehensive Income - Three Months Ended March 31, 2024 and 2023			F-3
Unaudited Consolidated Statements of Changes in Stockholders’ Equity-Three Months Ended March 31, 2024 and 2023			F-4
Unaudited Consolidated Statements of Cash Flows - Three Months Ended March 31, 2024 and 2022			F-5
Notes to Unaudited Consolidated Financial Statements			F-6
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3 Quanitative and Qualitative Disclosure about Market Risk			34
Item 4 Controls and Procedures			34

PART II OTHER INFORMATION
Item 1 Legal Proceedings			35
Item 1A Risk Factors			35
Item 2 Unregistered Sale of Equity Securities and Use of Proceeds			35
Item 3 Defaults Upon Senior Securities			35
Item 4 Mine Safety Disclosures			35
Item 5 Other Information			35
Item 6 Exhibits			36

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements.

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)


	March 31, 2024			December 31, 2023
ASSETS
Cash and due from banks	$	13,040		$	17,156
Interest-earning bank balances		18,196			17,376
Federal funds sold		140,831			116,025

Total cash and cash equivalents		172,067			150,557

Securities available-for-sale, at fair value		118,098			91,352
Securities held-to-maturity (fair value $199 and $200, at March 31, 2024 and December 31, 2023, respectively)		167			193
Loans receivable, net of deferred fees and costs		1,571,231			1,548,335
Less: allowance for credit losses		(18,618	)		(18,492	)

Loan receivable, net		1,552,613			1,529,843
Bank-owned life insurance		59,240			58,860
Premises and equipment, net		14,115			14,453
Accrued interest receivable		6,405			6,089
Restricted investment in bank stock		1,398			1,410
Deferred taxes, net		11,605			11,512
Goodwill		8,853			8,853
Core deposit intangible		1,301			1,422
Operating lease right-of-use asset		22,726			23,398
Equity method investments		9,051			8,296
Other assets		10,362			10,259

TOTAL ASSETS	$	1,988,001		$	1,916,497

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest-bearing	$	247,056		$	249,282
Interest-bearing		1,458,564			1,386,459

Total deposits		1,705,620			1,635,741
Accrued interest payable		11,831			9,162
Operating lease liability		23,643			24,280
Other liabilities		5,099			7,103

TOTAL LIABILITIES		1,746,193			1,676,286

STOCKHOLDERS’ EQUITY:
Common stock, no par value; 15,000,000 shares authorized, 6,320,356 shares issued and outstanding at March 31, 2024; at December 31, 2023, 6,299,331 shares issued and outstanding		—			—
Paid-in capital		98,312			98,291
Treasury Stock, at cost of 19,000 shares at March 31, 2024		(579	)		—
Retained earnings		151,860			149,414
Accumulated other comprehensive loss		(7,785	)		(7,494	)

TOTAL STOCKHOLDERS’ EQUITY		241,808			240,211

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,988,001		$	1,916,497

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 March 31,
	2024		2023
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	24,940	$	19,894
Securities available-for-sale:
Taxable		564		278
Tax-exempt		286		284
Securities held-to-maturity		2		3
Other interest and dividend income		2,274		153

TOTAL INTEREST AND DIVIDEND INCOME		28,066		20,612

INTEREST EXPENSE
Deposits		12,618		3,865
Borrowings		—		86

TOTAL INTEREST EXPENSE		12,618		3,951

NET INTEREST INCOME		15,448		16,661
Provision for credit losses		186		265

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		15,262		16,396

NON-INTEREST INCOME
Income from bank-owned life insurance		381		290
Fees and service charges		432		448
Loan fees, including preypayment penalties		724		351
Other		448		285

TOTAL NON-INTEREST INCOME		1,985		1,374

NON-INTEREST EXPENSE
Salaries and employee benefits		6,520		5,399
Occupancy and equipment		2,029		1,341
Professional fees		524		465
Data processing and communications		1,160		1,300
Federal deposit insurance		273		190
Advertising and promotion		142		110
Office expense		119		97
Core deposit intangible		120		135
Other		949		735

TOTAL NON-INTEREST EXPENSE		11,836		9,772

INCOME BEFORE INCOME TAX EXPENSE		5,411		7,998
INCOME TAX EXPENSE		1,066		1,901

NET INCOME	$	4,345	$	6,097

Earnings per common share-basic	$	0.69	$	0.97
Earnings per common share-diluted	$	0.68	$	0.95

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 March 31,
	2024			2023
NET INCOME	$	4,345		$	6,097
Other comprehensive income (loss)
Unrealized gains (losses) arising during period on securities available-for-sale		(434	)		1,739

Net unrealized gain (loss)		(434	)		1,739
Tax effect		143			(498	)

Total other comprehensive income (loss)		(291	)		1,241

COMPREHENSIVE INCOME	$	4,054		$	7,338

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)


	Common Stock			Paid-in Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total
Three Months Ended March 31, 2024 and 2023
Balance, December 31, 2022	$	34,547		$	81,291		$	(19,452	)	$	131,488		$	(8,273	)	$	219,601
Net income		—			—			—			6,097			—			6,097
Other comprehensive loss		—			—			—			—			1,241			1,241
Change in accounting principle		—			—			—			(284	)		—			(284	)
Formation of Princeton Bancorp, Inc.		(34,547	)		15,095			19,452			—			—			—
Stock options exercised (16,307 shares)		—			297			—			—			—			297
Dividends declared $0.30 per share		—			—			—			(1,843	)		—			(1,843	)
Dividend reinvestment plan (958 shares)		—			33			—			(33	)		—			—
Stock-based compensation expense		—			164			—			—			—			164

Balance, March 31, 2023	$	—		$	96,880		$	—		$	135,425		$	(7,032	)	$	225,273

Balance, December 31, 2023	$	—		$	98,291		$	—		$	149,414		$	(7,494	)	$	240,211
Net income		—			—			—			4,345			—			4,345
Other comprehensive loss		—			—			—			—			(291	)		(291	)
Treasury stock repurchases (19,000 shares)		—			—			(579	)		—			—			(579	)
Stock options exercised (2,450 shares)		—			34			—			—			—			34
Share redemption for tax withholding on restricted stock vesting		—			(249	)		—			—			—			(249	)
Dividends declared $0.30 per share		—			—			—			(1,866	)		—			(1,866	)
Dividend reinvestment plan (1,018 shares)		—			33			—			(33	)		—			—
Stock-based compensation expense		—			203			—			—			—			203

Balance, March 31, 2024	$	—		$	98,312		$	(579	)	$	151,860		$	(7,785	)	$	241,808

See accompanying notes to unaudited consolidated financial statements.

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PRINCETON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three Months Ended March 31,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	4,345		$	6,097
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		186			265
Depreciation and amortization		409			305
Stock-based compensation expense		203			164
Amortization of premiums and accretion of discount on securities		6			11
Accretion of net deferred loan fees and costs		(37	)		(534	)
Increase in cash surrender value of bank-owned life insurance		(380	)		(290	)
Deferred income tax		98			(793	)
Amortization of core deposit intangible		121			136
Increase (decrease) in accrued interest receivable and other assets		(152	)		2,052
Increase (decrease) in accrued interest payable and other liabilities		28			(227	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		4,827			7,186

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities		(28,898	)		(345	)
Principal repayments and maturities on securities available-for-sale		1,254			1,144
Maturities, calls and principal repayments of securities held-to-maturity		26			2
Net increase in loans		(22,859	)		(18,840	)
Purchases of premises and equipment		(71	)		(245	)
Redemption (purchases) of restricted bank stock		12			(1,553	)

NET CASH USED IN INVESTMENT ACTIVITIES		(50,536	)		(19,837	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		69,879			(55,630	)
Proceeds from overnight borrowings		—			34,500
Cash dividends		(1,899	)		(1,876	)
Dividend reinvestment program		33			33
Share redemption for tax witholding on restricted stock vesting		(249	)		—
Purchase of treasury stock		(579	)		—
Proceeds from exercise of stock options		34			297

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		67,219			(22,676	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		21,510			(35,327	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		150,557			53,351

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	172,067		$	18,024

SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid	$	9,949		$	2,818
Income taxes paid	$	724		$	653
Increase in ROU leases	$	1,808		$	9,799
Reclass of paid-in capital related to holding company formation	$	—		$	15,095
Reclass of treasury stock related to holding company formation	$	—		$	19,452
Reclass of common stock related to holding company formation	$	—		$	(34,547	)

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 March 31, 2024, the Company had 211 total employees and 209 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 is subject to receipt of all required banking regulatory approvals, Cornerstone stockholder approval and certain financial and other contingencies. The transaction is expected to close in the second or third quarter of 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 March 31, 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)

The following schedule presents earnings per share data for the three-month periods ended March 31, 2024, and 2023 (in thousands, except per share data):

Note 2 - Earnings Per Share (continued)


	Three months ended March 31,
	2024		2023
Net income applicable to common stock	$	4,345	$	6,097
Weighted average number of common shares outstanding		6,328		6,257

Basic earnings per share	$	0.69	$	0.97

Net income applicable to common stock	$	4,345	$	6,097
Weighted average number of common shares outstanding		6,328		6,257
Dilutive effect on common shares outstanding		90		129

Weighted average number of diluted common shares outstanding		6,418		6,386

Diluted earnings per share	$	0.68	$	0.95

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-months period ended March 31, 2024, and 2023:


	Three months ended March 31,
	2024				2023
	Options		Weighted Ave Exercise Price		Options		Weighted Ave Exercise Price
Options to purchase		245,633	$	21.38		374,496	$	22.01
Anti-dilutive		86,431	$	33.19		—	$	—

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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 March 31, 2024 and December 31, 2023 with gross unrealized gains and losses therein:


	March 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
			(In thousands)
Available-for-sale
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs)	$	71,266	$	153	$	(6,578	)	$	64,841
U.S. government agency securities		11,260		—		(1,078	)		10,182
Obligations of state and political subdivisions		44,056		2		(3,378	)		40,680
Small business association (SBA) securities		2,392		5		(2	)		2,395

Total	$	128,974	$	160	$	(11,036	)	$	118,098


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
			(In thousands)
Available-for-sale
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs)	$	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 March 31, 2024 and December 31, 2023 are as follows:


	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
						(In thousands)
March 31, 2024
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs)	$	7,494	$	(114	)	$	30,206	$	(6,464	)	$	37,700	$	(6,578	)
U.S. government agency securities		4,998		(2	)		5,184		(1,076	)		10,182		(1,078	)
Obligations of state and political subdivisions		6,788		(108	)		31,196		(3,270	)		37,984		(3,378	)
Small business association (SBA) securities		816		(2	)		—		—			816		(2	)

Total	$	20,096	$	(226	)	$	66,586	$	(10,810	)	$	86,682	$	(11,036	)


	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
						(In thousands)
December 31, 2023
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs)	$	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 March 31, 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 Cost		Fair Value
	(In thousands)
Due in one year or less	$	285	$	284
Due after one year through five years		8,454		8,263
Due after five years through ten years		34,437		32,065
Due after ten years		12,140		10,250
Mortgage-backed securities (GSEs)		71,266		64,841
Small business association (SBA) securities		2,392		2,395

	$	128,974	$	118,098

F-10

Table of Contents

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-month period ended March 31, 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 March 31, 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 March 31, 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 March 31, 2024.

At March 31, 2024, the Company’s

available-for-sale

securities portfolio consisted of approximately 227 securities, of which 164

available-for-sale

securities were in an unrealized loss position for more than twelve months and 30

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 98 municipal securities aggregating $31.2 million with a loss of $3.3 million, 62 mortgage-backed

securities-GSE

aggregating $30.2 million with a loss of $6.5 million and four agency securities aggregating $5.2 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 March 31, 2024, and December 31, 2023.

Note 4 – Loans Receivable

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


	March 31, 2024			December 31, 2023
	(In thousands)
Commercial real estate	$	1,162,741		$	1,142,864
Commercial and industrial		45,930			50,961
Construction		321,009			310,187
Residential first-lien mortgage		36,565			38,040
Home equity/consumer		7,311			8,081

Total loans		1,573,556			1,550,133
Deferred fees and costs		(2,325	)		(1,798	)

Loans, net	$	1,571,231		$	1,548,335

The Company did not purchase any loans during the three months ended March 31, 2024, or 2023.

F-11

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

Upon CECL, 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 March 31, 2024.

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


	March 31, 2024			December 31, 2023
	(In thousands)
Allowance for credit losses - loans	$	(18,618	)	$	(18,492	)
Allowance for credit losses - off balance sheet		(473	)		(589	)

	$	(19,091	)	$	(19,081	)

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


	March 31, 2024				December 31, 2023
	With a Related Allowance		Without a Related Allowance		With a Related Allowance		Without a Related Allowance
			(In thousands)
Commercial real estate	$	110	$	1,235	$	—	$	4,485
Commercial and industrial		40	$	596		—		2,116
Construction		—		—		—		—
Residential first-lien mortgage		—		134		—		107

Total nonaccrual loans	$	150	$	1,965	$	—	$	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 three-month period ending March 31, 2024, the Company wrote off $310 thousand in accrued interest receivable for loans, compared to $130

thousand for the three-month period ending March 31, 2023. Accrued interest receivable related to loans, at March 31, 2024, and March 31, 2023, was

$5.6 million and $4.3 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 March 31, 2024:


	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
							(In thousands)
Commercial real estate	$	356	$	841	$	1,345	$	2,542	$	1,160,199	$	1,162,741	$	—
Commercial and industrial		232		274		636		1,142		44,788		45,930		—
Construction		—		—		—		—		321,009		321,009		—
Residential first-lien mortgage		27		—		134		161		36,404		36,565		—
Home equity/consumer		—		—		—		—		7,311		7,311		—

Total	$	615	$	1,115	$	2,115	$	3,845	$	1,569,711	$	1,573,556	$	—

F-12

Table of Contents

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 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
							(In thousands)
Commercial real estate	$	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.

F-13

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of March 31, 2024.

Note 4 – Loans Receivable (continued)


	2024		2023		2022		2021		2020		Prior			Revolving Loans		Total
	(Dollars in thousands)
Commercial real estate
Pass	$	25,851	$	134,137	$	244,778	$	116,312	$	61,828	$	574,323		$	5,512	$	1,162,741
Special mention		—		—		—		—		—		—			—		—
Substandard		—		—		—		—		—		—			—		—

Total commercial real estate		25,851		134,137		244,778		116,312		61,828		574,323			5,512		1,162,741
Current period gross charge-offs												(237	)				(237	)
Commercial and industrial
Pass		653		563		1,615		11,702		148		12,158			12,230		39,069
Special mention		—		—		—		—		—		4,508			—		4,508
Substandard		—		—		—		—		500		1,853			—		2,353

Total commercial and industrial		653		563		1,615		11,702		648		18,519			12,230		45,930
Current period gross charge-offs												(46	)				(46	)
Construction
Pass		6,050		5,832		17,809		83,849		11,371		7,391			188,707		321,009
Special mention		—		—		—		—		—		—			—		—
Substandard		—		—		—		—		—		—			—		—

Total construction		6,050		5,832		17,809		83,849		11,371		7,391			188,707		321,009
Residential first-lien mortgage
Performing		—		—		966		3,805		2,816		28,846			—		36,433
Nonperforming		—		—		—		—		—		132			—		132

Total residential first-lien mortgage		—		—		966		3,805		2,816		28,978			—		36,565
Home equity/consumer
Performing		223		546		1,371		298		3		1,893			2,949		7,283
Nonperforming		—		—		28		—		—		—			—		28

Total home equity/consumer		223		546		1,399		298		3		1,893			2,949		7,311
Total
Pass		32,777		141,078		266,539		215,966		76,166		624,611			209,398		1,566,535
Special mention		—		—		—		—		—		4,508			—		4,508
Substandard		—		—		28		—		500		1,985			—		2,513

Total loans	$	32,777	$	141,078	$	266,567	$	215,966	$	76,666	$	631,104		$	209,398	$	1,573,556

F-14

Table of Contents

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.


	2023		2022		2021		2020		2019		Prior		Revolving 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
Non performing		—		—		—		—		—		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 /non performing		—		—		—		—		—		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 March 31, 2024:


	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer			Total
							(In thousands)
Allowance for credit losses:
Beginning balance	$	16,047		$	488		$	1,145		$	725		$	87		$	18,492
Provision 1		631			(31	)		(124	)		(153	)		(21	)		302
Charge-offs		(237	)		(46	)		—			—			—			(283	)
Recoveries		5			102			—			—			—			107

Total	$	16,446		$	513		$	1,021		$	572		$	66		$	18,618

1	The provision for credit losses on the Consolidated Statement of Income is $186,000 comprising of a $302,000 thousand increase to the ACL for loans and a $116,000 reduction to the reserve for unfunded liabilities.

F-15

Table of Contents

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 three months ended March 31, 2023:


	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer		PPP		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	)
Provision 1		(4	)		16			329			(10	)		13		—		—			344
Charge-offs		—			—			—			—			—		—		—			—
Recoveries		3			—			—			—			—		—		—			3

Total	$	10,037		$	214		$	5,349		$	654		$	253	$	—	$	—		$	16,507

1	The provision for credit losses on the Consolidated Statement of Income is $265,000 comprising a $344,000 increase to the allowance for credit losses on loans and a $79,000 reduction to the reserve for unfunded liabilities.

As of March 31, 2024, the Company had six loans totaling $2.1 million that were individually analyzed for potential credit loss and all the loans have real estate as credit support. Compared to 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.

Note 5 – Deposits

The components of deposits were as follows:


	March 31, 2024				December 31, 2023
	(Dollars in thousands)
Demand, non-interest-bearing checking	$	247,056	14.48	%	$	249,282	15.24	%
Demand, interest-bearing checking		215,364	12.63	%		247,939	15.16	%
Savings		149,386	8.76	%		146,484	8.96	%
Money market		378,652	22.20	%		354,005	21.64	%
Time deposits, $250,000 and over		179,479	10.52	%		173,614	10.61	%
Time deposits, other		535,683	31.41	%		464,417	28.39	%

	$	1,705,620	100.00	%	$	1,635,741	100.00	%

F-16

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 6 – Borrowings

At March 31, 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

re-evaluated

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:

Level

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

Level

: 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

: 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 March 31, 2024 were as follows:


Description	(Level 1) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value March 31, 2024
	(In thousands)
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs)	$	—	$	64,841	$	—	$	64,841
U.S. government agency securities		—		10,182		—		10,182
Obligations of state and political subdivisions		—		40,680		—		40,680
Small Business Association (SBA) securities		—		2,395		—		2,395

Securities available-for-sale at fair value	$	—	$	118,098	$	—	$	118,098

F-17

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (continued)

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) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value December 31, 2023
	(In thousands)
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs)	$	—	$	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 available-for-sale at fair value	$	—	$	91,352	$	—	$	91,352

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2024, were as follows.


Description	(Level 1) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value March 31, 2024
	(In thousands)
Collateral dependent loan	$	—	$	—	$	95	$	95

	$	—	$	—	$	95	$	95

The following table presents quantitative information using Level 3 fair value measurements at March 31, 2024.


Description	March 31, 2024		Valuation Technique			Unobservable Input		Range (Weighted Average)
	(Dollars in thousands)
							Discount		6.0	%
Collateral dependent loan	$	95		Collateral	1		adjustment		(6.0	%)

1	Value based on third party offer to purchase note from the Bank.

F-18

Table of Contents

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) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value December 31 2023
	(In thousands)
Collateral dependent loan	$	—	$	—	$	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, 2023		Valuation Technique			Unobservable Input		Range (Weighted Average)
	(Dollars in thousands)
							Discount		0.0	%
Collateral dependent loan	$	4,485		Collateral	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 March 31, 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.

F-19

Table of Contents

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 March 31, 2024 are as follows.


	March 31, 2024
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	172,067	$	172,067	$	172,067	$	—	$	—
Securities available-for-sale at fair value		118,098		118,098		—		118,098		—
Securities held-to-maturity		167		167		—		167		—
Loans receivable, net		1,552,613		1,495,787		—		—		1,495,787
Restricted investments in bank stock		1,398		1,398		—		1,398		—
Accrued interest receivable		6,405		6,405		—		6,405		—
Equity method investments		9,051		9,051		—		5,900		3,151
Mortgage servicing rights		1,383		1,383		—		1,383		—
Financial Liabilities:
Deposits	$	1,705,620		1,705,620	$	—	$	1,705,620	$	—
Accrued interest payable		11,831		11,831		—		11,831		—

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


	December 31, 2023
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	150,557	$	150,557	$	150,557	$	—	$	—
Securities AFS		91,352		91,352		—		91,352		—
Securities HTM		193		192		—		192		—
Loans receivable, net		1,529,843		1,425,814		—		—		1,425,814
Restricted 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
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, 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).

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.

F-20

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (concluded)

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 Condition Location		Three Months Ended March 31, 2024			Year ended December 31, 2023
			(In thousands)
Operating Lease Right of Use Asset:
Gross carrying amount			$	23,398		$	16,026
Increased asset from new leases				1,808			9,799
Accumulated amortization				(2,480	)		(2,427	)

Net book value		Operating lease right-of-use asset	$	22,726		$	23,398

Operating Lease Liability:
Lease liability		Operating lease liability	$	23,643		$	24,280

As of March 31, 2024, the weighted-average remaining lease terms for operating leases was 11.6 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.48%. 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.

F-21

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Leases (continued)

Future minimum payments under operating leases with terms longer than 12 months are as follows at March 31, 2024 (in thousands):


Twelve months ended March 31,
2024	$	3,501
2025		3,453
2026		3,269
2027		2,992
2028		2,779
Thereafter		15,748

Total future operating lease payment		31,742
Amounts representing interest		(8,099	)

Present value of net future lease payments	$	23,643


	Three Months Ended March 31,
	2024		2023
	(In thousands)
Lease cost:
Operating lease	$	987	$	665
Short-term lease cost		48		2

Total lease cost	$	1,035	$	667

Other information:
Cash paid for amounts included in the measurement of lease liabilities	$	898	$	585

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 of 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

that the fair value of a Reporting Unit is less than its carrying amount, including goodwill. A qualitative 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

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, 2023 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, 2023.

F-22

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 9 – Goodwill and Core Deposit Intangible (continued)

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


	Goodwill		Core Deposit Intangible
	(In thousands)
Balance at December 31, 2023	$	8,853	$	1,422
Amortization expense		—		(121	)

Balance at March 31, 2024	$	8,853	$	1,301

As of March 31, 2024, the remaining current fiscal year and future fiscal periods amortization for the core deposit intangible is (in thousands):


2024		314
2025		353
2026		274
2027		195
Thereafter		165

Total	$	1,301

Note 10 – Subsequent Events

On April 23, 2024, during the Company’s annual shareholder meeting, the Board of Directors approved an amendment to the Company’s articles of incorporation to authorize a class of preferred stock consisting of 2,000,000 shares.

On April 24, 2024, the Board of Directors declared a cash dividend of $0.30 per share of common stock to shareholders of record on May 10, 2024, payable on May 31, 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.

F-23

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 Transaction, may be more difficult, time-consuming or costly than expected; the ability to obtain required regulatory and shareholder approvals, and 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.

Executive Overview

Princeton Bancorp, Inc. is the holding company for The Bank of Princeton, a community bank founded in 2007. The Bank is a New Jersey state-chartered commercial bank with 22 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Fort Lee, Hamilton, Kingston, Lakewood, Lambertville, Lawrenceville, Monroe, New Brunswick, Palisades Park, Pennington, Piscataway, Princeton Junction, Quakerbridge and Sicklerville. There are also five branches in the Philadelphia, Pennsylvania area and two in the New York City metropolitan area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation (“FDIC”).

On October 19, 2022, the Bank entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cornerstone Financial Corporation, a New Jersey based holding company from Cornerstone bank (“Cornerstone”). Pursuant to the terms and conditions set forth in the Merger Agreement, Cornerstone will merge with and into Princeton Bancorp, with Cornerstone surviving (the “Merger”). The Bank plans to merge Cornerstone with and into the Company immediately after the Merger. The Company has received the requisite approvals of the Merger Agreement from the Federal Deposit Insurance Corporation, and New Jersey state bank regulators. The Company anticipates that the Merger will close in the third quarter of 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 is showing signs of stress with inflation hitting a 40-year high, an increase in energy prices, specifically home-heating costs, higher interest rates set by the Federal Open Market Committee (impacting the real estate market) and uncertainties resulting from regional conflicts in around the world, including in Ukraine and the Middle East. However, the unemployment rate in New Jersey is below the national average.

Comparison of Financial Condition at March 31, 2024 and December 31, 2023

General

Total assets were $1.99 billion on March 31, 2024, an increase of $71.5 million, or 3.73%, when compared to $1.92 billion at the end of 2023. The primary reason for the increase in total assets was attributable to increases in available for sale securities of $26.7 million, an increase in net loans of $22.9 million, and an increase in cash and cash equivalents of approximately $21.5 million.

Cash and cash equivalents

Cash and cash equivalents increased $21.5 million, or 14.29%, to $172.1 million at March 31, 2024 compared to December 31, 2023. This increase was primarily related to deposit growth of approximately $69.9 and partially offset by increases in available-for-sale securities of $26.7 million and in total loans of $22.9 million.

Investment securities

Total available-for-sale investment securities increased million $26.7, or 29.28%, to $118.1 million at March 31, 2024 compared to December 31, 2023. This increase was related to the purchase of Government National Mortgage Association securities during the first quarter of 2024.

Loans

Loans, net of deferred loan fees and costs, increased $22.9 million, or 1.48%, to $1.57 billion at March 31, 2024 compared to December 31, 2023. The increase in the Company’s net loans consisted of a $19.9 million increase in commercial real estate loans and a $10.8 million increase in construction loans, partially offset by a decrease of $5.0 million in commercial and industrial loans, a decrease of $1.5 million in residential mortgages and a decrease of $770 thousand in HELOC/consumer loans.

Charge-offs for first quarter of 2024 were $283 thousand and recoveries were $107 thousand compared to the fourth quarter of 2023 which recorded charge offs of $55 thousand and recoveries of $65 thousand. The coverage ratio of the allowance for credit losses to period end loans was 1.18% at March 31, 2024 and 1.19% at December 31, 2023.

At March 31, 2024, non-performing assets totaled $2.1 million, a decrease of $4.6 million when compared to the amount at December 31, 2023. The decrease was primarily related to a $4.5 million commercial real estate loan which was sold during the first quarter of 2024. Non-performing assets as a percentage of total loans, net of deferred fees and costs, was 0.13% at March 31, 2024 and 0.43% at December 31, 2023.

Deposits

Total deposits at March 31, 2024 increased $69.9 million, or 4.27%, when compared to December 31, 2023. Certificates of deposit increased $77.1 million, money market deposits increased $24.7 million, and savings deposits increased $2.9 million. Partially offsetting these increases were decreases in interest-bearing demand deposits of $32.6 million and non-interest-bearing deposits of $2.2 million.

At March 31, 2024, the Company had approximately $426.7 million in uninsured deposits, consisting of $67.6 million in non-interest-bearing demand deposits, $128.7 million in interest-bearing demand deposits, $128.9 million in money market accounts, $21.3 million in savings deposits and $80.2 million in certificates of deposits.

Borrowings

The Company had no outstanding borrowings at March 31, 2024 and at December 31, 2023.

Stockholders’ equity

Total stockholders’ equity on March 31, 2024 increased $1.6 million or 0.66% when compared to December 31, 2023. The increase was primarily due to the $2.4 million increase in retained earnings, consisting of $4.3 million in net income partially offset by $1.9 million of cash dividends recorded during the period. Additionally, stockholders’ equity declined as a result of a stock buyback of 19,000 shares totaling $579 thousand. The ratio of equity to total assets at March 31, 2024 and at December 31, 2023 was 12.2% and 12.5%, 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.

Liquidity (continued)

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 $148.9 million as of March 31, 2024.

As of March 31, 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 March 31, 2024. As of March 31, 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 March 31, 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 March 31, 2024.

We believe that our current sources of funds provide adequate liquidity for our current cash flow needs.

Capital Resources

Regulatory Capital Requirements. Federally insured, state-chartered non-member banks are required to maintain minimum levels of regulatory capital. Current FDIC capital standards require these institutions to satisfy a common equity Tier 1 capital requirement and a Tier 1 capital requirement, a leverage capital requirement and a risk-based capital requirement.

In addition, in order to make capital distributions and pay discretionary bonuses to executive officers without restriction, an institution must also maintain additional common equity in excess of the minimum requirements. This excess is referred to as a capital conservation buffer. At March 31, 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 March 31, 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 March 31, 2024 and December 31, 2023 are presented below:

Capital Resources (continued)


											To be well capitalized
						For capital conservation					under prompt corrective
	Actual					buffer requirement					action provision
	Amount		Ratio			Amount		Ratio			Amount		Ratio
						(Dollars in thousands)
March 31, 2024:
Total capital (to risk-weighted assets)	$	255,304		14.305	%	$	187,392		10.500	%	$	178,468		10.000	%
Tier 1 capital (to risk-weighted assets)	$	236,686		13.262	%	$	151,698		8.500	%	$	142,774		8.000	%
Common equity tier 1 capital (to-risk weighted assets	$	236,686		13.262	%	$	124,928		7.000	%	$	116,004		6.500	%
Tier 1 leverage capital (to average assets)	$	236,686		11.994	%	$	128,273		6.500	%	$	98,672		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	%

Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023

General

The Company reported net income of $4.3 million, or $0.68 per diluted common share, for the first quarter of 2024, compared to net income of $6.1 million, or $0.95 per diluted common share, for the first quarter of 2023. The decrease in net income for the first quarter of 2024 compared to the same period in 2023 was primarily due to increases in interest expense of $8.7 million and $2.1 million in non-interest expense, partially offset by a $7.5 million increase interest income, $611 thousand increase in non-interest income and a reduction of $835 thousand in income tax expense recorded.

Interest income

Interest income increased $7.5 million for the three months ended March 31, 2024, compared to the same period in 2023. Interest income on loans increased $5.0 million due to increases in both the average balance of loans of $175.4 million and the yield of 60 basis points. Other interest and dividend income increased $2.1 million due to an increase in average balance of $153.6 million and an increase in the yield of 90 basis points. Interest on taxable available-for-sale securities increased $286 thousand due to an 120 basis point increase in yield and a $17 thousand increase in the average balance of taxable available-for-sale securities.

Interest expense

Interest expense on deposits increased $8.7 million to $12.6 million for the three-month period ended March 31, 2024, due to increases in both the rate paid on interest-bearing deposits of 209 basis points and in the average balance of interest-bearing deposits of $351.6 million over the same prior year period.

Provision for credit losses

The Company reduced its provision for credit losses by $79 thousand during the three months ended March 31, 2024 while the allowance for credit losses was $10 thousand higher than at December 31, 2023. The decrease in the ACL in the current quarter consisted of $302 thousand increase recorded to the allowance of credit losses and a reduction to the allowance of $116 thousand in unfunded commitments, which is reported in other liabilities on the Company’s statement of condition. Charge-offs were $283 thousand and recoveries were $107 thousand for the quarter ending March 31, 2024.

Non-interest income

Total non-interest income of $2.0 million for the first quarter of 2024 increased $611 thousand, when compared to the quarter ended March 31, 2023. The increase over the first quarter of 2023 was due to increases in loan fees of $373 thousand, $163 thousand of other non-interest income, and $91 thousand in bank owned life insurance income.

Non-interest expense

Total non-interest expense for the first quarter of 2024 increased $2.1 million or 21.1% from the first quarter of 2023. The increase was due primarily to increases in salaries and employee benefits and occupancy and equipment expenses of $1.1 million and $688 thousand, respectively. This increase can be attributed in part to the acquisition of Noah Bank which occurred in the second quarter of 2023.

Provision for income taxes

For the three months ending March 31, 2024, the Company recorded an income tax expense of $1.1 million, resulting in an effective tax rate of 19.7%, compared to an income tax expense of $1.9 million resulting in an effective tax rate of 23.8% for the quarter ended March 31, 2023. The lower effective tax rate record in the first three months ended March 31, 2024, was attributed to a higher level of tax free investments benefit compared to a lower amount of net income.

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

The following table shows for the three-month period indicated the total dollar amount of interest earned from average interest earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.


	Three Months Ended March 31,
	2024							2023							Change 2024 vs 2023
	Average Balances		Income/ Expense		Yield Rates			Average Balances		Income/ Expense		Yield Rates			Average Balances			Yield Rates
								(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,551,206	$	24,940		6.47	%	$	1,375,849	$	19,894		5.86	%	$	175,357			0.60	%
Securities
Taxable available-for-sale		58,742		564		3.86	%		42,235		278		2.66	%		16,507			1.20	%
Tax exempt available-for-sale		40,758		285		2.81	%		41,634		284		2.77	%		(876	)		0.05	%
Held-to-maturity		182		2		4.42	%		200		3		5.36	%		(18	)		-0.94	%
Federal funds sold		148,069		2,009		5.46	%		8,454		95		4.56	%		139,615			0.90	%
Other interest earning-assets		18,954		266		5.64	%		5,001		58		4.77	%		13,953			0.87	%

Total interest-earning assets		1,817,911	$	28,066		6.21	%		1,473,373	$	20,612		5.67	%		344,538			0.54	%

Other non-earnings assets		140,660							109,354							31,306

Total assets	$	1,958,571						$	1,582,727						$	375,844

Interest-bearing liabilities
Demand	$	242,030	$	1,193		1.98	%	$	264,507	$	551		0.84	%	$	(22,477	)		1.14	%
Savings		147,672		921		2.51	%		182,763		417		0.92	%		(35,091	)		1.58	%
Money markets		364,150		3,557		3.93	%		268,814		1,158		1.75	%		95,336			2.18	%
Certificates of deposit		678,306		6,947		4.12	%		364,470		1,739		1.94	%		313,836			2.18	%

Total deposit		1,432,158		12,618		3.54	%		1,080,554		3,865		1.45	%		351,604			2.09	%
Borrowings		—		—		0.00	%		6,993		86		4.99	%		(6,993	)		-4.99	%

Total interest-bearing liabilities		1,432,158	$	12,618		3.54	%		1,087,547	$	3,951		1.47	%		344,611			2.07	%

Non-interest-bearing deposits		244,089							242,814							1,275
Other liabilities		42,094							28,587							13,507

Total liabilities		1,718,341							1,358,948							359,393
Stockholders’ equity		240,230							223,779							16,451

Total liabilities and stockholder’s equity	$	1,958,571						$	1,582,727						$	375,844

Net interest-earnings assets	$	385,753						$	385,826						$	(73	)
Net interest income; interest rate spread						2.67	%						4.20	%					-1.53	%

Net interest margin			$	15,448		3.42	%			$	16,661		4.59	%	$	(1,213	)		-1.17	%

Net interest margin FTE¹						3.48	%						4.66	%					-1.18	%

¹	Includes federal and state tax effect of tax exempt securities and loans.

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.


	2024 vs. 2023 Increase (Decrease) Due to
	Rate			Volume			Net
				(In thousands)
Interest and dividend income:
Loans receivable, including fees	$	240		$	4,806		$	5,046
Securities available-for-sale
Taxable		245			41			286
Tax-exempt		6			(5	)		1
Securities held-to-maturity		1			—			(1	)
Federal funds sold		37			1,877			1,914
Other interest and dividend income		21			187			208

Total interest and dividend income	$	549		$	6,907		$	7,454

Interest expense
Demand	$	1,074		$	(432	)	$	642
Savings		1,809			(1,305	)		504
Money markets		(4,300	)		6,699			2,399
Certificates of deposit		390			4,818			5,208
Borrowings		—			(86	)		(86	)

Total interest expense	$	(1,027	)	$	9,696		$	8,667

Change in net interest income	$	1,576		$	(2,789	)	$	(1,213	)

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.

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 March 31, 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 March 31, 2024, based on contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and anticipated prepayments of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans.


	3 Months or Less			More than 3 Months to 1 Year			More than 1 Year to 3 Years			More than 3 Years to 5 Years			More than 5 Years			Non-Rate Sensitive			Total Amount
(Dollars in thousands)
Interest-earning assets: (1)
Investment securities	$	13,567		$	14,261		$	22,117		$	16,552		$	64,219		$	(12,450	)	$	118,266
Loans receivable		495,979			214,358			401,487			419,068			35,491			(13,770	)		1,552,613
Other interest-earnings assets (2)		159,027			—			—			—			—			13,040			172,067
Other non-interest assets		—			—			—			—			—			145,055			145,055

Total interest-earning assets	$	668,573		$	228,619		$	423,604		$	435,620		$	99,710		$	(13,180	)	$	1,988,001

Interest-bearing liabilities:
Checking and savings accounts	$	364,750		$	—		$	—		$	—		$	—		$	—		$	364,750
Money market accounts		378,652			—			—			—			—			—			378,652
Certificate accounts		242,238			272,624			199,163			1,137			—			—			715,162
Borrowings		—			—			—			—			—			—			—

Total interest-bearing liabilities	$	985,640		$	272,624		$	199,163		$	1,137		$	—		$	—		$	1,458,564

Interest-earning assets less interest-bearing liabilities	$	(317,067	)	$	(44,005	)	$	224,441		$	434,483		$	99,710		$	(13,180	)	$	529,437

Cumulative interest-rate sensitivity gap (3)	$	(317,067	)	$	(361,072	)	$	(136,631	)	$	297,852		$	397,562

Cumulative interest-rate gap as a percentage of total assets at March 31, 2024		-15.95	%		-18.16	%		-6.87	%		14.98	%		20.00	%

Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at March 31, 2024		67.83	%		71.30	%		90.63	%		120.42	%		127.26	%

(1)	Interest-earnings assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments and contractual maturities.

(2)	Includes interest-bearing bank balances, FHLB Stock and Federal Funds Sold

(3)	Interest-rate sensitivity gap represents the difference between total interest-earning assets and total interest-bearing liabilities.

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their adjustable-rate loans may decrease in the event of an interest rate increase.

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 March 31, 2024, and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.


Change in									NPV as % of Portfolio
Interest Rates	Net Portfolio Value								Value of Assets
In Basis Points
(Rate Shock)	Amounts		$ Change			% Change			NPV Ratio			Change
			(Dollars in thousands)
300	$	260,809	$	(4,296	)		-1.62	%		-5.31	%		-4.72	%
200	$	264,795	$	(310	)		-0.12	%		-3.79	%		-3.20	%
100	$	266,202	$	1,097			0.41	%		-2.22	%		-1.63	%
Static	$	265,105	$	—						-0.59	%
(100)	$	270,264	$	5,159			1.95	%		0.90	%		1.49	%
(200)	$	274,379	$	9,274			3.50	%		2.09	%		2.68	%
(300)	$	265,028	$	(77	)		-0.03	%		3.30	%		3.89	%

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.

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 March 31, 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 March 31, 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 March 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II–OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth under the Part I, Item 1.A. Risk Factors as set forth in the Company’s Annual Report on Form

10-K

for the year ended December 31, 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 March 31, 2024 were as follows:


	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program 1		Maximum Number of Shares that May Yet be Purchased Under Plans or Programs 1
Period								314,000
January 1 - 31, 2024		—	$	—		—		314,000
February 1 - 29, 2024		—	$	—		—		314,000
March 1 - 31, 2024		19,000	$	30.44		19,000		295,000

		19,000	$	30.44		19,000

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 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the fiscal quarter ended March 31, 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”.

Item 6. Exhibits


Exhibit Number		Description

2.1		Agreement and Plan of Merger, dated January 18, 2024, by and between Princeton Bancorp, Inc. and Cornerstone Financial Corporation (incorporated by reference to the registrant’s Current Report on Form 8-K filed with the SEC on January 18, 2024)*

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		InlineXBRL Taxonomy Extension Schema Document

101.CAL		InlineXBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		InlineXBRL Taxonomy Extension Definition Linkbase Document

101.LAB		InlineXBRL Taxonomy Extension Label LinkbaseDocument

101.PRE		InlineXBRL Taxonomy Extension Label LinkbaseDocument

104		Cover Page Interactive Data File (embedded within the Inline XBRL document

*	The schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish a copy of such schedules, or any section thereof, to the SEC upon request.

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: May 14, 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)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company