Princeton Bancorp Announces Second Quarter 2024 Results and Approvals of Pending Acquisition

HIGHLIGHTS

• Average total loans for the quarter increased by $34.7 million compared to the first quarter of 2024.
• Average total deposits for the quarter increased by $50.7 million compared to the first quarter of 2024.
• Non-performing assets remained low at $3.2 million, or 0.2% of total loans, compared to $6.7 million at year end 2023.

The Company reported net income of $5.1 million, or $0.80 per diluted common share, for the second quarter of 2024, compared to net income of $4.3 million, or $0.68 per diluted common share, for the first quarter of 2024, and net income of $6.8 million, or $1.07 per diluted common share, for the second quarter of 2023. The increase in net income for the second quarter of 2024 when compared to the first quarter of 2024 was due to an increase of $520 thousand in net interest income, a net reduction in the provision for credit losses of $304 thousand due to a provision reversal of $118 thousand recorded in the second quarter of 2024, an increase in non-interest income of $102 thousand, partially offset by an increase of $173 thousand in non-interest expense. The $1.7 million decrease in net income for the second quarter of 2024 compared to the same period in 2023  was primarily due to acquisition-related items recorded in the second quarter of 2023 due to the Company's acquisition of Noah Bank, resulting in a decrease in non-interest income of $9.5 million and an increase in income tax expense of $877 thousand, partially offset by a decrease in non-interest expenses of $5.8 million, and a decrease in the provision for credit losses of $2.6 million when compared to the second quarter of 2024.

Review of Statements of Financial Condition

Total assets were $1.98 billion at June 30, 2024, an increase of $67.4 million, or 3.52% when compared to $1.92 billion at the end of 2023. The primary reason for the increase in total assets was attributable to increases in available for sale securities of $40.3 million and net loans of $25.0 million, which were funded in part by an increase in deposits. The increase in the Company's net loans consisted of a $51.4 million increase in commercial real estate loans, partially offset by decreases of $22.9 million in construction loans and $2.0 million in residential mortgages.

Total deposits on June 30, 2024, increased $63.3 million, or 3.87%, when compared to December 31, 2023. Money market deposits increased $49.9 million, and certificates of deposit increased $41.3 million, partially offset by decreases in interest-bearing demand deposits of $24.2 million and non-interest-bearing deposits of $4.2 million.

Total stockholders' equity on June 30, 2024 increased $4.6 million or 1.93% when compared to December 31, 2023. The increase was primarily due to the $5.7 million increase in retained earnings, consisting of $9.5 million in net income partially offset by $3.8 million of cash dividends recorded during the period. The ratio of equity to total assets at June 30, 2024 and at December 31, 2023 was 12.34% and 12.53%, respectively.

Asset Quality

At June 30, 2024, non-performing assets totaled $3.2 million, a decrease of $3.5 million when compared to the amount at December 31, 2023.

Review of Quarterly and Six-Month Financial Results

Net interest income was $16.0 million for the second quarter of 2024, compared to $15.4 million for the first quarter of 2024 and $15.7 million for the second quarter of 2023. The increase from the previous quarter was the result of an increase in interest income of $1.3 million, or 4.8%, partially offset by an increase in interest expense of $824 thousand, or 6.5%. The net interest margin for the second quarter of 2024 was 3.44%, increasing by 2 basis points when compared to the first quarter of 2024. This increase was primarily associated with an increase in average interest-earning assets of $50.1 million, resulting in an increase of 12 basis points, partially offset by an increase in total interest-bearing deposits of $51.5 million, resulting in an increase in the cost of funds of 10 basis points. For the six-month period ended June 30, 2024, the Company recorded net income of $9.5 million, or $1.48 per diluted common share, compared to $12.9 million, or $2.02 per diluted common share, for the same period in 2023. The decrease was primarily due to acquisition-related items recorded during 2023 due to the acquisition of Noah Bank.

The Company recorded a reversal of credit losses of $118 thousand during the second quarter of 2024, which consisted of $169 thousand decrease recorded to the allowance of credit losses, offset by an increase to the provision for credit losses of $51 thousand related to unfunded commitments, which are recorded in other liabilities on the Company's statements of financial condition. The current quarters' reversal of provision recorded on the Company's statements of income was $304 thousand lower when compared to the provision for credit losses for the quarter ended March 31, 2024, and was $2.6 million lower than the provision for the same period in 2023, which can be attributed to the acquisition of Noah Bank, which closed in May 2023.  For the quarter ended June 30, 2024, the Company recorded charge-offs of $84 thousand and recoveries of $99 thousand. The coverage ratio of the allowance for credit losses to period end loans was 1.17% at June 30, 2024 and 1.19% at December 31, 2023.

Total non-interest income of $2.1 million for the second quarter of 2024 increased $102 thousand or 5.1% when compared to the first quarter of 2024 and decreased $9.5 million or 82.0% when compared to the quarter ended June 30, 2023. When comparing the results from the second quarter 2024 to the same period of 2023, the decrease was primarily due to the bargain purchase gain of $9.7 million attributed to the acquisition of Noah Bank, which closed in May 2023.

Total non-interest expense of $12.0 million for the second quarter of 2024 increased $173 thousand, or 1.5%, when compared to the first quarter of 2024. The increase compared to the first quarter of 2024 was primarily related to data processing and communications expense increasing $244 thousand, professional fees increasing $78 thousand and other expenses increasing $60 thousand, partially offset by a decrease in occupancy and equipment expense of $179 thousand and salaries and benefits expense of $77 thousand.  Total non-interest expense for the second quarter of 2024 decreased $5.8 million or 32.6% when compared to the second quarter of 2023.  The decrease was due primarily to $7.0 million in merger-related expenses recorded, a $667 thousand increase in salaries and benefits expense and a $145 thousand increase in occupancy and equipment expenses that were all primarily associated with the Noah Bank acquisition in 2023.

For the quarter ended June 30, 2024, the Company recorded an income tax expense of $1.0 million, resulting in an effective tax rate of 16.8%, compared to an income tax expense of $1.0 million resulting in an effective tax rate of 19.7% for the first quarter ended March 31, 2024, and compared to an income tax expense of $161 thousand resulting in an effective tax rate of 2.32% for the quarter ended June 30, 2023. The effective tax rate in the second quarter of 2023 was lower than the current quarter's rate because of the non-taxable $9.7 million bargain purchase gain from the Noah bank acquisition.

About Princeton Bancorp, Inc. and The Bank of Princeton

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. On January 18, 2024, the Company announced that it has entered into a definitive agreement and plan of merger with Cornerstone Financial Corporation ("Cornerstone"), the parent company of Cornerstone Bank, headquartered in Mount Laurel, New Jersey, pursuant to which the Company will acquire Cornerstone in a transaction that is expected to close in the third quarter of 2024 (the "Transaction").

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 following the completion of the Transaction may be more difficult, time-consuming or costly than expected; the ability to obtain required regulatory 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 military conflicts in 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 Bank's products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors' products and services; the willingness of customers to substitute competitors' products and services for the Bank's products and services; credit risk associated with the Bank's lending activities; risks relating to the real estate market and the Bank's real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Company and the Bank; and the timing and nature of the regulatory response to any applications filed by the Company and the Bank; technological changes; other acquisitions; changes in consumer spending and saving habits; those risks under the heading "Risk Factors" set forth in the Bank's Annual Report on Form 10-K for the year ended December 31, 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.