10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

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 September

30, 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 November 5, 2024, there were 6,848,948 outstanding shares of the issuer’s common stock, no par value.

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements.

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except share data)


	September 30,			December 31,
	2024			2023
ASSETS
Cash and due from banks	$	19,384		$	17,156
Interest-earning bank balances		21,760			17,376
Federal funds sold		139,914			116,025

Total cash and cash equivalents		181,058			150,557

Securities available-for-sale, at fair value		188,859			91,352
Securities held-to-maturity (fair value $164 and $192, at September 30, 2024 and December 31, 2023, respectively)		163			193
Loans receivable, net of deferred fees and costs		1,831,407			1,548,335
Less: allowance for credit losses		(23,200	)		(18,492	)

Loan receivable, net		1,808,207			1,529,843
Bank-owned life insurance		68,757			58,860
Premises and equipment, net		17,579			14,453
Accrued interest receivable		8,203			6,089
Restricted investment in bank stock		2,075			1,410
Deferred taxes, net		19,816			11,512
Goodwill		14,381			8,853
Core deposit intangible		3,860			1,422
Operating lease right-of-use asset		22,628			23,398
Equity method investments		10,042			8,296
Other assets		9,102			10,259

TOTAL ASSETS	$	2,354,730		$	1,916,497

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest-bearing	$	302,846		$	249,282
Interest-bearing		1,743,155			1,386,459

Total deposits		2,046,001			1,635,741
Accrued interest payable		14,340			9,162
Operating lease liability		23,626			24,280
Other liabilities		9,261			7,103

TOTAL LIABILITIES		2,093,228			1,676,286

STOCKHOLDERS’ EQUITY:
Preferred stock, no par value; 2,000,000 shares authorized and none outstanding at September 30, 2024 and none authorized at December 31, 2023		—			—
Common stock, no par value; 15,000,000 shares authorized, 6,876,448 shares issued and 6,848,948 outstanding at September 30, 2024; 6,299,331 shares issued and outstanding at December 31, 2023
Paid-in capital		119,514			98,291
Treasury stock, at cost of 27,500 shares at September 30, 2024		(842	)		—
Retained earnings		148,716			149,414
Accumulated other comprehensive loss		(5,886	)		(7,494	)

TOTAL STOCKHOLDERS’ EQUITY		261,502			240,211

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,354,730		$	1,916,497

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	28,135		$	23,503		$	79,109		$	64,914
Securities available-for-sale:
Taxable		1,273			357			2,838			927
Tax-exempt		285			285			857			853
Securities held-to-maturity		2			3			7			8
Other interest and dividend income		2,115			2,852			6,475			3,924

TOTAL INTEREST AND DIVIDEND INCOME		31,810			27,000			89,286			70,626

INTEREST EXPENSE
Deposits		14,701			10,316			40,761			21,502
Borrowings		—			—			—			118

TOTAL INTEREST EXPENSE		14,701			10,316			40,761			21,620

NET INTEREST INCOME		17,109			16,684			48,525			49,006
Provision for (reversal of) credit losses		4,601			(182	)		4,669			2,546

NET INTEREST INCOME AFTER PROVISION FOR (REVERSAL OF) CREDIT LOSSES		12,508			16,866			43,856			46,460

NON-INTEREST INCOME
(Loss) on call/sale of securities available-for-sale		(7	)		(6	)		(7	)		(6	)
Income from bank-owned life insurance		423			331			1,192			916
Fees and service charges		521			479			1,418			1,391
Loan fees, including preypayment penalties		784			1,184			2,445			2,565
Gain on bargain purchase		—			—			—			9,696
Gain on sale of other real estate owned		—			203			—			203
Other		335			212			1,080			577

TOTAL NON-INTEREST INCOME		2,056			2,403			6,128			15,342

NON-INTEREST EXPENSE
Salaries and employee benefits		6,556			6,177			19,519			17,352
Occupancy and equipment		2,087			2,142			5,966			5,188
Professional fees		654			614			1,780			1,635
Data processing and communications		1,456			1,242			4,020			3,860
Federal deposit insurance		316			258			868			701
Advertising and promotion		181			139			479			375
Office expense		190			117			464			392
Other real estate expenses		—			—			—			1
Core deposit intangible		143			116			374			378
Acquisition-related expenses (reversal)		7,803			(1,391	)		7,803			5,635
Other		758			745			2,716			2,228

TOTAL NON-INTEREST EXPENSE		20,144			10,159			43,989			37,745

(LOSS) INCOME BEFORE INCOME TAX EXPENSE		(5,580	)		9,110			5,995			24,057
INCOME TAX (BENEFIT) EXPENSE		(1,124	)		1,512			980			3,574

NET (LOSS) INCOME	$	(4,456	)	$	7,598		$	5,015		$	20,483

Earnings (loss) per common share-basic	$	(0.68	)	$	1.21		$	0.78		$	3.26
Earnings (loss) per common share-diluted	$	(0.68	)	$	1.19		$	0.77		$	3.21

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except share data)


											Accumulated
											Other
	Common		Paid-in		Treasury			Retained			Comprehensive
	Stock		Capital		Stock			Earnings			Loss			Total
Three Months Ended September 30, 2024 and 2023
Balance, July 1, 2023	$	—	$	97,103	$	—		$	140,310		$	(8,514	)	$	228,899
Net income		—		—		—			7,598			—			7,598
Other comprehensive loss		—		—		—			—			(3,079	)		(3,079	)
Stock options exercised (16,750 shares)		—		507		—			—			—			507
Dividends declared $0.30 per share		—		—		—			(1,864	)		—			(1,864	)
Dividend reinvestment plan (1,083 shares)		—		22		—			(22	)		—			—
Stock-based compensation expense		—		147		—			—			—			147

Balance, September 30, 2023	$	—	$	97,779	$	—		$	146,022		$	(11,593	)	$	232,208

Balance, July 1, 2024	$	—	$	99,179	$	(842	)	$	155,083		$	(8,579	)	$	244,841
Net income (loss)		—		—		—			(4,456	)		—			(4,456	)
Other comprehensive income		—		—		—			—			2,693			2,693
Dividends declared $0.30 per share		—		—		—			(1,878	)		—			(1,878	)
Dividend reinvestment plan (899 shares)		—		33		—			(33	)		—			—
Stock-based compensation expense		—		269		—			—			—			269
Acquisition of Cornerstone Financial Corporation (525,946 shares, $38.09 per share)		—		20,033		—			—			—			20,033

Balance, September 30, 2024	$	—	$	119,514	$	(842	)	$	148,716		$	(5,886	)	$	261,502


													Accumulated
													Other
	Common			Paid-in			Treasury			Retained			Comprehensive
	stock			Capital			Stock			Earnings			Loss			Total
Nine Months Ended September 30, 2024 and 2023
Balance, January 1, 2023	$	34,547		$	81,291		$	(19,452	)	$	131,488		$	(8,273	)	$	219,601
Net income		—			—			—			20,483			—			20,483
Other comprehensive loss		—			—			—			—			(3,320	)		(3,320	)
Change in accounting principle		—			—			—			(284	)		—			(284	)
Formation of Princeton Bancorp, Inc.		(34,547	)		15,095			19,452			—			—			—
Stock options exercised (33,057 shares)		—			779			—			—			—			779
Dividends declared $0.90 per share		—			—			—			(5,583	)		—			(5,583	)
Dividend reinvestment plan (3,343 shares)		—			82			—			(82	)		—			—
Stock-based compensation expense		—			532			—			—			—			532

Balance, September 30, 2023	$	—		$	97,779		$	—		$	146,022		$	(11,593	)	$	232,208

Balance, January 1, 2024	$	—		$	98,291		$	—		$	149,414		$	(7,494	)	$	240,211
Net income		—			—			—			5,015			—			5,015
Other comprehensive income		—			—			—			—			1,608			1,608
Treasury stock repurchases (27,500 shares)		—			—			(842	)					—			(842	)
Stock options exercised (42,500 shares)		—			590			—			—			—			590
Share redemption for tax withholding on restricted stock vesting		—			(249	)		—			—			—			(249	)
Dividends declared $0.90 per share		—			—			—			(5,612	)		—			(5,612	)
Dividend reinvestment plan (3,058 shares)		—			101			—			(101	)		—			—
Stock-based compensation expense		—			748			—			—			—			748
Acquisition of Cornerstone Financial Corporation (525,946 shares, $38.09 per share)		—			20,033			—			—			—			20,033

Balance, September 30, 2024	$	—		$	119,514		$	(842	)	$	148,716		$	(5,886	)	$	261,502

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Nine Months Ended September 30,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	5,015		$	20,483
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		4,669			2,546
Depreciation and amortization		1,243			1,070
Stock-based compensation expense		747			532
Amortization of premiums and accretion of discount on securities		49			257
Accretion of net deferred loan fees and costs		(1,483	)		(1,937	)
Loss on call/sale of securities available-for-sale		7			6
Increase in cash surrender value of bank-owned life insurance		(1,192	)		(916	)
Deferred income tax		(877	)		(671	)
Amortization of core deposit intangible		374			378
Bargain purchase gain		—			(9,696	)
(Gain) loss on sale of other real estate owned		—			(203	)
(Increase) decrease in accrued interest receivable and other assets		1,642			2,747
Increase (decrease) in accrued interest payable and other liabilities		122			5,553

NET CASH PROVIDED BY OPERATING ACTIVITIES		10,316			20,149

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities		(98,669	)		(7,319	)
Maturities, calls and principal repayments of securities available-for-sale		16,842			5,244
Maturities, calls and principal repayments of securities held-to-maturity		30			6
Net (increase) decrease in loans		(26,093	)		59,696
Cash paid for acquisition		—			(25,414	)
Cash received from acquisition		7,866			23,181
Purchases of premises and equipment		(862	)		(1,420	)
Purchases of bank-owned life insurance		—			(4,950	)
Redemption (purchases) of restricted bank stock		(319	)		357
Proceeds from other real estate owned		—			236

NET CASH (USED IN) PROVIDED BY INVESTMENT ACTIVITIES		(101,205	)		49,617

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		127,503			98,536
Proceeds from overnight borrowings		—			(10,000	)
Cash dividends		(5,612	)		(5,501	)
Share redemption for tax witholding on restricted stock vesting		(249	)		—
Purchase of treasury stock		(842	)		—
Proceeds from exercise of stock options		590			779

NET CASH PROVIDED BY FINANCING ACTIVITIES		121,390			83,814

NET INCREASE IN CASH AND CASH EQUIVALENTS		30,501			153,580
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		150,557			53,351

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	181,058		$	206,931

SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid	$	35,583		$	12,404
Income taxes paid	$	1,820		$	3,455
Net assets acquired from Cornerstone Bank 1	$	303,486		$	—
Net liabilities assumed from Cornerstone Bank 1	$	288,971		$	—
Net assets acquired from Noah Bank	$	—		$	239,451
Net liabilities assumed from Noah Bank	$	—		$	204,341

1	For details of assets acquired and liabilities assumed - See Note 2.

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

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 35 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 September 30, 2024, the Company and its subsidiaries had 246 total employees and 244 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, Northern 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 August 23, 2024, the Company completed the acquisition of Cornerstone Financial Corporation (“CFC”), the holding company for Cornerstone Bank, a New Jersey chartered state bank headquartered in Mt. Laurel, New Jersey that primarily served the South Jersey market. On that date, the Company acquired 100% of the outstanding common stock of CFC in exchange for the Company’s stock, CFC was merged into the Company, and Cornerstone Bank was merged with and into the Bank.

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.

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 1 – Summary of Significant Accounting Policies (concluded)

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 September 30, 2024. While management uses current information to recognize losses on loans, future additions to the allowance for credit losses may be necessary based on changes in economic conditions in the market area or other factors.

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

Reclassifications

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

Recent Accounting Pronouncements Not Yet Adopted

The Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)

No. 2023-07

in November 2023, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. Early adoption is permitted because 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.

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.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 – Business Combinations

On August 23, 2024, the Company completed the acquisition of CFC, the holding company for Cornerstone Bank, a New Jersey chartered state bank headquartered in Mt. Laurel, New Jersey that primarily served the South Jersey market. On that date, the Company acquired 100% of the outstanding common stock of CFC in exchange for the Company’s stock, CFC was merged into the Company, and Cornerstone Bank was merged with and into the Bank.

In accordance with the terms of the acquisition agreement, the Company issued its common stock at an exchange ratio of 0.24 shares of Company common stock per share of Cornerstone’s common stock outstanding on the closing date, having a value of $9.14 per CFC share based on the $38.09 closing price of the Company’s common stock on August 23, 2024.

The acquisition of Cornerstone Bank was accounted for as a business combination using the acquisition method of accounting, and accordingly, the assets acquired, the liabilities assumed, and consideration transferred were recorded at their estimated fair value as of the acquisition. The $5.5 million total in the table below was recorded as “Goodwill” on the Consolidated Statement of Financial Condition.

The following table summarizes the purchase price calculation and goodwill resulting from acquisition:


(Dollars in thousands except per share data)	Fair Value
Purchase Price Consideration in Cash for Cornerstone Financial Corporation’s
Outstanding Shares
Cornerstone Financial Corporation number of common shares outstanding		2,191,999
Exchange ratio		0.240

Princeton Bancorp, Inc shares issued		525,946
Value assigned to Cornerstone Financial Corporation common shares	$	38.09

Purchase price assigned to Cornerstone Financial Corporation common shares exchanged for Princeton Bancorp, Inc common stock	$	20,033

Assets Acquired:
Cash and cash equivalents	$	7,866
Securities available-for-sale		13,972
Loans receivable, net of allowance		255,496
Core deposit intangible		2,812
Premises and equipment		3,507
Operating leases right-of-use		1,259
Deferred tax assets		7,427
Other assets		11,137

Fair value of assets acquired		303,476

Liabilities Assumed:
Deposits		282,757
Operating lease liability		1,259
Other liabilities assumed		4,955

Fair value of liabilities assumed		288,971

Total identifiable net assets		14,505

Goodwill	$	5,528

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 – Business Combinations (concluded)

The Company recorded merger-related expenses of $7.8 million, consisting of $3.2 million in severance payments, $1.5 million for termination of the corporate headquarters lease, $1.5 million related to termination of data processing contracts, $615 thousand for legal related expenses, $330 thousand for investment banker services, $416 thousand in other professional services provided and $305 thousand in other miscellaneous related expenses. In addition, the Company recorded a $3.2 million provision for credit loss for the purchased

non-credit

deteriorated loans and $154 thousand for purchase credit deteriorated loans in connection with the acquisition.

While the valuation of the acquired assets and liabilities is substantially complete, fair value estimates related to the assets and liabilities from Cornerstone Bank are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, investments, loans and deposits as management continues to review the estimated fair value and evaluate the assumed tax position. When the valuation is final, any changes to the preliminary valuation could result in adjustments of goodwill recorded.

The following is a description of the fair value methodologies used to estimate the fair values of major categories of assets acquired.

Cash and due from banks:

The estimated fair values of cash and due from banks approximated their stated value.

Investment securities:

The acquired portfolio had a fair value of $13.9 million, primarily consisting of mortgage-backed securities and treasury securities.

Loans:

The Company recorded $255.5 million of acquired loans that were initially at their fair values as of the date of the acquisition. Fair values for loans were based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The probability of default (“PD”), loss given default (“LGD”), exposure of default and prepayment assumptions are the key factors driving credit losses that are embedded in the estimated cash flows. The Company determined that $16.7 million of the acquired loans were purchased credit deteriorated (“PCD”) of which $13.8 million were performing and $2.9 million were

non-performing

at the time of the acquisition.

Allowance for credit losses

: The acquisition resulted in the addition of $3.2 million in the allowance for credit losses on purchased

non-credit

deteriorated loans and a gross up of $154 thousand identified for PCD loans.

Other assets

: The Company acquired $8.7 million of bank owned life insurance, $7.4 million of deferred tax assets, $3.5 million of premises and equipment, $2.8 million in core deposit intangible, and $1.3 million of operating lease

right-of-use

assets and recorded the assets at fair value.

Time deposits:

Time deposits were valued at the account level based on their remaining maturity dates and comparing the contractual cost of the portfolio to similar instruments. The valuation adjustment of $252 thousand will be amortized to expense over a five-year period.

Note 3 - Earnings Per Share

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 - Earnings Per Share (continued)

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


	Three months ended
	September 30,
	2024			2023
Net income (loss) applicable to common stock	$	(4,456	)	$	7,598
Weighted average number of common shares outstanding		6,573			6,295

Basic earnings (loss) per share	$	(0.68	)	$	1.21

Net (loss) income applicable to common stock	$	(4,456	)	$	7,598
Weighted average number of common shares outstanding		6,573			6,295
Dilutive effect on common shares outstanding 1		—			95

Weighted average number of diluted common shares outstanding		6,573			6,390

Diluted earnings (loss) per share	$	(0.68	)	$	1.19

1	Dilutive effect on common shares outstanding not taken into consideration during the three months ended September 30, 2024 due to net (loss) recognized.

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


	Nine months ended
	September 30,
	2024		2023
Net income applicable to common stock	$	5,015	$	20,483
Weighted average number of common shares outstanding		6,412		6,275

Basic earnings per share	$	0.78	$	3.26

Net income applicable to common stock	$	5,015	$	20,483
Weighted average number of common shares outstanding		6,412		6,275
Dilutive effect on common shares outstanding		84		105

Weighted average number of diluted common shares outstanding		6,496		6,380

Diluted earnings per share	$	0.77	$	3.21

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 - Earnings Per Share (concluded)

The following schedule presents stock options granted but not exercised and the amount of share that were anti-dilutive because the weighted average exercise price equaled or exceeded the average estimated fair value of our common stock for the three-and nine-months period ended September 30, 2024, and 2023. Although the options exercised average price for the three-months ended September 30, 2024, fell below the fair value of our common stock, the options are considered anti-dilutive due to the net (loss) recognized for the three-months period ended September 30, 2024:


	Three months ended September 30,
	2024				2023
			Weighted Ave				Weighted Ave
	Options		Exercise Price		Options		Exercise Price
Options to purchase		—	$	—		276,704	$	19.56
Anti-dilutive		287,659	$	26.04		95,750	$	32.45


	Nine months ended September 30,
	2024				2023
			Weighted Ave				Weighted Ave
	Options		Exercise Price		Options		Exercise Price
Options to purchase		309,984	$	25.21		280,732	$	19.49
Anti-dilutive		—		—		95,750	$	32.45

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Investment Securities

The following summarizes the amortized cost and fair value of securities

available-for-sale

at September 30, 2024 and December 31, 2023 with gross unrealized gains and losses therein:


	September 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
			(In thousands)
Available-for-sale
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs)	$	135,032	$	763	$	(5,304	)	$	130,491
U.S. government agency securities		11,260		45		(837	)		10,468
Obligations of state and political subdivisions		43,897		11		(2,921	)		40,987
Small business association (SBA) securities		2,072		10		(2	)		2,080
U.S. treasury securities		4,818		15		—			4,833

Total	$	197,079	$	844	$	(9,064	)	$	188,859


	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		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 4 – 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 September 30, 2024 and December 31, 2023 are as follows:


	Less than 12 Months					More than 12 Months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(In thousands)
September 30, 2024
Mortgage-backed securities - U.S. government sponsored enterprises (GSEs)	$	19,131	$	(70	)	$	31,318	$	(5,234	)	$	50,449	$	(5,304	)
U.S. government agency securities		—		—			5,423		(837	)		5,423		(837	)
Obligations of state and political subdivisions		250		—			35,528		(2,921	)		35,778		(2,921	)
Small business association (SBA) securities		—		—			486		(2	)		486		(2	)

Total	$	19,381	$	(70	)	$	72,755	$	(8,994	)	$	92,136	$	(9,064	)


	Less than 12 Months					More than 12 Months							Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		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 September 30, 2024 by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties:


	Amortized
	Cost		Fair Value
	(In thousands)
Due in one year or less	$	2,920	$	2,923
Due after one year through five years		7,611		7,589
Due after five years through ten years		40,308		38,063
Due after ten years		9,136		7,713
Mortgage-backed securities (GSEs)		135,032		130,491
Small business association (SBA) securities		2,072		2,080

	$	197,079	$	188,859

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Investment Securities (concluded)

Proceeds from calls and maturities of securities

available-for-sale

were not significant for the three and nine-month period ended September 30, 2024.

The Company uses a defined 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 September 30, 2024.

The Company’s securities primarily consist of the following types of instruments; U.S. guaranteed mortgage-backed securities, U.S guaranteed agency bonds, state and political subdivision issued bonds, mortgage related securities guaranteed by the SBA and U.S. treasury notes. 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 September 30, 2024. The state and political subdivision securities carry a minimum investment rating of A by either Moody’s or Standard and Poor. Some of the smaller municipalities also have insurance to cover the Company in the event of default. Therefore, the Company did not project a credit loss and no reserve was recorded as of September 30, 2024.

At September 30, 2024, the Company’s

available-for-sale

securities portfolio consisted of approximately 264 securities, of which 168

available-for-sale

securities were in an unrealized loss position for more than twelve months and 6

available-for-sale

securities were in a loss position for less than twelve months. The

available-for-sale

securities in a loss position for more than twelve months consisted of 106 municipal securities aggregating $35.5 million with a loss of $2.9 million, 54 mortgage-backed

securities-GSE

aggregating $31.3 million with a loss of $5.2 million, 4 agency securities aggregating $5.4 million with a loss of $837 thousand and 4 SBA securities aggregating $486 thousand with a loss of $2 thousa

. 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 September 30, 2024, and December 31, 2023.

Note 5 – Loans Receivable

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


	September 30,			December 31,
	2024			2023
	(In thousands)
Commercial real estate	$	1,391,245		$	1,142,864
Commercial and industrial		93,782			50,961
Construction		258,332			310,187
Residential first-lien mortgage		70,389			38,040
Home equity/consumer		19,406			8,081

Total loans		1,833,154			1,550,133
Deferred fees and costs		(1,747	)		(1,798	)

Loans, net	$	1,831,407		$	1,548,335

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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

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


	September 30, 2024			December 31, 2023
	(In thousands)
Allowance for credit losses - loans	$	(23,200	)	$	(18,492	)
Allowance for credit losses - off balance sheet		(464	)		(589	)

	$	(23,664	)	$	(19,081	)

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


	September 30, 2024				December 31, 2023
	With a		Without a		With a		Without a
	Related		Related		Related		Related
	Allowance		Allowance		Allowance		Allowance
	(In thousands)
Commercial real estate	$	—	$	1,279	$	—	$	4,485
Commercial and industrial		28		548		—		2,116
Construction		—		—		—		—
Residential first-lien mortgage		—		479		—		107
Home equity/consumer		—		—		—		—

Total nonaccrual loans	$	28	$	2,306	$	—	$	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 nine-month period ended September 30, 2024, the Company wrote off $692 thousand in accrued interest receivable for loans, compared to $366 thousand for the nine-month period ended September 30, 2023. Accrued interest receivable related to loans, at September 30, 2024, and December 31, 2023, was $7.1 million and $5.5 million, respectively. The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loan receivables by the length of time a recorded payment is past due. The following table presents the segments of the loan portfolio, summarized by the past due status as of September 30, 2024:


													Loans
	30-59		60-89		>90								Receivable
	Days		Days		Days		Total				Total		>90 Days
	Past		Past		Past		Past				Loans		and
	Due		Due		Due		Due		Current		Receivable		Accruing
	(In thousands)
Commercial real estate	$	24,054	$	4,391	$	1,279	$	29,724	$	1,361,521	$	1,391,245	$	—
Commercial and industrial		401		2,222		576		3,199		90,583		93,782		—
Construction		—		—		—		—		258,332		258,332		—
Residential first-lien mortgage		400		—		479		879		69,510		70,389		—
Home equity/consumer		67		—		—		67		19,339		19,406		—

Total	$	24,922	$	6,613	$	2,334	$	33,869	$	1,799,285	$	1,833,154	$	—

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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


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

Total	$	491	$	—	$	6,708	$	7,199	$	1,542,934	$	1,550,133	$	—

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

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)


	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
	(Dollars in thousands)
Commercial real estate
Pass	$	112,403	$	168,841	$	305,533	$	135,130	$	75,353	$	578,291	$	7,551	$	1,383,102
Special mention		—		—		—		—		—		6,864		—		6,864
Substandard		—		—		—		—		—		1,279		—		1,279

Total commercial real estate		112,403		168,841		305,533		135,130		75,353		586,434		7,551		1,391,245
Current period gross charge-offs												237				237
Commercial and industrial
Pass		14,447		6,448		7,909		10,612		269		18,461		21,622		79,768
Special mention		—		—		—		—		—		1,334		—		1,334
Substandard		—		—		—		—		—		12,680		—		12,680

Total commercial and industrial		14,447		6,448		7,909		10,612		269		32,475		21,622		93,782
Current period gross charge-offs												408				408
Construction
Pass		6,057		8,826		30,385		59,502		6,196		104		147,114		258,184
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		148		—		148

Total construction		6,057		8,826		30,385		59,502		6,196		252		147,114		258,332
Residential first-lien mortgage
Performing		607		1,909		6,004		5,654		3,003		52,733		—		69,910
Nonperforming		—		—		—		—		—		479		—		479

Total residential first-lien mortgage		607		1,909		6,004		5,654		3,003		53,212		—		70,389
Home equity/consumer
Performing		1,123		1,005		1,045		277		81		1,602		14,251		19,384
Nonperforming		—		—		—		—		—		22		—		22

Total home equity/consumer		1,123		1,005		1,045		277		81		1,624		14,251		19,406
Total
Pass		134,637		187,029		350,876		211,175		84,902		651,191		190,538		1,810,348
Special mention		—		—		—		—		—		8,198		—		8,198
Substandard		—		—		—		—		—		14,608		—		14,608

Total loans	$	134,637	$	187,029	$	350,876	$	211,175	$	84,902	$	673,997	$	190,538	$	1,833,154

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
	(Dollars in thousands)
Commercial real estate
Pass	$	132,834	$	233,436	$	116,836	$	53,574	$	175,991	$	417,417	$	5,551	$	1,135,639
Special mention		—		—		—		—		—		2,740		—		2,740
Substandard		—		—		—		—		—		4,485		—		4,485

Total commercial real estate		132,834		233,436		116,836		53,574		175,991		424,642		5,551		1,142,864

Current period gross charge-offs												1,718				1,718
Commercial and industrial
Pass		2,098		2,304		11,925		1,962		1,133		13,954		15,045		48,421
Special mention		—		—		—		—		—		500		—		500
Substandard		—		—		—		—		—		2,040		—		2,040

Total commercial and industrial		2,098		2,304		11,925		1,962		1,133		16,494		15,045		50,961

Current period gross charge-offs												55				55
Construction
Pass		5,832		18,379		91,774		19,216		—		8,484		166,502		310,187
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—

Total construction		5,832		18,379		91,774		19,216		—		8,484		166,502		310,187

Current period gross charge-offs												148				148
Residential first-lien mortgage
Performing		—		979		4,792		2,839		1,545		27,778		—		37,933
Nonperforming		—		—		—		—		—		107		—		107

Total residential first-lien mortgage		—		979		4,792		2,839		1,545		27,885		—		38,040

Current period gross charge-offs												2				2
Home equity/consumer
Performing		1,153		1,016		1,172		—		—		1,606		3,134		8,081
Nonperforming		—		—		—		—		—		—		—		—

Total home equity/consumer		1,153		1,016		1,172		—		—		1,606		3,134		8,081

Total
Pass/performing		141,917		256,114		226,499		77,591		178,669		469,239		190,232		1,540,261
Special mention		—		—		—		—		—		3,240		—		3,240
Substandard /nonperforming		—		—		—		—		—		6,632		—		6,632

Total loans	$	141,917	$	256,114	$	226,499	$	77,591	$	178,669	$	479,111	$	190,232	$	1,550,133

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


			Commercial						Residential
	Commercial		and						first-lien		Home equity/
	real estate		industrial			Construction			mortgage		consumer			Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	16,623	$	377		$	744		$	660	$	60		$	18,464
Purchased non-credit deteriorated loans 1		2,106		15			546			271		214			3,152
Purchased credit deteriorated loans		110		4			11			13		16			154
Provision (reversal) 1		1,482		867			(699	)		8		(122	)		1,536
Charge-offs		1		(279	)		—			—		—			(278	)
Recoveries		3		134			35			—		—			172

Total	$	20,325	$	1,118		$	637		$	952	$	168		$	23,200

The provision for credit losses on the Consolidated Statement of Income is $4.6 million comprising of an increase of $3.2

million related to purchased non-credit deteriorated loans acquired, $

1.5 million increase to the allowance for loan loss and a $87 thousand reduction to the reserve for unfunded liabilities.

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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


				Commercial						Residential
	Commercial			and						first-lien			Home equity/
	real estate			industrial			Construction			mortgage			consumer			Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	16,047		$	488		$	1,145		$	725		$	87		$	18,492
Purchased non-credit deteriorated loans 1		2,106			15			546			271			214			3,152
Purchased credit deteriorated loans		110			4			11			13			16			154
Provision (reversal) 1		2,219			756			(1,100	)		(57	)		(149	)		1,669
Charge-offs		(236	)		(409	)		—			—			—			(645	)
Recoveries		79			264			35			—			—			378

Total	$	20,325		$	1,118		$	637		$	952		$	168		$	23,200

The provision for credit losses on the Consolidated Statement of Income is $4.7 million comprising of an increase of $3.2

million related to purchased non-credit deteriorated loans acquired, $

1.7 million increase to the allowance for loan loss and a $152 thousand reduction to the reserve for unfunded liabilities.

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


			Commercial						Residential
	Commercial		and						first-lien		Home equity/
	real estate		industrial			Construction			mortgage		consumer			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	12,123	$	407		$	4,529		$	661	$	250		$	17,970
Provision (reversal) 1		3,301		(81	)		(3,219	)		160		(161	)		—
Charge-offs		—		—			—			—		—			—
Recoveries		4		18			—			—		—			22

Total	$	15,428	$	344		$	1,310		$	821	$	89		$	17,992

1	The reversal of credit losses on the Consolidated Statement of Income is $182 thousand comprising of a $182 reduction to the reserve for unfunded liabilities.

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


				Commercial						Residential
	Commercial			and						first-lien			Home equity/
	real estate			industrial			Construction			mortgage			consumer			Unallocated			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	8,654		$	271		$	6,289		$	236		$	45		$	966		$	16,461
CECL adoption		1,384			(73	)		(1,269	)		428			195			(966	)		(301	)
CECL day 1 provision		1,586			105			—			16			—			—			1,707
Purchased credit deteriorated loans		499			102			—			—			—			—			601
Provision (reversal) 1		4,994			(84	)		(3,562	)		143			(151	)		—			1,340
Charge-offs		(1,718	)		—			(148	)		(2	)		—			—			(1,868	)
Recoveries		29			23			—			—			—			—			52

Total	$	15,428		$	344		$	1,310		$	821		$	89		$	—		$	17,992

1	The provision for credit losses on the Consolidated Statement of Income is $2.5 million comprising of $1.7 million related to non-PCD loans acquired, a $1.3 million increase to the allowance for credit losses on loans and a $501 thousand reduction to the reserve for unfunded liabilities.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (concluded)

As of September 30, 2024, the Company had ten loans totaling $2.3 million that were individually analyzed for potential credit loss and all the loans have real estate as credit support. As of December 31, 2023, the Company had nine loans totaling $6.7 million that were individually analyzed for potential credit loss.

Occasionally, the Company will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss, proactively work with borrowers in financial difficulty, or to comply with regulations regarding the treatment of certain bankruptcy filing and discharge situations. Typically, such concessions may consist of a reduction in interest rate to a below market rate, taking into account the credit quality of the note, extension of additional credit base on receipt of adequate collateral, or a deferment or reduction of payments (principal or interest) which materially alters the Company’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. When principal forgiveness is provided, the amount forgiven is charged off against the allowance for credit losses on loans. There were no modifications to borrowers with financial difficulties and no loans that defaulted for the nine-month periods ended September 30, 2024, and September 30, 2023.

Note 6 – Deposits

The components of deposits were as follows:


	September 30, 2024				December 31, 2023
	(Dollars in thousands)
Demand, non-interest-bearing checking	$	302,846	14.80	%	$	249,282	15.24	%
Demand, interest-bearing checking		284,504	13.91	%		247,939	15.16	%
Savings		178,299	8.71	%		146,484	8.96	%
Money market		493,353	24.11	%		354,005	21.64	%
Time deposits, $250,000 and over		213,310	10.43	%		173,614	10.61	%
Time deposits, other		573,689	28.04	%		464,417	28.39	%

	$	2,046,001	100.00	%	$	1,635,741	100.00	%

Note 7 – Borrowings

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

Note 8 – 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.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

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 September 30, 2024 were as follows:


	(Level 1)
	Quoted Price		(Level 2)
	in Active		Significant		(Level 3)		Total Fair
	Markets for		Other		Significant		Value
	Identical		Observable		Unobservable		September 30,
Description	Assets		Inputs		Inputs		2024
	(In thousands)
Mortgage-backed securities - U.S. government sponsored enterprise (GSEs)	$	—	$	130,491	$	—	$	130,491
U.S. government agency securities		—		10,468		—		10,468
Obligations of state and political subdivisions		—		40,987		—		40,987
Small Business Association (SBA) securities		—		2,080		—		2,080
U.S. treasury securities		4,833		—		—		4,833

Securities available-for-sale at fair value	$	4,833	$	184,026	$	—	$	188,859

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:


	(Level 1)
	Quoted Price		(Level 2)
	in Active		Significant		(Level 3)		Total Fair
	Markets for		Other		Significant		Value
	Identical		Observable		Unobservable		December 31,
Description	Assets		Inputs		Inputs		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

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – 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:


	(Level 1)
	Quoted Price		(Level 2)
	in Active		Significant		(Level 3)		Total Fair
	Markets for		Other		Significant		Value
	Identical		Observable		Unobservable		December 31
Description	Assets		Inputs		Inputs		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.

Range

December 31,

Valuation

Unobservable

(Weighted

Description

2023

Technique

Input

Average)

(Dollars in thousands)

Collateral dependent loan

4,485

Collateral

Discount adjustment

0.0

% (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 September 30, 2024 or 2023. The Company’s policy is to recognize transfers between levels as of the end of the reporting period.

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

Investment Securities

The fair value of securities

available-for-sale

(carried at fair value) and

held-to-maturity

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

Individual evaluated loans (generally carried at fair value)

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

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


	September 30, 2024
	Carrying		Estimated
	Amount		Fair Value		Level 1		Level 2		Level 3
	(In thousands)
Financial Assets:
Cash and cash equivalents	$	181,058	$	181,058	$	181,058	$	—	$	—
Securities available-for-sale at fair value		188,859		188,859		—		188,859		—
Securities held-to-maturity		163		164		—		164		—
Loans receivable, net		1,808,207		1,819,217		—		—		1,819,217
Restricted investments in bank stock		2,075		2,075		—		2,075		—
Accrued interest receivable		8,203		8,203		—		8,203		—
Equity method investments		10,042		10,042		—		6,100		3,942
Mortgage servicing rights		1,115		1,115		—		1,115		—
Financial Liabilities:
Deposits	$	2,046,001		1,988,165	$	—	$	1,988,165	$	—
Accrued interest payable		14,340		14,340		—		14,340		—

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


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

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

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

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

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (concluded)

Limitations

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

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

off-balance

sheet instruments.

In addition, the fair value estimates are based on existing on and

off-balance

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

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

Note 9 – 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 30 operating lease agreements for 28 branches and its corporate offices with terms extending through 2042. 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		Nine Months Ended			Twelve Months Ended
	Condition Location		September 30, 2024			December 31, 2023
			(In thousands)
Operating Lease Right of Use Asset:
Gross carrying amount			$	23,398		$	16,026
Increased asset from new leases				3,066			9,799
Accumulated amortization				(3,836	)		(2,427	)

Net book value		Operating lease right-of-use asset	$	22,628		$	23,398

Operating Lease Liability:

Lease liability		Operating lease liability	$	23,626		$	24,280

As of September 30, 2024, the weighted-average remaining lease terms for operating leases was 11.0 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.53%. The Company used FHLB fixed rate advances or at the time the lease was placed in service for the term most closely aligning with remaining lease term.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 9 – Leases (concluded)

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


Twelve months ended September 30, 2024	$	3,503
2025		3,373
2026		3,136
2027		2,932
2028		2,439
Thereafter		14,617

Total future operating lease payment		30,000
Amounts representing interest		(6,374	)

Present value of net future lease payments	$	23,626


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In thousands)				(In thousands)
Lease cost:
Operating lease	$	1,030	$	1,194	$	2,993	$	2,789
Short-term lease cost		27		31		92		96

Total lease cost	$	1,057	$	1,225	$	3,085	$	2,885

Other information:
Cash paid for amounts included in the measurement of lease liabilities	$	890	$	898	$	2,641	$	2,179

Note 10 – Goodwill and Core Deposit Intangible

In accordance with ASC 805, the Company recorded $5.5 million of goodwill along with a core deposit intangible asset of $2.8 million for the Cornerstone Bank acquisition in 2024 and recorded $8.9 million of goodwill along with a core deposit intangible asset of $4.2 million for the five branches acquired in 2019. The Noah Bank acquisition that occurred in 2023 did not generate any goodwill, but the Bank recorded $98 thousand in core deposit intangible asset. The core deposit intangible assets are being amortized over 10 years, using the sum of the year’s digits. Except as set forth below, GAAP requires that goodwill be tested for impairment annually (with the Company’s annual evaluation occurring on May 31 of each year) or more frequently if impairment indicators arise. The reporting unit was determined to be our community banking operations, which is our only operating segment.

ASC Topic

350-20

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

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 10 – Goodwill and Core Deposit Intangible (concluded)

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


			Core Deposit
	Goodwill		Intangible
	(In thousands)
Balance at December 31, 2023	$	8,853	$	1,422
Acquisition of Cornerstone Bank	$	5,528	$	2,812
Amortization expense		—		(374	)

Balance at September 30, 2024	$	14,381	$	3,860

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


2024		228
2025		847
2026		717
2027		587
2028		457
Thereafter		1,024

Total	$	3,860

Note 11 – Subsequent Events

On October 22, 2024, the Board of Directors declared a cash dividend of $0.30 per share of common stock to shareholders of record on November 5, 2024, payable on November 28, 2024.

Note 12 – 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.

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: difficulties and delays in integrating the businesses of Cornerstone Bank and the Company, retaining Cornerstone’s customers or fully realizing cost savings and other benefits; 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.

Throughout this document, references to “we,” “us,” or “our” refer to the Company and the Bank.

Executive Overview

The Company is the holding company for The Bank of Princeton (the “Bank”), a community bank founded in 2007. The Bank is a New Jersey state-chartered commercial bank with 28 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Burlington, Chesterfield, Cherry Hill, Cream Ridge, Deptford, Fort Lee, Hamilton, Kingston, Lakewood, Lambertville, Lawrenceville, Medford, Monroe, Moorestown, New Brunswick, Palisades Park, Pennington, Piscataway, Princeton Junction, Quakerbridge, Sicklerville, Voorhees, and Woodbury. 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”).

The Company’s common stock trades on the “Nasdaq Global Select Market” under ticker symbol, “BPRN.”

Critical Accounting Policies and Estimates

Princeton Bancorp has chosen accounting policies that it believes are appropriate to accurately and fairly report its operating results and financial position, and the Company applies those accounting policies in a consistent manner. The Significant Accounting Policies are summarized in Note 1 to the consolidated financial statements included in the 2023 Annual Report on Form 10-K. There have been no changes to the Critical Accounting Estimates since the Company filed its Annual Report on Form 10-K for the year ended December 31, 2023.

New Accounting Pronouncements

Refer to Note 1 to the consolidated financial statements included in the 2023 Annual Report on Form 10-K and Note 1- Summary of Significant Accounting Policies in this document.

Economy

The US economy expanded at an annual rate of 2.8% over the three months ended September 30, 2024, lifted by consumer spending. Inflation has slowed after hitting a 40-year high, but households still grapple with a 20% increase in prices since 2021, an increase in energy prices, higher interest rates (impacting the real estate market) and uncertainties resulting from regional conflicts in around the world, including in Ukraine and the Middle East. U.S. unemployment, at 4.7%, is low but rising. The unemployment rate in New Jersey is 4.6% at September 30, 2024.

Comparison of Financial Condition at September 30, 2024 and December 31, 2023

General

Total assets were $2.35 billion at September 30, 2024, an increase of $438.2 million, or 22.87% when compared to $1.92 billion at the end of 2023. The primary reason for the increase in total assets was the acquisition of Cornerstone Bank on August 23, 2024, which had approximately $303.5 million in assets (at fair value) at closing. When looking at specific components of the balance sheet, including acquired assets, the Company recorded an increase in net loans of $283.1 million primarily related to the Cornerstone acquisition, an increase in investments of $97.5 million, an increase in cash and cash equivalents of approximately $30.5 million.

Cash and cash equivalents

Cash and cash equivalents increased $30.5 million, or 20.26%, to $181.1 million at September 30, 2024 compared to December 31, 2023.

Investment securities

Total available-for-sale investment securities increased million $97.5, or 106.74%, to $188.9 million at September 30, 2024 compared to December 31, 2023. This increase was related to the purchase of mortgage-backed securities of U.S. government sponsored enterprises, and U.S government agency securities along with $14.0 million in securities acquired in the Cornerstone Bank acquisition during the nine-months ended September 30, 2024.

Loans

Loans, net of deferred loan fees and costs, increased $283.1 million, or 18.28%, to $1.83 billion at September 30, 2024 compared to December 31, 2023. The primary reasons for the increase in net loans were the $255.5 million in loans acquired from Cornerstone Bank and the $26.1 million increase from existing operations. The increase in the Company’s net loans consisted of increases of $248.5 million in commercial real estate loans, $42.9 million in commercial and industrial loans, $32.3 million in residential mortgages, and $11.3 in home equity and consumer loans, all partially offset by a decrease of $51.9 million in construction loans.

The Company’s CRE loan portfolio, which includes multi-family, land, owner-occupied and non-owner-occupied CRE loans, was $1.39 billion or 75.8% of total loans of $1.83 billion at September 30, 2024. There were 789 loans in the Company’s CRE portfolio with an average and median loan size of $1.8 million and $0.6 million, respectively. Loan to Value (“LTV”) estimates are less than 70% for $1.27 billion or 91.7% of the CRE portfolio and less than 80% for $1.37 billion or 99.2% of the CRE portfolio.

The following table presents the commercial real estate portfolio by property type along with the weighted average loan to value for the periods presented (dollars in thousands):


	September 30, 2024								December 31, 2023
	Balance		% of portfolio			Weighted Average LTV			Balance		% of portfolio			Weighted Average LTV
Commercial Real Estate
Multi Family		525,202		37.8	%		53.3	%		403,779		35.3	%		55.7	%
Owner Occupied		419,994		30.2	%		36.4	%		347,734		30.4	%		33.0	%
Land		30,250		2.2	%		76.9	%		30,280		2.6	%		79.6	%
Non Owner Occupied
Office Building		100,577		7.2	%		43.1	%		91,968		8.0	%		42.9	%
Retail		96,754		7.0	%		42.2	%		67,862		5.9	%		40.7	%
Industrial/Warehousing		78,374		5.6	%		45.9	%		69,917		6.1	%		46.0	%
Mixed Use		48,449		3.5	%		44.2	%		48,684		4.3	%		42.9	%
Restaurants		22,842		1.6	%		39.8	%		15,361		1.3	%		33.3	%
Healthcare		8,259		0.6	%		50.6	%		11,448		1.0	%		48.7	%
Other		60,544		4.4	%		45.8	%		55,830		4.9	%		38.7	%

Total non owner occupied		415,799		29.8	%					361,070		31.6	%

Total Commercial Real Estate		1,391,245		100.0	%					1,142,863		100.0	%

The following table presents the geographic markets of the commercial real estate portfolio for the periods presented (dollars in thousands):


	September 30, 2024					December 31, 2023
	Balance		% of portfolio			Balance		% of portfolio
Geographical Market
New York		639,005		46.0	%		533,991		46.7	%
New Jersey		546,759		39.3	%		408,368		35.7	%
Pennslyvania		185,529		13.3	%		172,848		15.1	%
Other		19,952		1.4	%		27,657		2.5	%

		1,391,245		100.00	%		1,142,864		100.00	%

For the three-month and nine-month periods ended September 30, 2024, charge-offs were $278 thousand and $645 thousand, and recoveries were $172 thousand and $378 thousand. For the three-month and nine-month periods ended September 30, 2023, charge-offs were zero and $1.9 million, and recoveries were $22 thousand and $52 thousand, respectively. The coverage ratio of the allowance for credit losses to period end loans was 1.27% at September 30, 2024 and 1.19% at December 31, 2023.

At September 30, 2024, non-performing assets totaled $2.3 million, a decrease of $4.4 million when compared to the amount at December 31, 2023. Non-performing assets as a percentage of total loans, net of deferred fees and costs, was 0.13% at September 30, 2024 and 0.43% at December 31, 2023.

Deposits

Total deposits on September 30, 2024, increased $410.3 million, or 25.08%, when compared to December 31, 2023. The primary reasons for the increase in total deposits were the $282.8 million in deposits acquired from Cornerstone Bank and the $127.5 million increase from existing operations. The increase in the Company’s deposits consisted of increases in certificates of deposit of $149.0 million, money market deposits of $139.3 million, non-interest-bearing deposits of $53.6 million, interest-bearing demand deposits of $36.6 million and savings deposits of $31.8 million.

At September 30, 2024, the Company had approximately $616.7 million in uninsured deposits, consisting of $89.0 million in non-interest-bearing demand deposits, $184.9 million in interest-bearing demand deposits, $172.2 million in money market accounts, $27.7 million in savings deposits and $142.9 million in certificates of deposits.

Borrowings

The Company had no outstanding borrowings at September 30, 2024 and at December 31, 2023.

Stockholders’ equity

Total stockholders’ equity at September 30, 2024, increased $21.3 million or 8.86% when compared to December 31, 2023. The increase was primarily due to the $21.2 million increase in paid-in capital associated with the issuance of common stock of $20.0 million related to the acquisition of Cornerstone and a decrease in accumulated other comprehensive income (loss) of $1.6 million. The ratio of equity to total assets at September 30, 2024 and at December 31, 2023 was 11.1% and 12.5%, respectively. The current period ratio decrease was primarily due to the Cornerstone Bank acquisition.

Liquidity

Our liquidity, represented by cash and cash equivalents, is a product of our operating, investing and financing activities. Our primary sources of funds are deposits, principal repayments of securities and outstanding loans, and funds provided from operations. In addition, we invest excess funds in short-term interest-earnings assets such as overnight deposits or U.S. agency securities, which provide liquidity to meet lending requirements. While scheduled payments from the amortization of loans and securities and short-term investments are relatively predictable sources of funds, general interest rates, economic conditions and competition greatly influence deposit flows and repayments on loans and mortgage-backed securities.

As a member of the FHLB we are eligible to borrow funds in an aggregate amount of up to 50% of the Company’s total assets, subject to its collateral requirements. Based on available eligible securities and qualified real estate loan collateral, the Company had the ability to borrow an additional $471.8 million as of September 30, 2024. The company maintained a $60.0 million letter of credit with the FHLB supporting municipal deposits as of September 30, 2024.

As of September 30, 2024, the Bank was eligible to use the Federal Reserve discount window for borrowings. Based on assets pledged as collateral as of the applicable date, the Bank’s borrowing availability was approximately $10.0 million at September 30, 2024. As of September 30, 2024, the Company had no outstanding advances from the discount window.

The Company is also a shareholder of Atlantic Community Bancshares, Inc., the parent company of Atlantic Community Bankers Bank (“ACBB”). As of September 30, 2024, the Company had available borrowing capacity with ACBB of $10.0 million to provide short-term liquidity generally for a period of not more than fourteen days. No amounts were outstanding under our line of credit with ACBB at September 30, 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 September 30, 2024, the required capital conservation buffer is 2.50%.

Under the risk-based capital requirements, “total” capital (a combination of core and “supplementary” capital) must equal at least 8.0% of “risk-weighted” assets. The FDIC also is authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. Management believes, as of September 30, 2024, that the Bank meets all capital adequacy requirements to which it is subject and is “well capitalized” under applicable regulations.

The Bank’s actual capital amounts and ratios and the regulatory requirements at September 30, 2024 and December 31, 2023 are presented below:


	Actual					For capital conservation buffer requirement					To be well capitalized under prompt corrective action provision
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in the thousands)
September 30, 2024:
Total capital (to risk-weighted assets)	$	266,469		13.168	%	$	212,480		10.500	%	$	202,362		10.000	%
Tier 1 capital (to risk-weighted assets)	$	243,269		12.021	%	$	172,008		8.500	%	$	161,890		8.000	%
Common equity tier 1 capital (to-risk weighted assets	$	243,269		12.021	%	$	141,653		7.000	%	$	131,535		6.500	%
Tier 1 leverage capital (to average assets)	$	243,269		11.440	%	$	138,222		6.500	%	$	106,325		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 September 30, 2024 and 2023

General

The Company reported net loss of $(4.5) million, or ($0.68) per diluted common share, for the third quarter of 2024, compared to net income of $7.6 million, or $1.19 per diluted common share, for the third quarter of 2023. The $12.1 million decrease in net income for the third quarter of 2024 compared to the same period in 2023 was primarily due to acquisition-related items recorded in the third quarter of 2024 due to the Company’s acquisition of Cornerstone Bank. Specifically, the decrease was a result of an increase of $10.0 million in non-interest expense, and an increase in the provision for credit losses of $4.8 million. These increases were primarily the result of the Cornerstone acquisition which resulted in $7.8 million in merger-related expenses and a $3.2 million provision for credit loss associated with the acquired purchased non-credit deteriorated loans.

Interest income

Interest income increased $4.8 million for the three months ended September 30, 2024, compared to the same period in 2023. Interest income on loans increased $4.6 million due to increases in both the average balance of loans of $226.9 million and the yield of 25 basis points. Interest on taxable available-for-sale securities increased $916 thousand due to a 150 basis point increase in yield and a $65.0 million increase in the average balance of taxable available-for-sale securities. Other interest and dividend income decreased $737 thousand due to a decrease in average balance of $55.1 million offset by an increase in the yield of 5 basis points.

Interest expense

Interest expense on deposits increased $4.4 million to $14.7 million for the three-month period ended September 30, 2024, due to increases in both the rate paid on interest-bearing deposits of 68 basis points and in the average balance of interest-bearing deposits of $223.5 million over the same prior year period.

Provision for credit losses

The Company recorded a provision of credit losses of $4.6 million during the three-months ended September 30, 2024, $3.2 million related to the CECL impact for purchased non-credit deteriorated loans associated with loans acquired in the Cornerstone acquisition, and $1.5 million recorded to the allowance of credit losses resulting from quantitative factors changes in the Company’s loan portfolio assumptions, offset by an decrease to the provision for credit losses of $88 thousand related to unfunded commitments, which are recorded in other liabilities on the Company’s statements of financial condition. Charge-offs were $278 thousand, and recoveries were $172 thousand, for the quarter ended September 30, 2024.

Non-interest income

Total non-interest income was $2.1 million for the three-months ended September 30, 2024, a decrease of $347 thousand or 14.4% when compared to the same prior year period.

Non-interest expense

Total non-interest expense was $20.1 million for the three-months ended September 30, 2024, an increase of $10.0 million or 98.3% when compared to the same prior year period. The increase was due primarily to $7.8 million in merger-related expenses recorded, $379 thousand more in salaries and benefits expense and $214 thousand more in data processing and communications expenses during the three-months ended September 30, 2024, of which were all primarily associated with the Cornerstone Bank acquisition.

Provision for income taxes

For the three months ended September 30, 2024, the Company recorded an income tax benefit of $1.1 million, resulting in an effective tax rate of (20.1%), compared to an income tax expense of $1.5 million resulting in an effective tax rate of 16.6% for the quarter ended September 30, 2023.

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

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


	Three Months Ended September 30,
	2024							2023							Change 2024 vs 2023
	Average Balances		Income/ Expense		Yield Rates			Average Balances		Income/ Expense		Yield Rates			Average Balances			Yield Rates
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,691,688	$	28,135		6.62	%	$	1,464,798	$	23,503		6.37	%	$	226,890			0.25	%
Securities
Taxable available-for-sale		111,633		1,273		4.56	%		46,599		357		3.06	%		65,034			1.50	%
Tax exempt available-for-sale		40,028		285		2.85	%		40,118		285		2.84	%		(90	)		0.01	%
Held-to-maturity		164		2		5.33	%		196		3		5.28	%		(32	)		0.05	%
Federal funds sold		135,164		1,828		5.38	%		199,350		2,702		5.38	%		(64,186	)		0.00	%
Other interest earning-assets		19,549		287		5.85	%		10,506		150		5.67	%		9,043			0.18	%

Total interest-earning assets		1,998,226	$	31,810		6.33	%		1,761,567	$	27,000		6.08	%		236,659			0.25	%

Other non-earnings assets		151,776							127,682							24,094

Total assets	$	2,150,002						$	1,889,249						$	260,753

Interest-bearing liabilities
Demand	$	258,728	$	1,213		1.86	%	$	243,359	$	1,031		1.68	%	$	15,369			0.18	%
Savings		159,521		1,031		2.57	%		149,215		788		2.10	%		10,306			0.48	%
Money markets		443,109		4,294		3.85	%		337,491		2,979		3.50	%		105,618			0.35	%
Certificates of deposit		721,240		8,163		4.50	%		629,082		5,518		3.48	%		92,158			1.02	%

Total deposit		1,582,598		14,701		3.70	%		1,359,147		10,316		3.01	%		223,451			0.68	%
Borrowings		—		—		N/A			—		—		N/A			—			N/A

Total interest-bearing liabilities		1,582,598	$	14,701		3.70	%		1,359,147	$	10,316		3.01	%		223,451			0.68	%

Non-interest-bearing deposits		269,030							255,775							13,255
Other liabilities		43,729							45,923							(2,194	)

Total liabilities		1,895,357							1,660,845							234,512
Stockholders’ equity		254,645							228,404							26,241

Total liabilities and stockholder’s equity	$	2,150,002						$	1,889,249						$	260,753

Net interest-earnings assets	$	415,628						$	402,420						$	13,208
Net interest income; interest rate spread						2.64	%						3.07	%					-0.43	%
Net interest margin			$	17,109		3.41	%			$	16,684		3.76	%	$	425			-0.35	%

Rate/Volume Analysis

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


	Three Months Ended September 30, 2024 vs. 2023 Increase (Decrease) Due to
	Rate			Volume			Net
	(Dollars in thousands)
Interest and dividend income:
Loans receivable, including fees	$	73		$	4,558		$	4,631
Investment securities
Taxable available-for-sale		338			578			916
Tax exempt available-for-sale		2			(1	)		1
Held-to-maturity		0			(1	)		(1	)
Federal funds sold		4			(878	)		(874	)
Other interest-earning assets		0			137			137

Total interest-earning assets	$	417		$	4,393		$	4,810

Interest expense:
Demand		230			(48	)	$	182
Savings		386			(143	)		243
Money market		584			731			1,315
Certificates of deposit		298			2,347			2,645
Borrowings		—			—			—

Total interest expense	$	1,498		$	2,887		$	4,385

Change in net interest income	$	(1,081	)	$	1,506		$	425

Comparison of Operating Results for the Nine Months Ended September 30, 2024, and 2023

General

The Company reported net income of $5.0 million, or $0.77 per diluted common share, for the nine-month period ended September 30, 2024, compared to net income of $20.5 million, or $3.21 per diluted common share, for the same period in 2023. The decrease in net income for the nine-month period ended September 30, 2024, compared to the same period in 2023, was primarily the result of a $9.7 bargain purchase gain in 2023 from the Company’s acquisition of Noah Bank in May of that year, a reduction of $2.6 million of income tax expense and the additional operating expenses recorded in 2024 related to the Cornerstone acquisition.

Interest income

Interest income increased $18.7 million for the nine-months ended September 30, 2024, compared to the same period in 2023. Interest income on loans increased $14.2 million due to increases in both the average balance of loans of $185.1 million and the yield of 47 basis points. Interest on taxable available-for-sale securities increased $1.9 million due to a 158 basis point increase in yield and a $42.2 million increase in the average balance of taxable available-for-sale securities. Other interest and dividend income increased $2.6 million due to an increase in average balance of $59.3 million and an increase in the yield of 16 basis points.

Interest expense

Interest expense on deposits increased $19.3 million to $40.8 million for the nine-month period ended September 30, 2024, due to increases in both the rate paid on interest-bearing deposits of 126 basis points and in the average balance of interest-bearing deposits of $284.6 million over the same prior year period.

Provision for credit losses

The Company recorded a $4.7 million provision for credit losses for the nine-month period ended September 30, 2024, and recorded $2.5 million provision for credit losses for the nine-month period ended September 30, 2023. The increase for the nine-month period ended September 30, 2024, compared with the same prior year period, is primarily due to $3.2 million of the provision related to purchased non-credit deteriorated loans acquired in the Cornerstone Bank acquisition and $1.5 million recorded to the allowance of credit losses resulting from changes in the quantitative factors used in the Company’s loan portfolio assumptions. For the nine-month periods ended September 30, 2024, charge-offs were $646 thousand, and recoveries were $378 thousand.

Non-interest income

For the nine-month period ended September 30, 2024, non-interest income decreased $9.2 million or (60.1%), from the same nine-month period in 2023, primarily due to the $9.7 million bargain purchase gain from the Noah acquisition recorded in the nine-month period ended September 30, 2023.

Non-interest expense

For the nine-month period ended September 30, 2024, non-interest expense was $44.0 million, compared to $37.7 million for the same period in 2023. The increase was primarily due to an increase in merger-related expenses of $2.2 million during 2024 as well as increases in salaries and employee benefits of $2.2 million over the same period in 2023 associated with merit increases as well as additional staff costs related to the Cornerstone and Noah acquisitions.

Provision for income taxes

For the nine-month period ended September 30, 2024, the Bank recorded an income tax expense of $1.0 million, resulting in an effective tax rate of 16.35%, compared to an income tax expense of $3.6 million resulting in an effective tax rate of 14.86% for the nine-month period ended September 30, 2023.

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


	Nine Months Ended September 30,
	2024							2023							Change 2024 vs 2023
	Average Balances		Income/ Expense		Yield Rates			Average Balances		Income/ Expense		Yield Rates			Average Balances			Yield Rates
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,609,890	$	79,109		6.56	%	$	1,424,768	$	64,914		6.09	%	$	185,122			0.47	%
Securities
Taxable available-for-sale		86,732		2,838		4.36	%		44,517		927		2.78	%		42,215			1.59	%
Tax exempt available-for-sale		40,180		857		2.84	%		40,974		853		2.78	%		(794	)		0.07	%
Held-to-maturity		171		7		5.25	%		198		8		5.28	%		(27	)		-0.03	%
Federal funds sold		138,843		5,644		5.43	%		91,761		3,639		5.30	%		47,082			0.13	%
Other interest earning-assets		19,281		831		5.76	%		7,086		285		5.36	%		12,195			0.40	%

Total interest-earning assets		1,895,097	$	89,286		6.29	%		1,609,304	$	70,626		5.87	%		285,793			0.42	%

Other non-earnings assets		144,630							114,544							30,086

Total assets	$	2,039,727						$	1,723,848						$	315,879

Interest-bearing liabilities
Demand	$	244,271	$	3,525		1.93	%	$	250,100	$	2,417		1.29	%	$	(5,829	)		0.64	%
Savings		151,884		2,925		2.57	%		163,516		1,888		1.54	%		(11,632	)		1.03	%
Money markets		399,253		11,724		3.92	%		297,360		6,251		2.81	%		101,893			1.11	%
Certificates of deposit		704,388		22,587		4.28	%		504,237		10,946		2.90	%		200,151			1.38	%

Total deposit		1,499,796		40,761		3.63	%		1,215,213		21,502		2.37	%		284,583			1.26	%
Borrowings		—		—		0.00	%		3,133		118		5.01	%		(3,133	)		-5.01	%

Total interest-bearing liabilities		1,499,796	$	40,761		3.63	%		1,218,346	$	21,620		2.37	%		281,450			1.26	%

Non-interest-bearing deposits		252,184							244,718							7,466
Other liabilities		42,239							34,313							7,926

Total liabilities		1,794,219							1,497,377							296,842
Stockholders’ equity		245,508							226,471							19,037

Total liabilities and stockholder’s equity	$	2,039,727						$	1,723,848						$	315,879


Net interest-earnings assets	$	395,301						$	390,958						$	4,343
Net interest income; interest rate spread						2.66	%						3.50	%					-0.84	%
Net interest margin			$	48,525		3.42	%			$	49,006		4.07	%	$	(481	)		-0.65	%

Rate/Volume Analysis


	Nine Months Ended September 30, 2024 vs. 2023 Increase (Decrease) Due to
	Rate			Volume			Net
	(In thousands)
Interest and dividend income:
Loans receivable, including fees	$	516		$	13,679		$	14,195
Securities available-for-sale
Taxable		294			1,618			1,912
Tax-exempt		13			(9	)		4
Securities held-to-maturity		(11	)		10			(1	)
Federal funds sold		53			1,952			2,005
Other interest and dividend income		2			545			547

Total interest and dividend income	$	867		$	17,795		$	18,662

Interest expense:
Demand		975			133		$	1,108
Savings		917			120			1,037
Money market		1,362			4,111			5,473
Certificates of deposit		820			10,823			11,643
Borrowings		—			(118	)		(118	)

Total interest expense	$	4,074		$	15,069		$	19,143

Change in net interest income	$	(3,207	)	$	2,726		$	(481	)

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 September 30, 2024, which we expect, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the “GAP Table”). Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at September 30, 2024, based on contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and anticipated prepayments of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans.


	3 Months or Less			More than 3 Months to 1 Year			More than 1 Year to 3 Years			More than 3 Years to 5 Years			More than 5 Years			Non-Rate Sensitive			Total Amount
(Dollars in thousands)
Interest-earning assets: (1)
Investment securities	$	21,608		$	41,919		$	44,907		$	19,098		$	70,664		$	(9,011	)	$	189,185
Loans receivable		505,503			208,999			531,160			494,963			112,026			(44,444	)		1,808,207
Other interest-earnings assets (2)		163,749			—			—			—			—			—			163,749

Total interest-earning assets	$	690,860		$	250,918		$	576,067		$	514,061		$	182,690		$	(53,455	)	$	2,161,141

Interest-bearing liabilities:
Checking and savings accounts	$	462,803					$	—		$	—		$	—		$	—		$	462,803
Money market accounts		493,353			—			—			—			—			—			493,353
Certificate accounts		124,152			620,773			39,554			2,520			—			—			786,999
Borrowings		—			—			—			—			—			—			—

Total interest-bearing liabilities	$	1,080,308		$	620,773		$	39,554		$	2,520		$	—		$	—		$	1,743,155

Interest-earning assets less interest-bearing liabilities	$	(389,448	)	$	(369,855	)	$	536,513		$	511,541		$	182,690		$	(53,455	)	$	417,986

Cumulative interest-rate sensitivity gap (3)	$	(389,448	)	$	(759,303	)	$	(222,790	)	$	288,751		$	471,441

Cumulative interest-rate gap as a percentage of total assets at September 30, 2024		-16.54	%		-32.25	%		-9.46	%		12.26	%		20.02	%

Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at September 30, 2024		63.95	%		55.36	%		87.20	%		116.56	%		127.05	%

(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 September 30, 2024, and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.


Change in Interest Rates	Net Portfolio Value
In Basis Points (Rate Shock)	Amounts		$ Change			% Change			EVE/EVA¹			Change
			(Dollars in thousands)
300	$	295,229	$	(17,731	)		-5.67	%		13.33	%		(0.03	)
200	$	302,457	$	(10,503	)		-3.36	%		13.41	%		0.05
100	$	306,791	$	(6,169	)		-1.97	%		13.35	%		(0.01	)
Static	$	312,960	$	—						13.36	%
(100)	$	317,461	$	4,501			1.44	%		13.33	%		(0.03	)
(200)	$	315,716	$	2,756			0.88	%		13.08	%		(0.28	)
(300)	$	303,601	$	(9,359	)		-2.99	%		12.42	%		(0.94	)

¹	Economic Value of Equity (EVE) divded by Economic Value of Assets (EVA)

As is the case with the GAP Table, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV require the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the models presented assume that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV model provides an indication of interest rate risk exposure at a particular point in time, such model is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.


PART I FINANCIAL INFORMATION

Item 1	Financial Statements
	Unaudited Consolidated Statements of Financial Condition - September 30, 2024 and December 31, 2023	3
	Unaudited Consolidated Statements of Income - Three and Nine Months Ended September 30, 2024 and 2023	4
	Unaudited Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2024 and 2023	5
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity - Three and Nine Months Ended September 30, 2024 and 2023	6
	Unaudited Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2024 and 2023	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3	Quantitative and Qualitative Disclosure about Market Risk	42
Item 4	Controls and Procedures	42

PART II OTHER INFORMATION

Item 1	Legal Proceedings	43
Item 1A	Risk Factors	43
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	43
Item 3	Defaults Upon Senior Securities	43
Item 4	Mine Safety Disclosures	43
Item 5	Other Information	43
Item 6	Exhibits	44


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
NET INCOME (LOSS)	$	(4,456	)	$	7,598		$	5,015		$	20,483
Other comprehensive income (loss)
Unrealized losses arising during period on securities available-for-sale		3,758			(4,321	)		2,240			(4,656	)
Reclassification adjustment for losses (gains) realized in income 1		7			6			7			6

Net unrealized income (loss)		3,765			(4,315	)		2,247			(4,650	)
Tax effect		(1,072	)		1,236			(639	)		1,330

Total other comprehensive income (loss)		2,693			(3,079	)		1,608			(3,320	)

COMPREHENSIVE INCOME (LOSS)	$	(1,763	)	$	4,519		$	6,623		$	17,163


Exhibit Number		Description

31.1		Rule 13a-14(a) Certification on the Principal Executive Officer

31.2		Rule 13a-14(a) Certification on the Principal Financial Officer

32		Section 1350 Certifications

101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Label Linkbase Document

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


		Princeton Bancorp, Inc.

Date: November 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)