Bank of Princeton BPRN

PRINCETON, N.J., Jan. 26, 2023 /PRNewswire/ -- The Bank of Princeton (the "Bank"), the wholly owned subsidiary of Princeton Bancorp, Inc. (NASDAQ: BPRN), today reported its unaudited financial condition and results of operations at and for the quarter and year ended December 31, 2022.  The Bank reported net income of $7.2 million, or $1.13 per diluted common share, for the fourth quarter of 2022, compared to net income of $7.0 million, or $1.09 per diluted common share, for the third quarter of 2022, and net income of $6.2 million, or $0.92 per diluted common share, for the fourth quarter of 2021. The increase in net income for the fourth quarter of 2022, when compared to the three months ended September 30, 2022, was primarily due to an increase of $550 thousand in net interest income and a $454 thousand decrease in non-interest expenses, partially offset by a $710 thousand decrease in non-interest income and a $98 thousand increase in income tax expense. The increase in net income, when comparing it to the three months ended December 31, 2021, was primarily due to an increase in net interest income of $2.2 million and a $100 thousand decrease in the provision for loan losses, partially offset by a $708 thousand increase in non-interest expenses, a $470 thousand decrease in non-interest income and a $180 thousand increase in income tax expense.   For the year ended December 31, 2022, the Bank recorded net income of $26.5 million, or $4.11 per diluted common share, compared to $22.5 million, or $3.30 per diluted common share for the year ended December 31, 2021, primarily due to a $5.5 million increase in net interest income, a $3.2 million decrease in the Bank's provision for loan losses, and a $196 thousand increase in non-interest income, partially offset by a $4.0 million increase in non-interest expenses and an increase in income taxes of $856 thousand.

Highlights for the three and twelve month periods ended December 31, 2022 are as follows:

• During the year ended December 31, 2022, the Bank completed the purchase of 324,017 shares of common stock from the 5% stock buyback program that commenced in 2022 at a weighted average price of $29.07.
• Net income for the fourth quarter of 2022 increased $988 thousand or 16.0% over the same period in 2021.
• The Bank improved its net interest margin by 86 basis points for the fourth quarter of 2022 compared to the same period in 2021.
• The ratio of nonperforming loans to total loans continues to be low at 0.02% as of December 31, 2022, compared to 0.09% at December 31, 2021.

President/CEO Edward Dietzler noted that, "The Bank's earnings performance far exceeds the prior year, up 17.8% year-over-year, driven by a strong net interest margin of 4.82% for the quarter and excellent credit quality."

Balance Sheet Review

Total assets were $1.60 billion at December 31, 2022, a decrease of $85.9 million, or 5.1% when compared to $1.69 billion at the end of 2021. The primary reason for the decrease in total assets was a decrease in cash and cash equivalents of approximately $105.4 million and a $17.8 million decrease in available-for-sale securities, partially offset by an increase of $35.2 million in net loans.  The increase in net loans primarily consisted of a $102.5 million increase in commercial real estate loans, partially offset by a decrease of $77.3 million in Payroll Protection Program ("PPP") loans which are no longer being offered by the SBA.

Total deposits at December 31, 2022 decreased $98.4 million, or 6.8%, when compared to December 31, 2021.  When comparing deposit products between the two periods, money market deposits decreased $89.4 million, savings decreased $34.9 million and non-interest-bearing demand deposits decreased $21.2 million.  Partially offsetting these decreases were increases in certificates of deposit of $36.4 million and interest-bearing demand deposits of $10.7 million. In addition, the Bank had $10 million in outstanding borrowings at December 31, 2022 and none at December 31, 2021.  

Total stockholders' equity at December 31, 2022 increased $3.0 million or 1.4% when compared to the end of 2021. The increase was primarily due to the $20.0 million increase in retained earnings consisting of $26.5 million in income less $6.5 million of cash dividends recorded during the period.  Partially offsetting this increase was $9.4 million of common stock repurchased pursuant to the 2022 buyback program, and a $9.1 million change in the accumulated other comprehensive income (loss) on the available-for-sale investment portfolio associated with an increase in unrealized losses due to the increase in interest rates.  The ratio of equity to total assets at December 31, 2022 and at December 31, 2021, was 13.7% and 12.8%, respectively.  

Asset Quality

At December 31, 2022, non-performing assets were $266 thousand, a decrease of $1.1 million, or 81.0%, when compared to the amount at December 31, 2021.  This decrease was primarily due to the sale of an other real estate owned property in the amount of $226 thousand and a $757 thousand write-down of a non-performing loan.  Troubled debt restructurings ("TDRs") totaled $5.9 million at December 31, 2022 and $6.9 million at December 31, 2021. All three TDR loans totaling $5.9 million are performing in accordance with the agreed-upon terms as of December 31, 2022.  

Review of Quarterly and Year-to-Date Financial Results

Net interest income was $18.2 million for the fourth quarter of 2022, compared to $17.7 million for the third quarter of 2022 and $16.0 million for the fourth quarter of 2021.  The increase from the previous quarter was the result of an increase in interest income of $1.4 million, or 7.2%, partially offset by an increase in interest expense of $817 thousand.  The net interest margin for the fourth quarter 2022 was 4.82%, increasing 18 basis points when compared to the third quarter of 2022. This increase was primarily associated with an increase of 39 basis points in the yield on earning assets. When comparing the three-month periods ended December 31, 2022 and 2021, net interest income increased $2.2 million, which was primarily due to an increase of 109 basis points in the yield earned on interest-earning assets. For the year ended December 31, 2022, net interest income was $68.1 million compared to $62.6 million for the year ended December 31, 2021.  The increase from the previous year was the result of an increase in interest income of $4.8 million, or 6.9% and a decrease in interest expense of $674 thousand, or 10.1%.  The rate on total deposits, for the three-month periods ended December 31, 2022 and 2021 was 0.64% and 0.38%, respectively.  For the years ended December 31, 2022 and 2021, the rate on total deposits was 0.43% and 0.47%, respectively.

The Bank recorded provisions for loan losses of $200 thousand and $400 thousand during the three-months and year ended December 30, 2022, respectively. The comparable amounts were $300 thousand and $3.6 million for the three months and year ended December 31, 2021, respectively. Net charge-offs for the three-month and twelve-month periods ended December 31, 2022 were $406 thousand and $560 thousand, respectively.  Net charge-offs for the comparable periods in 2021 were $101 thousand and $1.8 million, respectively.  The Bank did not make any material changes to the qualitative factors used in determining the level of general reserve needed for management's assessment of the credit quality in the loan portfolio.  The coverage ratio of allowance for loan losses to period end loans was 1.20% (excluding and including PPP loans) at December 31, 2022, compared to 1.24% (excluding PPP loans it was 1.32%) at December 31, 2021.

Total non-interest income of $1.0 million for the fourth quarter of 2022 decreased $710 thousand and $470 thousand, or by 41.6% and 32.0%, when compared to the quarter ended September 30, 2022 and the quarter ended December 31, 2021, respectively. The decrease over the prior quarter was primarily due to a $614 thousand decrease in loan fees and a $58 thousand decrease in other fees and service charges. The decrease over the 2021 period was primarily due to a $521 thousand decrease in loan fees, partially offset by a $117 thousand increase in other non-interest income. For the year ended December 31, 2022, non-interest income increased $196 thousand, or 4.2%, from the year ended December 31, 2021, primarily due to a $365 thousand increase in other non-interest income, partially offset by a $273 thousand decrease in loan fees.

Total non-interest expense for the fourth quarter of 2022 increased $708 thousand, or 7.9%, when compared to the same period in 2021.  This increase was primarily due to a $537 thousand increase in salaries and benefits expenses and a $456 thousand increase in data processing and communications expenses partially offset by decreases in other real estate owned expense of $157 thousand, other non-interest expenses of $115 thousand and occupancy and equipment expenses of $108 thousand. When comparing the quarter ended December 31, 2022 to the immediately preceding quarter, non-interest expense decreased $454 thousand, or 4.5%, primarily due to decreases in salaries and employee benefits costs, professional fees and occupancy and equipment expenses, partially offset by an increase in data processing and communications expenses. For the year ended December 31, 2022, non-interest expense was $38.5 million, compared to $34.5 million for the same period in 2021. This increase was primarily due to increases in salaries and benefits expenses as a result of additional benefit programs and increases in data processing and communications costs related to technology costs incurred to enhance services.

For the three-month period ended December 31, 2022, the Bank recorded an income tax expense of $2.2 million, resulting in an effective tax rate of 23.5%, compared to an income tax expense of $2.1 million resulting in an effective tax rate of 23.2% for the three-month period ended September 30, 2022, and compared to an income tax expense of $2.0 million resulting in an effective tax rate of 24.6% for the three-month period ended December 31, 2021.  For the years ended December 31, 2022 and 2021, the income tax expenses were $7.6 million (effective tax rate of 22.2%) and $6.7 million (effective tax rate of 23.0%), respectively.

About Princeton Bancorp, Inc. and The Bank of Princeton

Princeton Bancorp, Inc. is the holding company for The Bank of Princeton, a community bank founded in 2007.  The Bank is a New Jersey state-chartered commercial bank with 19 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Hamilton, Lakewood, Lambertville, Lawrenceville, Monroe, New Brunswick, Pennington, Piscataway, Princeton Junction, Quakerbridge and Sicklerville.  There are also four branches in the Philadelphia, Pennsylvania area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

Princeton Bancorp, Inc. 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 following factors, among others, could cause the company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the extent of the adverse impact of the current global coronavirus outbreak on our customers, prospects and business, including related supply chain shortage of goods, as well as 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 the 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; inflation, interest rate, 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; acquisitions including the company's pending acquisition of Noah Bank; ability to meet other closing conditions to that acquisition; delay in closing the acquisition; difficulties and delays in integrating the businesses of Noah Bank and the Bank or fully realizing cost savings and other benefits; changes in consumer spending and saving habits; those risks set forth in the Bank's Annual Report on Form 10-K for the year ended December 31, 2021 under the heading "Risk Factors," 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.