Bank of Princeton BPRN

PRINCETON, N.J., Oct. 20, 2022 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ: BPRN) today reported its unaudited financial condition and results of operations at and for the quarter ended September 30, 2022.  The Bank reported net income of $7.0 million, or $1.09 per diluted common share, for the third quarter of 2022, compared to net income of $6.3 million, or $0.98 per diluted common share, for the second quarter of 2022, and net income of $5.9 million, or $0.88 per diluted common share, for the third quarter of 2021. The increase in net income, when compared to the three months ended June 30, 2022, was primarily due to an increase of $1.4 million in net interest income and a $595 thousand increase in non-interest income, partially offset by a $697 thousand increase in non-interest expenses and a $459 thousand increase income tax expense. The increase in net income, when comparing it to the three months ended September 30, 2021, was primarily due to an increase in net interest income of $1.6 million, a $1.0 million decrease in the provision for loan losses and a $389 thousand increase in non-interest income, partially offset by a $1.6 million increase in non-interest expenses and a $350 thousand increase in income tax expense.   For the nine-month period ended September 30, 2022, the Bank recorded net income of $19.3 million, or $2.98 per diluted common share, compared to $16.3 million, or $2.38 per diluted common share for the same period in 2021, primarily due to a $3.2 million increase in net interest income a $3.1 million decrease in the Bank's provision for loan losses, and a $666 thousand increase in non-interest income, partially offset by a $3.3 million increase in non-interest expenses and an increase in income taxes of $676 thousand.

Highlights for the three and nine month periods ended September 30, 2022 are as follows:

• During the nine months ended September 30, 2022, the Bank purchased 315,058 shares of common stock nearly completing the authorized 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 third quarter of 2022 increased $1.0 million or 17.7% over the same period in 2021.
• The Bank maintained its low total cost of funds on deposits at 40 basis points for the third quarter of 2022, down 8 basis points from the same period in 2021.
• The ratio of nonperforming loans to total loans continues to be low at 0.05% as of September 30, 2022, compared to 0.09% at December 31, 2021 and 0.11% at September 30, 2021.

President/CEO Edward Dietzler noted that, "The Bank's earnings performance continues to increase, propelled by a strong net interest margin of 4.64% for the quarter and strong credit quality."

Balance Sheet Review

Total assets were $1.60 billion at September 30, 2022, a decrease of $84.6 million, or 5.0% 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 $110.8 million and a $19.0 million decrease in available-for-sale securities, partially offset by an increase of $43.2 million in net loans.  The increase in net loans primarily consisted of a $117.6 million increase in commercial real estate loans, partially offset by a decrease of $71.7 million in Payroll Protection Program ("PPP") loans which are no longer being offered by the SBA.

Total deposits at September 30, 2022 decreased $79.1 million, or 5.5%, when compared to December 31, 2021.  When comparing deposit products between the two periods, money market deposits decreased $49.0 million, interest-bearing demand deposits decreased $25.1 million, savings decreased $12.1 million, certificates of deposit decreased $6.1 million and non-interest-bearing demand deposits increased $13.1 million. In addition, the Bank had no outstanding borrowings at September 30, 2022 and December 31, 2021.  

Total stockholders' equity at September 30, 2022 decreased $4.1 million or 1.9% when compared to the end of 2021. This decrease was primarily due to the $9.2 million of common stock repurchased pursuant to the 2022 buyback program, and a $10.8 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.  These decreases were partially offset by a $14.4 million increase in retained earnings consisting of $19.3 million of net income less $4.9 million of cash dividends recorded during the period. The ratio of equity to total assets at September 30, 2022 and at December 31, 2021, was $13.3% and 12.8%, respectively.  

Asset Quality

At September 30, 2022, non-performing assets were $729 thousand, a decrease of $672 thousand, or 48.0%, 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 $400 thousand write-down of a non-performing loan.  Troubled debt restructurings ("TDRs") totaled $6.3 million at September 30, 2022 and $6.9 million at December 31, 2021. Three TDR loans totaling $5.9 million are performing in accordance with the agreed-upon terms and there is one TDR loan in non-accrual status as of September 30, 2022.  

Review of Quarterly and Year-to-Date Financial Results

Net interest income was $17.7 million for the third quarter of 2022, compared to $16.3 million for the second quarter of 2022 and $16.1 million for the third quarter of 2021.  The increase from the previous quarter was the result of an increase in interest income of $1.6 million, or 9.4%, partially offset by an increase in interest expense of $226 thousand.  The net interest margin for the third quarter 2022 was 4.64%, increasing 45 basis points when compared to the second quarter of 2022. This increase was primarily associated with an increase of 52 basis points in the yield on earning assets. When comparing the same three-month period ended September 30, 2022 and 2021, net interest income increased $1.6 million, which was primarily due to an increase of 54 basis points in the yield earned on interest-earning assets. For the nine-month period ended September 30, 2022, net interest income was $49.8 million compared to $46.6 million for the nine-month period ended September 30, 2021.  The increase from the previous nine-month period was the result of an increase in interest income of $1.8 million, or 3.4% and a decrease in interest expense of $1.5 million, or 28.0%.  The rate on total deposits, for the three-month periods ended September 30, 2022 and 2021 was 0.40% and 0.48%, respectively.  For the nine-month periods ended September 30, 2022 and 2021, the rate on total deposits was 0.36% and 0.50%, respectively.

The Bank recorded a provision for loan losses of $200 thousand during the three-month period ended September 30, 2022 and since no provision had been recorded earlier in the year, the nine-month period reflects the same $200 thousand.  The comparable amounts were $1.2 million and $3.3 million for the three months and nine months ended September 30, 2021, respectively. The primary reasons for the provisions for loan losses during the 2021 periods were charge-offs in the amounts of $821 thousand and $1.8 million, respectively.  Net charge-offs for the three-month and nine-month periods ended September 30, 2022 were $200 thousand and $154 thousand, 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 1.21% (excluding PPP loans it was 1.21%) at September 30, 2022, compared to 1.24% (excluding PPP loans it was 1.32%) at December 31, 2021.

Total non-interest income for the third quarter of 2022 increased $595 thousand and $389 thousand to $1.7 million, or by 53.5% and 29.5% when compared to the quarter ended June 30, 2022 and the quarter ended September 30,2021, respectively. The increase over the prior quarter was to primarily due to a $547 thousand increase in loan fees and a $74 thousand increase in other non-interest income. The increase over the 2021 period was primarily due to a $214 thousand increase in loan fees and a $148 thousand increase in other non-interest income. For the nine-month period ended September 30, 2022, non-interest income increased $666 thousand, or 20.8%, from the same nine-month period in 2021, primarily due to a $248 thousand increase in loan fees and a $247 thousand increase in other non-interest income.

Total non-interest expense for the third quarter of 2022 increased $1.6 million, or 18.4%, when compared to the same period in 2021.  This increase was primarily due to a $1.1 million increase in salaries and benefits expenses, a $206 thousand increase in professional fees and a $139 thousand increase in data processing and communications expenses. When comparing the quarter ended September 30, 2022 to the immediately preceding quarter, non-interest expense increased $697 thousand, or 7.4%, primarily due to increases salaries and employee benefits costs, professional fees and occupancy and equipment expenses, partially offset by a decrease in other real estate owned expenses. For the nine-month period ended September 30, 2022, non-interest expense was $28.8 million, compared to $25.5 million for the same period in 2021. This increase was primarily due to increases in salaries and benefits expenses and data processing and communications costs.

For the three-month period ended September 30, 2022, the Bank recorded an income tax expense of $2.1 million, resulting in an effective tax rate of 23.2%, compared to an income tax expense of $1.6 million resulting in an effective tax rate of 20.6% for the three-month period ended June 30, 2022, and compared to an income tax expense of $1.8 million resulting in an effective tax rate of 22.8% for the three-month period ended September 30, 2021.  For the nine-month periods ended September 30, 2022 and 2021, the income tax expenses were $5.4 million (effective tax rate of 21.7%) and $4.7 million (effective tax rate of 22.3%), respectively.

About The Bank of Princeton

The Bank of Princeton is 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

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including this press release), which are made in good faith by the Bank 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 Bank's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Bank's control). The following factors, among others, could cause the Bank'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 Bank conducts 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 Bank; and the timing and nature of the regulatory response to any applications filed by the Bank; technological changes; acquisitions; 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 Bank at managing the risks involved in the foregoing.

The Bank cautions that the foregoing list of important factors is not exclusive. The Bank 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 Bank, except as required by applicable law or regulation.