Princeton Bancorp, Inc. (Form: 10-Q, Received: 05/11/2023 16:58:15)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20429

FORM

10-Q

(Mark one)

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

For the quarterly period ended

March

, 2023

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

For the transition period from __________ to __________

Commission File Number:

001-41589

PRINCETON BANCORP, INC.

(Exact name of registrant as specified in its charter)


Pennsylvania		88-4268702
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

183 Bayard Lane, Princeton, New Jersey 08540

(Address of principal executive offices) (Zip Code)

(609)

921-1700

(Registrant’s telephone number, including area code)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	BPRN	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒

Yes

☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒

Yes

☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐ No

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 8, 2023, there were 6,261,569 outstanding shares of the issuer’s common stock, no par value.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION


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

PART II OTHER INFORMATION

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

Explanatory Note

On January 10, 2023 (the “Effective Date”), Princeton Bancorp, Inc., a Pennsylvania corporation (the “Company”) acquired all of the outstanding stock of The Bank of Princeton, a New Jersey state-chartered bank (the “Bank”), (the “Reorganization”) pursuant to the terms of an Agreement and Plan of Reorganization and Merger dated February 23, 2022 (the “Plan”). Pursuant to the Reorganization, shares of the Bank’s common stock were exchanged for shares of the Company’s common stock on a one-for-one basis. As a result, the Bank became the sole direct wholly owned subsidiary of the Company, the Company became the holding company for the Bank and the stockholders of the Bank became stockholders of the Company.

Before the Effective Date, the Bank’s common stock was registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and the Bank was subject to the information requirements of the Exchange Act and, in accordance with Section 12(i) thereof, filed quarterly reports, proxy statements and other information with the Federal Deposit Insurance Corporation (“FDIC”). As of the Effective Date, pursuant to Rule 12g-3 under the Exchange Act, the Company is the successor registrant to the Bank, the Company’s common stock is deemed to be registered under Section 12(b) of the Exchange Act, and the Company has become subject to the information requirements of the Exchange Act and files reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).

Prior to the Effective Date, the Company conducted no operations other than obtaining regulatory approval for the Reorganization. Accordingly, the consolidated financial statements for periods prior to the Effective Date, discussions of those financial statements, and market data and all other information presented herein for periods prior to the Effective Date, are those of the Bank.

In this report, unless the context indicates otherwise, references to “we,” “us,” and “our” refer to the Company and the Bank. However, if the discussion relates to a period before the Effective Date, the terms refer only to the Bank.

PART I–FINANCIAL INFORMATION

Item 1. Financial Statements.

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per share data)


	March 31, 2023			December 31, 2022
ASSETS
Cash and due from banks	$	10,083		$	12,161
Interest-earning bank balances		7,941			13,140
Federal funds sold		—			28,050

Total cash and cash equivalents		18,024			53,351

Securities available-for-sale, at fair value		84,512			83,402
Securities held-to-maturity (fair value $199 and $200, at March 31, 2023 and December 31, 2022, respectively)		199			201
Loans receivable, net of deferred costs		1,388,575			1,370,368
Less: allowance for credit lossess		(16,507	)		(16,461	)

Loan receivable, net		1,372,068			1,353,907
Bank-owned life insurance		52,906			52,617
Premises and equipment, net		11,662			11,722
Accrued interest receivable		4,865			4,756
Restricted investment in bank stock		3,295			1,742
Deferred taxes, net		7,784			7,599
Goodwill		8,853			8,853
Core deposit intangible		1,690			1,825
Operating lease right-of-use asset		15,707			16,026
Other assets		3,755			5,778

TOTAL ASSETS	$	1,585,320		$	1,601,779

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest-bearing	$	218,709		$	265,078
Interest-bearing		1,073,391			1,082,652

Total deposits		1,292,100			1,347,730
Borrowings		44,500			10,000
Accrued interest payable		2,160			1,027
Operating lease liability		16,466			16,772
Other liabilities		4,821			6,649

TOTAL LIABILITIES		1,360,047			1,382,178

STOCKHOLDERS’ EQUITY:
Common stock, no par value; 15,000,000 shares authorized, 6,261,629 shares issued and outstanding at March 31, 2023; at December 31, 2022, par value $5.00 per share, 6,909,402 shares issued and 6,245,597 shares outstanding		—			34,547
Paid-in capital		96,880			81,291
Treasury stock, at cost 663,805 shares at December 31, 2022		—			(19,452	)
Retained earnings		135,425			131,488
Accumulated other comprehensive loss		(7,032	)		(8,273	)

TOTAL STOCKHOLDER’S EQUITY		225,273			219,601

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,585,320		$	1,601,779

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)


	Three Months Ended March 31
	2023		2022
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	19,894	$	16,492
Securities available-for-sale:
Taxable		278		223
Tax-exempt		284		303
Securities held-to-maturity		3		3
Other interest and dividend income		153		57

TOTAL INTEREST AND DIVIDEND INCOME		20,612		17,078

INTEREST EXPENSE
Deposits		3,865		1,224
Borrowings		86		—

TOTAL INTEREST EXPENSE		3,951		1,224

NET INTEREST INCOME		16,661		15,854
Provision for credit losses		265		—

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		16,396		15,854

NON-INTEREST INCOME
Income from bank-owned life insurance		290		282
Fees and service charges		448		475
Loan fees, including prepayment penalties		351		95
Other		285		194

TOTAL NON-INTEREST INCOME		1,374		1,046

NON-INTEREST EXPENSE
Salaries and employee benefits		5,399		4,901
Occupancy and equipment		1,341		1,478
Professional fees		465		561
Data processing and communications		1,300		1,035
Federal deposit insurance		190		264
Advertising and promotion		110		119
Office expense		97		54
Other real estate expenses		—		9
Core deposit intangible		135		154
Other		735		693

TOTAL NON-INTEREST EXPENSE		9,772		9,268

INCOME BEFORE INCOME TAX EXPENSE		7,998		7,632
INCOME TAX EXPENSE		1,901		1,611

NET INCOME	$	6,097	$	6,021

Earnings per common share-basic	$	0.97	$	0.93
Earnings per common share-diluted	$	0.95	$	0.91
Dividends declared per common share	$	0.30	$	0.25

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)


	Three Months Ended March 31,
	2023			2022
NET INCOME	$	6,097		$	6,021
Other comprehensive income (loss)
Unrealized gains (losses) arising during period on securities available-for-sale		1,739			(6,113	)
Tax effect		(498	)		1,591

Total other comprehensive income (loss)		1,241			(4,522	)

COMPREHENSIVE INCOME	$	7,338		$	1,499

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)


	Common Stock			Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total
Three Months Ended March 31, 2023 and 2022
Balance, December 31, 2021	$	34,100		$	80,220	$	(10,032	)	$	111,451		$	839		$	216,578
Net income		—			—		—			6,021			—			6,021
Other comprehensive loss		—			—		—			—			(4,522	)		(4,522	)
Stock options exercised (6,450 shares)		32			73		—			—			—			105
Directors compensation (4,019 shares)		44			165		—			—			—			209
Dividends declared $0.25 per share		—			—		—			(1,668	)		—			(1,668	)
Purchase of treasury stock (124,440 shares)		—			—		(3,615	)		—			—			(3,615	)
Dividend reinvestment plan (802 shares)		5			10		—			9			—			24
Stock-based compensation expense		—			108		—			—			—			108

Balance, March 31, 2022	$	34,181		$	80,576	$	(13,647	)	$	115,813		$	(3,683	)	$	213,240


Balance, December 31, 2022	$	34,547		$	81,291	$	(19,452	)	$	131,488		$	(8,273	)	$	219,601
Net income		—			—		—			6,097			—			6,097
Other comprehensive loss		—			—		—			—			1,241			1,241
Adoption of CECL		—			—		—			(284	)		—			(284	)
Formation of Princeton Bancorp, Inc.		(34,547	)		15,095		19,452			—			—			—
Stock options exercised (16,307 shares)		—			297		—			—			—			297
Dividends declared $0.30 per share		—			—		—			(1,843	)		—			(1,843	)
Dividend reinvestment plan (958 shares)		—			33		—			(33	)		—			—
Stock-based compensation expense		—			164		—			—			—			164

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

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three Months Ended March 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	6,097		$	6,021
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		265			—
Depreciation and amortization		305			317
Stock-based compensation expense		164			108
Amortization of premiums and accretion of discount on securities		11			16
Accretion of net deferred loan fees and costs		(534	)		(1,853	)
Income earned from small business investment company (“SBIC”) Investment		(181	)		—
Increase in cash surrender value of bank-owned life insurance		(290	)		(282	)
Deferred income tax benefit		(793	)		(20	)
Amortization of core deposit intangible		136			155
Decrease in accrued interest receivable and other assets		2,233			1,972
Decrease in accrued interest payable and other liabilities		(227	)		(1,797	)

NET CASH PROVIDED BY OPERATING ACTIVITIES		7,186			4,637

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities		(345	)		(4,318	)
Principal repayments of securities available-for-sale		839			2,453
Maturities and calls of securities available-for-sale		305			450
Maturities, calls and principal repayments of securities held-to-maturity		2			2
Net increase in loans		(18,840	)		(58,105	)
Purchases of premises and equipment		(245	)		(250	)
Purchases of restricted bank stock		(1,553	)		(12	)

NET CASH USED IN INVESTMENT ACTIVITIES		(19,837	)		(59,780	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits		(55,630	)		(4,598	)
Proceeds from overnight borrowings		34,500			—
Cash dividends		(1,876	)		(1,668	)
Dividend reinvestment program		33			24
Purchase of treasury stock		—			(3,615	)
Proceeds from exercise of stock options		—			105
Release of restricted stock units		297			209

NET CASH USED IN FINANCING ACTIVITIES		(22,676	)		(9,543	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(35,327	)		(64,686	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		53,351			158,716

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	18,024		$	94,030

SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid	$	2,818		$	1,597
Income taxes paid	$	653		$	435
Reclass of paid-in capital related to holding company formation	$	15,095			—
Reclass of treasury stock related to holding company formation	$	19,452			—
Reclass of common stock related to holding company formation	$	(34,547	)		—

See accompanying notes to unaudited consolidated financial statements.

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 23 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 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. As of

March 31, 2023

, the Company had

179 total employees and 176 full-time equivalent employees.

On January 10, 2023 Princeton Bancorp, Inc., a Pennsylvania corporation (the “Company”) acquired all of the outstanding stock of the Bank. 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.

On October 19, 2022, the Bank entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Noah Bank, a Pennsylvania-chartered bank (“Noah”). Pursuant to the terms and conditions set forth in the Merger Agreement, Noah will merge with and into TBOP Acquisition company, a newly-formed wholly owned subsidiary of the Bank, with Noah surviving (the “Merger”). The Company plans to merge Noah with and into the Company immediately after the Merger. The Merger Agreement has been approved by the boards of directors of each of the Company and Noah and by Noah’s shareholders.

Basis of Financial Statement Presentation

The unaudited consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, the Bank and its 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, 2022.

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 and evaluation of the potential impairment of goodwill.

Management believes that the allowance for credit losses is adequate as of March 31, 2023 and December 31, 2022. 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.

Table of Contents

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 1 – Summary of Significant Accounting Policies (continued)

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.

Recently issued accounting standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No. 2020-04,

“Reference Rate Reform” (Topic 848), which provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from London Interbank Offered Rate (“LIBOR”) toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered “minor” so that any existing unamortized origination fees/costs would carry forward and continue to be amortized and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or

re-measurements

of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU

2020-04

also provides numerous optional expedients for derivative accounting. ASU

2020-04

is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU

2020-04

for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. We anticipate this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and March 31, 2023 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. We are evaluating the impacts of this ASU and we do not anticipate any material impacts to the financial statements.

Recently adopted accounting standards

Effective January 1, 2023 the Company adopted the FASB issued ASU

2016-13,

“

Financial Instruments—Credit Losses,

” (“CECL”) which amends the Board’s guidance on the impairment of financial instruments, using the modified retrospective method. The amended guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses will represent a valuation account that is deducted from the amortized cost basis of the financial assets to present their net carrying value at the amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets as well as expected increases or decreases of expected credit losses that have taken place during the period. When determining the allowance, expected credit losses over the contractual term of the financial asset(s) (taking into account prepayments) will be estimated considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Upon adoption of the new CECL standard, effective January 1, 2023, the Company recorded a

one-time

decrease, net of tax, in retained earnings of $284,000, a reduction to the allowance for credit losses of $301,000 and an increase in the reserve for unfunded liabilities of $695,000.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 – Earnings Per Share

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

The following schedule presents earnings per share data for the three-month periods ended March 31, 2023 and 2022 (in thousands, except per share data):


	Three months ended March 31,
	2023		2022
Net income applicable to common stock	$	6,097	$	6,021
Weighted average number of common shares outstanding		6,257		6,465

Basic earnings per share	$	0.97	$	0.93


Net income applicable to common stock	$	6,097	$	6,021
Weighted average number of common shares outstanding		6,257		6,465
Dilutive effect on common shares outstanding		129		149

Weighted average number of diluted common shares outstanding		6,386		6,614

Diluted earnings per share	$	0.95	$	0.91

The following schedule presents stock options granted but not exercised and the amount of share that were anti-dilutive because the weighted average exercise price equaled or exceeded the estimated fair value of our common stock for the three-month periods ended March 31, 2023 and 2022:


	Three months ended March 31,
	2023				2022
	Options		Weighted Ave Exercise Price		Options		Weighted Ave Exercise Price
Options to purchase		374,496	$	22.01		343,570	$	16.62
Anti-dilutive		—	$	—		95,750	$	32.45

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 – Investment Securities

The following summarizes the amortized cost and fair value of securities

available-for-sale

at March 31, 2023 and December 31, 2022 with gross unrealized gains and losses therein:


	March 31 , 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Available-for-sale			(In thousands)
Mortgage-backed securities—U.S. government sponsored enterprises (GSEs)	$	40,677	$	3	$	(5,981	)	$	34,699
U.S. government agency securities		6,260		—		(1,025	)		5,235
Obligations of state and political subdivisions		44,844		67		(2,627	)		42,284
Small business investment company securities		2,587		—		(293	)		2,294

Total	$	94,368	$	70	$	(9,926	)	$	84,512


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Available-for-sale			(In thousands)
Mortgage-backed securities—U.S. government sponsored enterprises (GSEs)	$	41,515	$	2	$	(6,602	)	$	34,915
U.S. government agency securities		6,260		—		(1,175	)		5,085
Obligations of state and political subdivisions		45,161		8		(3,828	)		41,341
Small business investment company securities		2,061		—		—			2,061

Total	$	94,997	$	10	$	(11,605	)	$	83,402

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 – Investment Securities (continued)

The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of related securities

available-for-sale

at March 31, 2023 and December 31, 2022 are as follows:


	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

March 31, 2023	(In thousands)
Mortgage-backed securities—U.S. government sponsored enterprises (GSEs)	$	6,557	$	(195	)	$	27,940	$	(5,786	)	$	34,497	$	(5,981	)
U.S. government agency securities		—	$	—			5,235		(1,025	)		5,235		(1,025	)
Obligations of state and political subdivisions		10,642		(144	)		22,499		(2,483	)		33,141		(2,627	)
Small business investment company securities		2,294		(293	)		—		—			2,294		(293	)

Total	$	19,493	$	(632	)	$	55,674	$	(9,294	)	$	75,167	$	(9,926	)


	Less than 12 Months					More than 12 Months					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

December 31, 2022	(In thousands)
Mortgage-backed securities—U.S. government sponsored enterprises (GSEs)	$	15,605	$	(1,778	)	$	19,137	$	(4,824	)	$	34,742	$	(6,602	)
U.S. government agency securities		—		—			5,085		(1,175	)		5,085		(1,175	)
Obligations of state and political subdivisions		36,421		(3,457	)		1,352		(371	)		37,773		(3,828	)
Small business investment company securities		—		—			—		—			—		—

	$	52,026	$	(5,235	)	$	25,574	$	(6,370	)	$	77,600	$	(11,605	)

The amortized cost and fair value of securities

available-for-sale

at March 31, 2023 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	$	675	$	675
Due after one year through five years		4,719		4,641
Due after five years through ten years		26,436		25,263
Due after ten years		19,274		16,940
Mortgage-backed securities (GSEs)		40,677		34,699
SBIC securities		2,587		2,294

	$	94,368	$	84,512

There were no sales of securities

available-for-sale

or proceeds from calls for the three-month periods ended March 31, 2023 and March 31, 2022.

On January 1, 2023, the Company adopted ASU

2016-13

and implemented the CECL methodology for allowance for credit losses on its investment securities

available-for-sale.

The new CECL methodology replaces the other-than-temporary impairment model that previously existed. The company did not have a CECL day 1 impact attributable to its investment securities portfolio and did

not

have an allowance for credit losses on its investment securities available for sale as of March 31, 2023.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 – Investment Securities (concluded)

The Company’s securities primarily consist of four types of instruments; U.S. guaranteed mortgage-backed securities, U.S guaranteed agency bonds, state and political subdivision issued bonds and one small business investment company security guaranteed by the U.S. government. We believe it is reasonable to expect that the securities with a credit guarantee of the U.S. government, will have a

zero-credit

loss. Therefore no reserve was recorded for U.S. guaranteed securities or bonds at March 31, 2023. The state and political subdivision securities carry a minimum investment rating of A. Some of the smaller municipalities also have insurance to cover the Company in the event of default. Therefore, the Company expects to have a

zero-credit

loss and no reserve was recorded as of March 31, 2023.

At March 31, 2023, the Comapny’s

available-for-sale

and

held-to-maturity

investment securities portfolio consisted of approximately 206 securities, of which 113

available-for-sale

securities were in an unrealized loss position for more than twelve months and 61

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 77 municpal securities aggregating $22.5 million with a loss of $2.5 million, 32 mortgage-backed

securities-GSE

aggregating $27.9 million with a loss of $5.8 million and four agency securities aggregating $5.2 million with a loss of $1.0 million. The Company does not intend to sell these securities, and it is not more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. Unrealized losses primarily relate to interest rate fluctuations and not credit concerns. No OTTI charges were recorded for the three months ended March 31, 2023 and 2022.

There are no securities pledged as of March 31, 2023 and December 31, 2022.

Note 4 – Loans Receivable

Loans receivable, net at March 31, 2022 and December 31, 2022 were comprised of the following:


	March 31, 2023			December 31, 2022

	(In thousands)
Commercial real estate	$	864,497		$	873,573
Commercial and industrial		30,916			28,859
Construction		442,693			417,538
Residential first-lien mortgage		42,566			43,125
Home equity/consumer		7,535			7,260
Paycheck protection program (PPP) -phase I		1,239			1,307
Paycheck protection program (PPP) -phase II		1,077			1,162

Total loans		1,390,523			1,372,824
Deferred fees and costs		(1,948	)		(2,456	)

Loans, net	$	1,388,575		$	1,370,368

The Company did not purchase any loans during the three months ended March 31, 2023 and 2022, respectively.

Upon adoption of CECL the Company has elected to use the discounted cash flow methodology in determining the appropriate quantitative adjustments, which projects future losses, based on historical 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.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

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


	March 31, 2023			December 31, 2022

	(In thousands)
Allowance for credit losses—loans	$	(16,507	)	$	(16,461	)
Allowance for credit losses—off balance sheet		(949	)		(332	)

	$	(17,456	)	$	(16,793	)

The following table presents nonaccrual loans by segment of the loan portfolio as of March 31, 2023 and December 31, 2022:


	March 31, 2023				December 31, 2023
	With a Related Allowance		Without a Related Allowance		With a Related Allowance		Without a Related Allowance

	(In thousands)
Commercial real estate	$	—	$	6,193	$	—	$	—
Construction		148		—		148		—
Residential first-lien mortgage		—		114		—		118

Total nonaccrual loans	$	148	$	6,307	$	148	$	118

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, excluding PPP loans, summarized by the past due status as of March 31,

2023


	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 days		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing

	(In thousands)
Commercial real estate	$	—	$	—	$	6,193	$	6,193	$	858,304	$	864,497	$	—
Commercial and industrial		—		—		—		—		30,916		30,916		—
Construction		—		—		148		148		442,545		442,693		—
Residential first-lien mortgage		—		—		—		—		42,566		42,566		—
Home equity/consumer		—		—		—		—		7,535		7,535		—
PPP Phase I & II 1						171		171		2,145		2,316		171

Total	$	—	$	—	$	6,512	$	6,512	$	1,384,011	$	1,390,523	$	171

1	PPP loans that are classified as past due in the table above, have applied for or are in the process of requesting loan forgiveness from the SBA.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The following table presents the segments of the loan portfolio summarized by the past due status as of December 31, 2022:


	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 days		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
							(In thousands)
Commercial real estate	$	—	$	6,193	$	—	$	6,193	$	867,380	$	873,573	$	—
Commercial and industrial		—		—		—		—		28,859		28,859		—
Construction		—		—		148		148		417,390		417,538		—
Residential first-lien mortgage		1,292		—		118		1,410		41,715		43,125		—
Home equity/Consumer		—		—		—		—		7,260		7,260		—
PPP Phase I & II 1		255				184		439		2,030		2,469		184

Total	$	1,547	$	6,193	$	450	$	8,190	$	1,364,634	$	1,372,824	$	184

1	PPP loans that are classified as past due in the table above, have applied for or are in the process of requesting loan forgiveness from the SBA.

The Company categorizes all 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.

There were no loans charged off during the three months ended March 31, 2023 that would require additional disclosure.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of March 31, 2023:


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total

	(Dollars in thousands)
Commercial real estate
Pass	$	1,690	$	205,254	$	74,625	$	52,319	$	149,358	$	366,663	$	5,547	$	855,457
Special mention		—		—		—		—		—		2,848		—		2,848
Substandard		—		—		—		—		—		6,193		—		6,193

Total commercial real estate		1,690		205,254		74,625		52,319		149,358		375,704		5,547		864,497
Commercial and industrial 1
Pass		803		3,127		1,309		560		5,831		3,289		15,488		30,408
Special mention		—		—		—		—		—		508		—		508
Substandard		—		—		—		—		—		—		—		—

Total commercial and industrial		803		3,127		1,309		560		5,831		3,797		15,488		30,916
Construction
Pass		—		6,904		142,187		9,718		—		14,301		266,510		439,620
Special mention		—		—		—		2,925		—		—		—		2,925
Substandard		—		—		—		—		—		148		—		148

Total construction		—		6,904		142,187		12,643		—		14,450		266,510		442,693
Residential first-lien mortgage
Performing		—		1,053		6,075		2,910		1,594		30,820		—		42,452
Nonperforming		—		—		—		—		—		114		—		114

Total residential first-lien mortgage		—		1,053		6,075		2,910		1,594		30,934		—		42,566
Home equity/consumer
Performing		164		814		367		5		—		2,588		3,598		7,535
Nonperforming		—		—		—		—		—		—		—		—

Total home equity/consumer		164		814		367		5		—		2,588		3,598		7,535

Total Loans	$	2,657	$	217,153	$	224,563	$	68,436	$	156,784	$	427,472	$	291,143	$	1,388,207

1	Due to the guarantee by the Small Business Association the PPP loans were not included in this table.

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of December 31, 2022:


	Pass		Special Mention		Substandard		Doubtful		Total

	(In thousands)
Commercial real estate	$	864,497	$	2,883	$	6,193	$	—	$	873,573
Commercial and industrial		28,350		509		—		—		28,859
Construction		417,390		—		148		—		417,538
Residential first-lien mortgage		43,007		—		118		—		43,125
Home equity/consumer		7,260		—		—		—		7,260
PPP		2,469		—		—		—		2,469

Total with no related allowance	$	1,362,973	$	3,392	$	6,459	$	—	$	1,372,824

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (continued)

The following table presents the allowance for credit losses on loans receivable at and for the three months ended March 31, 2023:


	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer		PPP		Unallocated			Total
										(In thousands)
Allowance for credit losses:
Beginning balance	$	8,654		$	271		$	6,289		$	236		$	45	$	—	$	966		$	16,461
CECL adoption		1,384			(73	)		(1,269	)		428			195		—		(966	)		(301	)
Provision 1		(4	)		16			329			(10	)		13		—		—			344
Charge-offs		—			—			—			—			—		—		—			—
Recoveries		3			—			—			—			—		—		—			3

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

Ending Balance:
Individually evaluated	$	—		$	—		$	118		$	—		$	—	$	—	$	—		$	118
Collectively evaluated		10,037			214			5,231			654			253		—		—			16,389

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

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

The following table presents the recorded investment in loans receivable at March 31, 2023:


	Commercial real estate		Commercial and industrial		Construction		Residential first-lien mortgage		Home equity/ consumer		PPP		Unallocated		Total
							(In thousands)
Loans:
Ending Balance:
Individually evaluated	$	6,685	$	11	$	248	$	121	$	80	$	—	$	—	$	7,145
Collectively evaluated		857,812		30,905		442,445		42,445		7,455		2,316		—		1,383,378

Ending balance	$	864,497	$	30,916	$	442,693	$	42,566	$	7,535	$	2,316	$	—	$	1,390,523

The following table presents the allowance for loan losses on loans receivables at and for the three months ended March 31, 2022:


	Commercial real estate		Commercial and industrial		Construction		Residential first-lien mortgage		Home equity/ consumer		PPP		Unallocated		Total
							(In thousands)
Allowance for loan losses:
Beginning balance	$	7,458	$	713	$	7,228	$	267	$	48	$	—	$	906	$	16,620
Provision		—		—		—		—		—		—		—		—
Charge-offs		—		—		—		—		—		—		—		—
Recoveries		34		—		—		—		—		—		—		34

Total	$	7,492	$	713	$	7,228	$	267	$	48	$	—	$	906	$	16,654

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Loans Receivable (concluded)

The following table presents the recorded investment of loans receivables and allowance for loan losses at December 31, 2022:


	Commercial real estate		Commercial and industrial		Construction		Residential first-lien mortgage		Home equity/ consumer		PPP		Unallocated		Total
							(In thousands)
Loans:
Ending Balance:
Individually evaluated for impairment	$	12,030	$	10	$	148	$	118	$	71	$	—	$	—	$	12,377
Collectively evaluated for impairment		861,543		28,849		417,390		43,007		7,189		2,469		—		1,360,447

Ending balance	$	873,573	$	28,859	$	417,538	$	43,125	$	7,260	$	2,469	$	—	$	1,372,824

Allowance for loan losses:
Ending Balance:
Individually evaluated for impairment	$	—	$	—	$	118	$	—	$	—	$	—	$	—	$	118
Collectively evaluated for impairment		8,654		271		6,171		236		45		—		966		16,343

	$	8,654	$	271	$	6,289	$	236	$	45	$	—	$	966	$	16,461

At March 31, 2023,

non-performing

assets totaled $6.5 million, an increase of $6.2 million, when compared to the amount at December 31, 2022. This increase was due to the delinquency of a $6.2 million commercial real estate loan. The loan is sufficiently secured by a

mixed-use

property comprising two buildings each with retail units and residential apartments. The property is located in New York City.

The Company classifies certain loans as troubled debt restructuring (“TDR”) loans when credit terms to a borrower in financial difficulty are modified. Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction, or some combination of the concessions. The restructured loan modifications primarily included maturity date extensions, rate modifications and payment schedule modifications. Effective January 1, 2023, performing TDRs are no longer reported for the current period. At December 31, 2022 there were three loans classified as TDR loans totaling $5.9 million and each of these loans was performing in accordance with the agreed-upon terms.

Note 5 – Deposits

The components of deposits were as follows:


	March 31, 2023					December 31, 2022

			(Dollars in thousands)
Demand, non-interest-bearing checking	$	218,709		16.93	%	$	265,078	19.67	%
Demand, interest-bearing checking		244,889		18.95	%		269,737	20.01	%
Savings		173,502		13.43	%		190,686	14.15	%
Money Market		263,874		20.42	%		283,652	21.05	%
Time deposits, $ 250,000 and over		88,378		6.84	%		83,410	6.19	%
Time deposits, other		302,748		23.43	%		255,167	18.93	%

	$	1,292,100		100.00	%	$	1,347,730	100.00	%

Note 6 – Borrowings

At March 31, 2023, the Company had overnight borrowings outstanding in the amount of $44.5 million at a rate of 4.99% and $10.0 million at a rate of 4.61% at December 31, 2022.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures

The Company follows the guidance on fair value measurements now codified as FASB ASC Topic 820,

Fair Value Measurement

(“Topic 820”)

Fair value measurements are not adjusted for transaction costs. Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments, however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective

period-end

and have not been

re-evaluated

or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different from the amounts reported at each

period-end.

The fair value measurement hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level

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

Level

: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level

: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2023 were as follows:


Description	(Level 1) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value March 31, 2023

			(In thousands)
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs)	$	—	$	34,699	$	—	$	34,699
U.S. government agency securities		—		5,235		—		5,235
Obligations of state and political subdivisions		—		42,284		—		42,284
SBIC securities		—		—		2,294		2,294

Securities available-for-sale at fair value	$	—	$	82,218	$	2,294	$	84,512

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (continued)

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy, used at December 31, 2022 were as follows:


Description	(Level 1) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value December 31, 2022

			(In thousands)
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs)	$	—	$	34,915	$	—	$	34,915
U.S. government agency securities				5,085		—		5,085
Obligations of state and political subdivisions		—		41,341		—		41,341
SBIC securities		—		—		2,061		2,061

Securities available-for-sale at fair value	$	—	$	81,341	$	2,061	$	83,402

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2023, were as follows:


Description	(Level 1) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value March 31, 2023

			(In thousands)
Impaired loans	$	—	$	—	$	30	$	30

	$	—	$	—	$	30	$	30

The following table presents quantitative information using Level 3 fair value measurements at March 31, 2023.


Description	March 31, 2023		Valuation Technique			Unobservable Input		(Weighted Average)

			(Dollars in thousands)
							Discount		6.0	%
Impaired loans	$	30		Collateral	1		adjustment		(6.0	%)

1	Fair value is generally determined through independent appraisal of the underlying collateral, primarily using comparable sales.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 7 – Fair Value Measurements and Disclosures (continued)

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2022, were as follows:


Description	(Level 1) Quoted Price in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total Fair Value December 31, 2022

			(In thousands)
Impaired loans	$	—	$	—	$	30	$	30

	$	—	$	—	$	30	$	30

The following table presents quantitative information using Level 3 fair value measurements at December 31, 2022.


Description	Fair Value December 31, 2022		Valuation Technique			Unobservable Input		Range (Weighted Average)

			(Dollars in thousands)
							Discount		6.0	%
Impaired loans	$	30		Collateral	1		adjustment		(6.0	%)

1	Fair value is generally determined through independent appraisal of the underlying collateral, primarily using comparable sales.

There were no transfers between fair value hierarchy levels during the three months ended March 31, 2023 and 2022. 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. 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.

Impaired loans (generally carried at fair value)

Impaired loans carried at fair value are those impaired loans in which the Company has measured impairment 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 7 – Fair Value Measurements and Disclosures (continued)

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


	March 31, 2023
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3

					(In thousands)
Financial Assets:
Cash and cash equivalents	$	18,024	$	18,024	$	18,024	$	—	$	—
Securities AFS		84,512		84,512		—		82,218		2,294
Securities HTM		199		199		—		199		—
Loans receivable, net		1,372,068		1,373,440		—		—		1,373,440
Restricted bank stock		3,295		3,295		—		3,295		—
Accrued interest receivable		4,865		4,865		—		4,865		—
Financial Liabilities
Deposits		1,292,100		1,204,237		—		1,204,237		—
Borrowings		44,500		44,500		—		44,500		—
Accrued interest payable		2,160		2,160		—		2,160		—

The carrying amounts and estimated fair value of financial instruments at December 31, 2022 are as follows:


	December 31, 2022
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3

					(In thousands)
Financial Assets:
Cash and cash equivalents	$	53,351	$	53,351	$	53,351	$	—	$	—
Securities AFS		83,402		83,402		—		81,341		2,061
Securities HTM		201		200		—		200		—
Loans receivable, net		1,353,907		1,347,137		—		—		1,347,137
Restricted bank stock		1,742		1,742		—		1,742		—
Accrued interest receivable		4,756		4,756		—		4,756		—
Financial Liabilities
Deposits		1,347,730		1,225,087				1,225,087		—
Borrowings		10,000		10,000				10,000
Accrued interest payable		1,027		1,027		—		1,027		—

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

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

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 7 – 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 8 – Leases

Leases (Topic 842) establishes a right of use model that requires a lessee to record a right of use asset (“ROU”) and a lease liability for all leases with terms longer than 12 months. The Company is obligated under 20 operating lease agreements for 19 branches and its corporate offices with terms extending through 2039. The Company’s lease agreements include options to renew at the Company’s discretion. The extensions are reasonably certain to be exercised, therefore they were considered in the calculations of the ROU asset and lease liability.

The following table represents the classification of the Company’s right of use and lease liability:


	Statement of Financial Condition Location		March 31, 2023			December 31, 2022

			(In thousands)
Operating Lease Right of Use Asset:
Gross carrying amount			$	16,026		$	17,919
Accumulated amortization				(319	)		(1,893	)

Net book value		Operating lease right-of-use asset	$	15,707		$	16,026

Operating Lease Liability:

Lease liability		Operating lease liability	$	16,466		$	16,772

As of March 31, 2023, the weighted-average remaining lease terms for operating leases was 11.1 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 2.54%. The Company used FHLB fixed rate advances 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 8 – Leases (continued)


	Three Months Ended March 31,
	2023		2022

	(In thousands)
Lease cost:
Operating lease	$	665	$	700
Short-term lease cost		2		24

Total lease cost	$	667	$	724

Other information:

Cash paid for amounts included in the measurement of lease liabilities	$	585	$	573

Future minimum payments under operating leases with terms longer than 12 months are as follows at March 31, 2023 (in thousands):


Twelve months ended March 31,
2024	$	2,227
2025		2,074
2026		2,000
2027		1,795
2028		1,499
Thereafter		10,014

Total future operating lease payment		19,609
Amounts representing interest		(3,143	)

Present value of net future lease payments	$	16,466

Note 9 – Goodwill and Core Deposit Intangible

On May 17, 2019, the Bank acquired five branches which were accounted for under FASB ASC 805,

Business Combinations

In accordance with ASC 805, the Bank recorded $8.9 million of goodwill along with $4.2 million of core deposit intangible assets. The intangible assets are related to core deposits and are being amortized over 10 years, using the sum of the year’s digits. For tax purposes, goodwill totaling $8.9 million is tax deductible and will be amortized over 15 years straight line. Except as set forth below, GAAP requires that goodwill be tested for impairment annually (with the 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

requires an at least 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 likely that (less than 50% probability) the fair value of the Reporting Unit is less than Carrying Value, then the Company does not have to perform a quantitative test and goodwill can be considered not impaired. After performing the qualitative factor test, the result was the Company determined that it was not more likely than not that the fair value of the Reporting Unit is less than the Carrying Value; therefore a quantitative test was not required as of May 31, 2022.

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PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 9 – Goodwill and Core Deposit Intangible (continued)

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


	Goodwill		Core Deposit Intangible

	(In thousands)
Balance at December 31, 2022	$	8,853	$	1,825
Amortization expense		—		(135	)

Balance at March 31, 2023	$	8,853	$	1,690

As of March 31, 2023, the remaining current fiscal year and future fiscal periods amortization for the core deposit intangible is (in thousands):


2023	$	357
2024		415
2025		338
2026		261
2027		183
Thereafter		136

Total	$	1,690

Note 10 – Subsequent Event

On April 19, 2023, the Board of Directors declared a cash dividend of $0.30 per share of common stock to shareholders of record on May 9, 2023, payable on May 26, 2023.

Note 11 – Risk and Uncertainties

The occurrence of events which adversely affect the global, national and regional economies may have a negative impact on our business. Like other financial institutions, our business relies upon the ability and willingness of our customers to transact business with us, including banking, borrowing and other financial transactions. A strong and stable economy at each of the local, federal and global levels is often a critical component of consumer confidence and typically correlates positively with our customers’ ability and willingness to transact certain types of business with us. Local and global events outside of our control which disrupt the New Jersey, Pennsylvania, New York, United States and/or global economy may therefore negatively impact our business and financial condition.

Government economic programs intended to backstop and bolster the economy through the pandemic, such as the PPP have ended, and the nation’s economy has entered an inflationary phase. The Consumer Price Index has risen at 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. The conflict between Russia and Ukraine has 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, 2022

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 factor 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, suppy chain disruptions, labor shortages and additional interest rate increases by the Federal Reserve. Other factors that could cause actual results to differ materially from those indicated by forward-looking statements include, but are not limited to, the following factors: the 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; ability to meet other closing conditions to that acquisition; delay in closing the acquisition; difficulties and delays in integrating the businesses of Noah 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, 2022 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.

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

Executive Overview

The Company was incorporated on February 23, 2022 under the laws of the Commonwealth of Pennsylvania and became the holding company of the Bank on January 10, 2023. The Bank is a New Jersey state-chartered bank that commenced operations on April 23, 2007. The Bank is a full-service bank providing personal and business lending and deposit services. The Bank has 20 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Hamilton, Lambertville, Lawrenceville, Lakewood, Monroe, New Brunswick, Pennington, Princeton Junction, Quakerbridge and Sicklerville. There are also four branches in the Philadelphia, Pennsylvania area. The Bank of Princeton is a member of the FDIC. The Bank also conducts loan origination activities in select areas of New York.

Since we commenced operations, we have grown through both de novo branching and acquisitions. In April 2023, the Company opened a new branch in Kingston, New Jersey.

On October 19, 2022, the Bank entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Noah Bank, a Pennsylvania-chartered bank (“Noah”). Pursuant to the terms and conditions set forth in the Merger Agreement, Noah will merge with and into TBOP Acquisition company, a newly-formed wholly owned subsidiary of the Bank, with Noah surviving (the “Merger”). The Bank plans to merge Noah with and into the Bank immediately after the Merger. The Company has received the requisite approvals of the Merger Agreement from the Federal Deposit Insurance Corporation, and the Pennsylvania and New Jersey state bank regulators. The Company anticipates that the Merger will close in the second quarter of 2023.

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 2022 Annual Report on Form 10-K. Except the changes related to the Company’s adoption of CECL as noted in Note 1 to the unaudited notes to the consolidated interim financial statements, 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, 2022.

New Accounting Pronouncements

Refer to Note 1 to the consolidated financial statements included in the 2022 Annual Report on Form 10-K and Note 1- Summary of Significant Accounting Policies in this document.

Economy

The US economy is showing signs of stress with inflation hitting a 40-year high, an increase in energy prices, specifically home-heating costs, higher interest rates set by the Federal Open Market Committee (impacting the real estate market) and uncertainties resulting from the Russian invasion of Ukraine. However, the unemployment rate in New Jersey is below the national average.

Comparison of Financial Condition at March 31, 2023 and December 31, 2022

General

Total assets were $1.59 billion at March 31, 2023, a decrease of $16.5 million, or 1.0% when compared to $1.60 billion at the end of 2022. The primary reason for the decrease in total assets was a decrease in cash and cash equivalents of approximately $35.3 million, partially offset by an increase of $18.2 million in net loans. The increase in net loans consisted of a $25.2 million increase in construction loans and a $2.1 million increase in commercial and industrial loans, partially offset by a decrease of $9.1 million in commercial real estate loans

Cash and cash equivalents

Cash and cash equivalents decreased $35.3 million, or 66.2%, to $18.0 million at March 31, 2023 compared to December 31, 2022. This decrease was primarily due to the funding of net loans of $18.2 million and a reduction in outstanding deposits of approximately $55.6 million.

Investment securities

Total available-for-sale investment securities increased slightly to $84.5 million at March 31, 2023 compared to $83.4 million at December 31, 2022. This increase was a result of approximately $1.7 million related to unrealized losses in the available-for-sale securities portfolio resulting from the recent rate changes, $839 thousand in principal payments and $305 thousand in called or matured securities, partially offset by $345 thousand in new purchases added to the available-for-sale securities portfolio.

Loans

Loans, net of deferred loan fees, increased $18.2 million to $1.39 billion at March 31, 2023 compared to $1.37 billion at December 31, 2022, or 1.3%. This increase was due to a $25.2 million increase in construction loans and a $2.1 million increase in commercial and industrial loans, partially offset by a $9.1 million reduction in commercial real estate loans.

The Company recorded a provision for credit losses of $265 thousand during the three months ended March 31, 2023. Net recoveries for the three-month period ended March 31, 2023 were $3 thousand and $34 thousand for the three-month period ended March 31, 2022. Upon adoption of the Current Expected Credit Losses (“CECL”) method of calculating the allowance for credit losses on January 1, 2023, the Company recorded a one-time decrease, net of tax, in retained earnings of $284 thousand, a reduction to the allowance for credit losses of $301 thousand and an increase in the reserve for unfunded liabilities of $695 thousand. During the first quarter of 2023, the Company recorded a provision for credit losses of $265 thousand in total representing a $344 thousand increase in the allowance for credit losses and a $79 thousand reduction to the reserve for credit losses on unfunded liabilities. The coverage ratio of allowance for credit losses to period end loans was 1.19% at March 31, 2023, compared to 1.20% at December 31, 2022.

At March 31, 2023, non-performing assets totaled $6.5 million, an increase of $6.2 million, when compared to the amount at December 31, 2022. This increase was due to the delinquency of a $6.2 million commercial real estate loan. The loan is sufficiently secured by a mixed-use property comprising two buildings each with retail units and residential apartments. The property is located in New York City.

Upon the adoption of the CECL method of calculating the allowance for credit losses effective January 1, 2023, performing troubled debt restructurings (“TDRs”) are no longer reported for the current period. At December 31, 2022 there were three loans classified as TDR loans totaling $5.9 million and each of these loans was performing in accordance with the agreed-upon terms.

Deferred Taxes

Deferred taxes increased $185 thousand to $7.8 million at March 31, 2023 compared to December 31, 2022. The increase was primarily due to a $550 thousand transfer to federal income taxes payable, a $111 thousand increase related to the adoption of CECL, partially offset by a $498 thousand decrease due to the reduction in unrealized losses on available-for-sale securities.

Deposits

Total deposits at March 31, 2023 decreased $55.6 million, or 4.1%, when compared to December 31, 2022. When comparing deposit products between the two periods, non-interest-bearing demand deposits decreased $46.4 million, interest-bearing demand deposits decreased $24.8, money market deposits decreased $19.8 million and savings deposits decreased $17.2 million. Certificates of deposit increased $52.5 million, partially offsetting these decreases.

Borrowings

The Company had $44.5 million in outstanding borrowings at March 31, 2023 an increase from $10.0 million at December 31, 2022.

Stockholders’ equity

Total stockholders’ equity at March 31, 2023 increased $5.7 million, or 2.6%, when compared to the end of 2022. This increase was primarily due to the $3.9 million increase in retained earnings consisting of $6.1 million of net income less $1.9 million of cash dividends recorded during the period, and a $1.2 million reduction in the accumulated other comprehensive loss on the available-for-sale investment portfolio associated with a decrease in unrealized losses. The ratio of equity to total assets at March 31, 2023 and at December 31, 2022, was 14.2% and 13.7%, respectively.

Liquidity

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

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 commercial real estate loan collateral, and a $80.0 million line of credit with the FHLB supporting municipal deposits, the Company had the ability to borrow $122.6 million as of March 31, 2023.

The Company is also a shareholder of Atlantic Community Bancshares, Inc., the parent company of Atlantic Community Bankers Bank (“ACBB”). As of March 31, 2023, the Company had available borrowing capacity with ACBB of $10.0 million to provide short-term liquidity generally for a period of not more than fourteen days. No amounts were outstanding under our line of credit with ACBB at March 31, 2023.

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

Capital resources

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

In addition, in order to make capital distributions and pay discretionary bonuses to executive officers without restriction, an institution must also maintain additional common equity in excess of the minimum requirements. This excess is referred to as a capital conservation buffer. At March 31, 2023, the required capital conservation buffer is 2.50%.

Under the risk-based capital requirements, “total” capital (a combination of core and “supplementary” capital) must equal at least 8.0% of “risk-weighted” assets. The FDIC also is authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. Management believes, as of March 31, 2023, that the Bank meets all capital adequacy requirements to which it is subject and is “well capitalized” under applicable regulations.

The Bank’s actual capital amounts and ratios and the regulatory requirements at March 31, 2023 and December 31, 2022 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)
March 31, 2023:
Total capital (to risk-weighted assets)	$	238,269		15.563	%	$	160,751		10.500	%	$	153,096		10.000	%
Tier 1 capital (to risk-weighted assets)	$	221,762		14.485	%	$	130,132		8.500	%	$	122,477		8.000	%
Common equity tier 1 capital (to-risk weighted assets)	$	221,762		14.485	%	$	107,167		7.000	%	$	99,512		6.500	%
Tier 1 leverage capital (to average assets)	$	221,762		14.084	%	$	102,351		6.500	%	$	78,731		5.000	%
December 31, 2022:
Total capital (to risk-weighted assets)	$	233,657		15.309	%	$	160,256		10.500	%	$	152,625		10.000	%
Tier 1 capital (to risk-weighted assets)	$	217,196		14.231	%	$	129,731		8.500	%	$	122,100		8.000	%
Common equity tier 1 capital (to-risk weighted assets)	$	217,196		14.231	%	$	106,838		7.000	%	$	99,206		6.500	%
Tier 1 leverage capital (to average assets)	$	217,196		13.474	%	$	104,775		6.500	%	$	80,596		5.000	%

Comparison of Operating Results for the Three Months Ended March 31, 2023 and 2022

General

The Company reported net income of $6.1 million, or $0.95 per diluted common share, for the first quarter of 2023, compared to net income of $6.0 million, or $0.91 per diluted common share, for the first quarter of 2022. Although net income for the first quarter of 2023 was only slightly higher than the net income for same period in 2022, net interest income was $807 thousand above the first quarter of 2022 and non-interest income was also higher by $328 thousand. Increases of $504 thousand in non-interest expense and $265 thousand in the provision for credit losses almost entirely offset the increases in income from the first quarter of 2022 to the same period in 2023.

Interest income

Interest income increased $3.5 million for the three months ended March 31, 2023 compared to the same period in 2022. Interest income on loans increased $3.4 million due to increases in both the average balance of loans of $29.1 million and the yield of 89 basis points. Other interest and dividend income increased $96 thousand due to an increase in the yield of 445 basis points, partially offset by a decrease in the average balance of $110.7 million, and interest on taxable available-for-sale securities increased $55 thousand due to an increases in yield of 93 basis points, partially offset by a decrease in the average balance of $10.0 million.

Interest expense

Interest expense on deposits increased $2.6 million to $3.9 million for the three-month period ended March 31, 2023, due to an increase in the rate paid on interest-bearing deposits of 102 basis points, partially offset by a reduction of $76.8 million in the average balance of interest-bearing deposits over the same prior year period.

Interest expense on borrowings was $86 thousand during the three-month period ended March 31, 2023 and there was no interest expense on borrowings during the same period in 2022.

Provision for loan losses

The Company recorded a provision for credit losses of $265 thousand during the three months ended March 31, 2023 and no provision for the three months ended March 31, 2022. Net recoveries for the three-month periods ended March 31, 2023 and 2022 were $3 thousand and $34 thousand, respectively. Upon adoption of the CECL method of calculating the allowance for credit losses on January 1, 2023, the Company recorded a one-time decrease, net of tax, in retained earnings of $284 thousand, a reduction to the allowance for credit losses of $301 thousand and an increase in the reserve for unfunded liabilities of $695 thousand. During the first quarter of 2023, the Company recorded a provision for credit losses of $265 thousand, representing a $344 thousand increase in the allowance for credit losses on loans and a $79 thousand reduction to the reserve for unfunded liabilities. The coverage ratio of allowance for credit losses to period end loans was 1.19% at both March 31, 2023 and at March 31, 2022. Refer to Note 4 – Loans of this document to see additional information regarding the Company’s adoption of CECL. See the section titled “Financial Condition —Allowance for Loan Losses” in our Form 10-K for the year ended December 31, 2022 for a discussion of our allowance for loan losses methodology, including additional information regarding the determination of the provision for loan losses.

Non-interest income

Total non-interest income of $1.4 million for the first quarter of 2023 increased $328 thousand, or by 31.4%, when compared to the quarter ended March 31, 2022. The increase over the first quarter of 2022 was primarily due to a $256 thousand increase in loan fees and a $91 thousand increase in other non-interest income.

Non-interest expense

Total non-interest expense for the first quarter of 2023 increased $504 thousand, or 5.4%, when compared to the same period in 2022. This increase was primarily due to a $498 thousand increase in salaries and benefits expenses and a $265 thousand increase in data processing and communications expenses, partially offset by decreases in occupancy and equipment expenses of $137 thousand, professional fees of $96 thousand and federal deposit insurance expense of $74 thousand.

Provision for income taxes

For the three-month period ended March 31, 2023, the Company recorded an income tax expense of $1.9 million, resulting in an effective tax rate of 23.8%, compared to an income tax expense of $1.6 million resulting in an effective tax rate of 21.1% for the three-month period ended March 31, 2022. The effective tax rate was impacted by legislation enacted by the Governor of the State of New York establishing an economic nexus threshold of $1.0 million in New York City (“NYC”) receipts for purposes of the NYC business corporation tax for tax years beginning on or after January 1, 2022. The Company’s effective tax rate increased as a result of this legislation.

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

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


	Three Months Ended March 31,
	2023							2022							Change 2023 vs 2022
	Average Balances		Income/ Expense		Yield Rates			Average Balances		Income/ Expense		Yield Rates			Average Balances			Yield Rates

	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,375,849	$	19,894		5.86	%	$	1,346,733	$	16,492		4.97	%	$	29,116			0.89	%
Securities
Taxable available-for-sale		42,235		278		2.66	%		52,221		223		1.73	%		(9,986	)		0.93	%
Tax exempt available-for-sale		41,634		284		2.77	%		48,605		303		2.53	%		(6,971	)		0.24	%
Held-to-maturity		200		3		5.36	%		207		3		5.35	%		(7	)		0.01	%
Federal funds sold		8,454		95		4.56	%		119,581		43		0.15	%		(111,127	)		4.41	%
Other interest earning-assets		5,001		58		4.77	%		4,546		14		1.25	%		455			3.52	%

Total interest-earning assets		1,473,373	$	20,612		5.67	%		1,571,893	$	17,078		4.41	%		(98,520	)		1.26	%

Other non-earnings assets		109,354							108,280							1,074

Total assets	$	1,582,727						$	1,680,173						$	(97,446)

Interest-bearing liabilities
Demand	$	264,507	$	551		0.84	%	$	257,978	$	160		0.25	%	$	6,529			0.59	%
Savings		182,763		417		0.92	%		232,136		136		0.24	%		(49,373	)		0.68	%
Money markets		268,814		1,158		1.75	%		376,517		247		0.27	%		(107,703	)		1.48	%
Certificates of deposit		364,470		1,739		1.94	%		290,686		681		0.95	%		73,784			0.99	%

Total deposit		1,080,554		3,865		1.45	%		1,157,317		1,224		0.43	%		(76,763	)		1.02	%
Borrowings		6,993		86		4.99	%		—		—		0.00	%		6,993			4.99	%

Total interest-bearing liabilities		1,087,547	$	3,951		1.47	%		1,157,317	$	1,224		0.43	%		(69,770	)		1.04	%

Non-interest-bearing deposits		242,814							285,298							(42,484	)
Other liabilities		28,587							20,505							8,082

Total liabilities		1,358,948							1,463,120							(104,172	)
Stockholders’ equity		223,779							217,053							6,726

Total liabilities and stockholder’s equity	$	1,582,727						$	1,680,173						$	(97,446)

Net interest-earnings assets	$	385,826						$	414,576						$	(28,750)
Net interest income; interest rate spread						4.20	%						3.98	%					0.22	%

Net interest margin			$	16,661		4.59	%			$	15,854		4.09	%	$	807			0.50	%

Net interest margin FTE¹						4.66	%						4.14	%					0.52	%

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

Rate/Volume Analysis

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


	Three Months Ended March 31, 2023 vs . 2022 Increase (Decrease) Due to
	Rate			Volume			Net

	(In thousands)
Interest and dividend income:
Loans receivable, including fees	$	1,140		$	2,262		$	3,402
Securities avalable-for-sale
Taxable		212			(157	)		55
Tax-exempt		54			(73	)		(19	)
Securities held-to-maturity		—			—			—
Federal funds sold		908			(856	)		52
Other interest-earning assets		28			16			44

Total interest-earning assets	$	2,342		$	1,192		$	3,534

Interest expense:
Demand	$	332		$	59		$	391
Savings		555			(274	)		281
Money market		1,753			(842	)		911
Certificates of deposit		211			847			1,058
Borrowings		—			86			86

Total interest expense	$	2,852		$	(125	)	$	2,727

Change in net interest income	$	(510	)	$	1,317		$	807

How We Manage Market Risk.

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk which is inherent in our lending, investment and deposit gathering activities. To that end, management actively monitors and manages interest rate risk exposure. In addition to market risk, our primary risk is credit risk on our loan portfolio. We attempt to manage credit risk through our loan underwriting and oversight policies.

The principal objective of our interest rate risk management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given our business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with approved guidelines. We seek to manage our exposure to risks from changes in interest rates while at the same time trying to improve our net interest spread. We monitor interest rate risk as such risk relates to our operating strategies. We have established an Asset/Liability Committee which is comprised of both Management and members of the Board of Directors. The Asset/Liability Committee meets on a regular basis and is responsible for reviewing our asset/liability policies and interest rate risk position. Both the extent and direction of shifts in interest rates are uncertainties that could have a negative impact on future earnings.

Gap Analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring the Company’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to affect adversely net interest income while a positive gap would tend to result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to affect adversely net interest income.

The table on the next page sets forth the amounts of our interest-earning assets and interest-bearing liabilities outstanding at March 31, 2023, which we expect, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the “GAP Table”). Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2023, 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	$	11,452		$	3,530		$	6,575		$	7,213		$	65,708		$	(9,767	)	$	84,711
Loans receivable		537,176			171,446			323,895			278,050			79,908			(18,407	)		1,372,068
Other interest-earnings assets (2)		11,236			—			—			—			—			10,083			21,319
Other non-interest assets		—			—			—			—			—			107,222			107,222

Total interest-earning assets	$	559,864		$	174,976		$	330,470		$	285,263		$	145,616		$	(18,091	)	$	1,585,320

Interest-bearing liabilities:
Checking and savings accounts	$	10,808		$	407,583		$	—		$	—		$	—		$	—		$	418,391
Money market accounts		14,317			249,557			—			—			—			—			263,874
Certificate accounts		43,030			160,463			168,426			19,207			—			—			391,126
Borrowings		40,500			—			—			—			—			—			40,500

Total interest-bearing liabilities	$	108,655		$	817,603		$	168,426		$	19,207		$	—		$	—		$	1,113,891

Interest-earning assets less interest-bearing liabilities	$	451,209		$	(642,627	)	$	162,044		$	266,056		$	145,616		$	(18,091	)	$	471,429

Cumulative interest-rate sensitivity gap (3)	$	451,209		$	(191,418	)	$	(29,374	)	$	236,682		$	382,298

Cumulative interest-rate gap as a percentage of total assets at March 31, 2023		28.46	%		-12.07	%		-1.85	%		14.93	%		24.11	%

Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at March 31, 2023		515.27	%		79.33	%		97.32	%		121.25	%		134.32	%

(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 also is monitored by management through the use of a model which generates estimates of the changes in our net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The following table sets forth our NPV as of March 31, 2023 and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.


Change in Interest Rates In Basis Points (Rate Shock)	Net Portfolio Value								NPV as % of Portfolio Value of Assets
Change in Interest Rates In Basis Points (Rate Shock)	Amonts		$ Change			% Change			NPV Ratio			Change

	(Dollars in thousands)
300	$	308,493	$	(4,140	)		-1.32	%		-6.08	%		-5.49	%
200	$	317,135	$	4,502			1.44	%		-4.02	%		-3.43	%
100	$	316,901	$	4,268			1.37	%		-2.28	%		-1.70	%
Static	$	312,633	$	—						-0.59	%
(100)	$	312,423	$	(210	)		-0.07	%		0.85	%		1.43	%

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 also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV model provides an indication of interest rate risk exposure at a particular point in time, such model is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company, such as the Company, is not required to provide the information by this Item. Certain market risk disclosure is set forth in Item 2 above under “How We Manage Market Risk.”

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Management, with the participation of the Company’s Chief Executive Officer and its Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule l3a-l5 (e) promulgated under the Exchange Act) as of March 31, 2023. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of March 31, 2023 to ensure that the information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in FDIC rules and forms.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting identified during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II–OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

The following represents a material change in our risk factors from those disclosed in Part I – “Item 1A. Risk Factors” in the 2022 Form 10-K.

Recent negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations.

The recent bank failures and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional, as well as community banks like the Company. These developments have negatively impacted customer confidence in regional and community banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin. If we were required to sell a portion of our securities portfolio to address liquidity needs, we may incur losses, including as a result of the negative impact of rising interest rates on the value of our securities portfolio, which could negatively affect our earnings and our capital. If we were required to raise additional capital in the current environment, any such capital raise may be on unfavorable terms, thereby negatively impacting book value and profitability. While we have taken actions to improve our funding, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Company, designed to address the recent negative developments in the banking industry, all of which may increase our costs of doing business and reduce our profitability. Among other things, there may be an increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, losses embedded in the held-to-maturity portion of our securities portfolio, contingent liquidity, CRE composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing. As a result, the Company could face increased scrutiny or be viewed as higher risk by regulators and the investor community.

Rising interest rates have decreased the value of a portion of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.

As a result of inflationary pressures and the resulting rapid increases in interest rates over the last year, the fair value of our securities classified as available for sale has declined. These securities make up a majority of the securities portfolio of the Company, resulting in unrealized losses embedded in other comprehensive income as a part of shareholders’ equity. If the Company were required to sell such securities to meet liquidity needs, including in the event of deposit outflows or slower deposit growth, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability. While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs. Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S. treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.


Exhibit Number		Description

10.1		The Bank of Princeton Non-Employee Directors Deferred Compensation Plan*

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 Presentation Linkbase Document

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Princeton Bancorp, Inc.

Date: May 11, 2023	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)

Exhibit 10.1

THE BANK OF PRINCETON

NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN,

AS AMENDED AND RESTATED

ARTICLE I

Purpose

The Board of Directors of The Bank of Princeton (the “TBOP”) adopted The Bank of Princeton Non-Employee Directors Deferred Compensation Plan (“Plan”) on March 23, 2022 to provide an opportunity for the Non-Employee Directors of the Board of Directors to defer income attributable to their service as a Non-Employee Director and to provide a means for recognizing the contribution of such directors to the success of TBOP.

The Plan is intended to meet the requirements of Code Section 409A, and shall be operated and interpreted consistent with that intent.

The Plan constitutes an unsecured promise by TBOP to pay benefits in the future. Participants in the Plan shall have the status of general unsecured creditors of the TBOP.

The Plan is unfunded for federal tax purposes and is intended to be an unfunded arrangement for Non-Employee Directors.

Any amounts set aside to defray the liabilities assumed by TBOP will remain the general assets of TBOP and shall remain subject to the claims of TBOP’s creditors until such amounts are distributed to the Participants.

ARTICLE II

Definitions

2.1

Account. Account means a bookkeeping account maintained to record the payment obligation of TBOP to a Participant as determined under the terms of the Plan. The Committee may maintain an Account to record the total obligation to a Participant and component Accounts to reflect amounts payable at different times and in different forms. Reference to an Account means any such Account established under the terms of this Plan, as the context requires. Accounts are intended to constitute unfunded obligations within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

2.2	Account Balance. Account Balance means, with respect to any Account, the total payment obligation owed to a Participant from such Account as of the most recent Valuation Date.

2.3	Affiliate. Affiliate means a corporation, trade or business that, together with the TBOP, is treated as a single employer under Code Section 414(b) or (c).

2.4	Beneficiary. Beneficiary means a natural person, estate, or trust designated by a Participant to receive payments to which a Beneficiary is entitled in accordance with provisions of the Plan.

2.5	Board of Directors. Board of Directors means the Board of Directors of TBOP.

2.6

Change in Control. Change in Control has the meaning under Code Section 409A and includes, any of the following events: (i) a change in the ownership of TBOP, (ii) a change in the effective control of TBOP, or (iii) a change in the ownership of a substantial portion of the assets of TBOP. Notwithstanding the foregoing, in no event shall the establishment of a bank holding company for TBOP constitute a Change in Control under this Plan.

2.7	Claimant. Claimant means a Participant or Beneficiary filing a claim under this Plan.

2.8	Code. Code means the Internal Revenue Code of 1986, as amended from time to time.

2.9	Code Section 409A. Code Section 409A means Section 409A of the Code and regulations and other guidance issued by the Treasury Department and Internal Revenue Service thereunder.

2.10	Committee. Committee means the Compensation/HR Committee of the Board of Directors.

2.11	Compensation. For purposes of a Non-Employee Director, Compensation means all cash compensation received for service on the Board of Directors.

2.12

Deferral Election and Distribution Form. Deferral Election and Distribution Form means an agreement between a Participant and TBOP that specifies: (i) the amount of Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV, and (ii) the Payment Schedule applicable to the Deferral.

2.13

Deferral. Deferral means a credit to a Participant’s Account(s) that records that portion of the Participant’s Compensation that the Participant has elected to defer to the Plan in accordance with the provisions of Article IV. Unless the context of the Plan clearly indicates otherwise, a reference to Deferrals includes Earnings attributable to such Deferrals.

2.14	Earnings. Earnings means an adjustment to the value of an Account in accordance with Article VII.

2.15	Effective Date. Effective Date means the date adopted by the Board of Directors.

2.16	Non-Employee Director. Non-Employee Director means a director who is not an employee of TBOP.

2.17	Participant. Participant means an individual described in Article III.

2.18	Payment Schedule. Payment Schedule means the date as of which payment of an Account will commence and the form in which payment of such Account will be made under the terms of a distribution election in effect for such Account under the terms of this Plan.

2.19	Plan. Plan means “The Bank of Princeton Non-Employee Directors Deferred Compensation Plan” as documented herein and as may be amended from time to time hereafter.

2.20	Plan Year. For purposes of 2022, the Plan Year shall mean April 1, 2022 – December 31, 2022. All subsequent Plan Years shall be January 1 through December 31.

2.21	Separation from Service. In the case of a Non-Employee Director, means a director’s termination of service on the Board of Directors.

2.22	Valuation Date. Means the Valuation Date determined by the Committee.

ARTICLE III

Eligibility and Participation

3.1	Eligibility and Participation. All Non-Employee Directors are eligible to participate in the Plan. Non-Employee Directors will become Participants as of the date on which the first Deferral Election and Distribution Form becomes irrevocable under Article IV.

ARTICLE IV

Deferrals

4.1	Deferral Elections, Generally.

(a)

Participants may make an initial election to defer Compensation by submitting a Deferral Election and Distribution Form at the time and in the manner established by the Committee, but in any event, in accordance with Section 4.2. A Deferral Election and Distribution Form filed under this paragraph (a) applies to Compensation earned after the date that the Deferral Election and Distribution Form becomes irrevocable.

(b)

A Deferral Election and Distribution Form that is not timely filed with respect to a service period, or that is submitted by a Participant who experiences a Separation from Service prior to the latest date such form would become irrevocable under Code Section 409A, shall be considered null and void.

4.2	Timing Requirements for Deferral Election and Distribution Forms.

(a)

Initial Eligibility. The Committee may permit Non-Employee Directors to defer Compensation earned in the first year of eligibility. The Deferral Election and Distribution Form must be filed within 30 days after attaining eligibility to participate and becomes irrevocable not later than the 30^th day. A Deferral Election and Distribution Form filed under this paragraph applies to Compensation earned after the date that the Deferral Election and Distribution Form becomes irrevocable.

(b)

Prior Year Election. Except as otherwise provided in this Section 4.2, the Committee may permit a Participant to defer Compensation by filing a Deferral Election and Distribution Form no later than December 31 of the year prior to the year in which the Compensation to be deferred is earned. A Deferral Election and Distribution Form under this paragraph shall become irrevocable with respect to such Compensation not later than the December 31 filing deadline.

4.3	Deductions from Compensation. The Committee has the authority to determine the practices under which Compensation subject to a Deferral Election and Distribution Form will be deducted from a Participant’s Compensation.

4.4	Vesting. Participant Deferrals of cash Compensation shall be 100% vested at all times.

4.5

Cancellation of Deferrals. The Committee may cancel a Participant’s Deferrals during periods in which the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable mental or physical impairment that can be expected to result in death or last for a continuous period of at least twelve months, provided cancellation occurs by the later of the end of the taxable year of the Participant or the 15^th day of the third month following the date the Participant incurs the disability.

ARTICLE V

Payments from Accounts

5.1	General Rules. The vested portion of a Participant’s Accounts shall become payable upon the first to occur of the payment events applicable to such Account under Sections 5.2 through 5.6.

Payment events and Payment Schedules elected by the Participant shall be set forth in a valid Deferral Election and Distribution Form filed under Article IV or in a valid modification election applicable to such Account as described in Section 5.9.

Payment amounts are based on Account Balances as of the last Valuation Date of the month next preceding the month actual payment is made.

5.2	Specified Date/Age Accounts.

Commencement. Payment is made or begins in the calendar year designated by the Participant, however it must be at least 2 years from the date of Deferral.

Form of Payment. Payment will be made in a lump sum, unless the Participant elected to receive a designated number of annual installments from 2 years up to 5 years.

5.3	Separation from Service. Upon a Participant’s Separation from Service other than death, the Participant is entitled to receive the vested portion of the Participant’s Account Balance.

Commencement. The distribution of a Participant’s Account shall commence payment on the first business day of the calendar year next following the calendar year in which Separation from Service occurs. Notwithstanding any other provision of this Plan, payment to a Participant who is a “specified employee” as defined in Code Section 409A(a)(2)(B) will commence no earlier than six months following his or her Separation from Service.

Form of Payment. The Account Balance will be paid in a single lump sum unless the Participant elected with respect to the Account Balance to receive annual installments from 2 years up to 5 years.

5.4

Death. Notwithstanding anything to the contrary in this Article V, upon the death of the Participant (regardless of whether such Participant a Non-Employee Director at the time of death), all remaining vested Account Balances shall be paid to the Participant’s Beneficiary in a single lump sum in the calendar year following the year of the Participant’s death and no later than December 31 of such year.

(a)

Designation of Beneficiary in General. The Participant shall designate a Beneficiary in the manner and on such terms and conditions as the Committee may prescribe. No such designation shall become effective unless filed with the Committee during the Participant’s lifetime. Any designation shall remain in effect until a new designation is filed with the Committee; provided, however, that in the event a Participant designates his or her spouse as a Beneficiary, such designation shall be automatically revoked upon the dissolution of the marriage unless, following such dissolution, the Participant submits a new designation naming the former spouse as a Beneficiary. A Participant may from time to time change his or her designated Beneficiary without the consent of a previously-designated Beneficiary by filing a new designation with the Committee.

(b)

No Beneficiary. If a designated Beneficiary does not survive the Participant, or if there is no valid Beneficiary designation, amounts payable under the Plan upon the death of the Participant shall be paid to the Participant’s spouse, or if there is no surviving spouse, then to the duly appointed and currently acting personal representative of the Participant’s estate.

5.5

Administrative Cash-Out of Small Balances. Notwithstanding anything to the contrary in this Article V, the Committee may at any time and without regard to whether a payment event has occurred, direct in writing an immediate lump sum payment of the Participant’s Accounts if the balance of such Accounts, combined with any other amounts required to be treated as deferred under a single plan pursuant to Code Section 409A, does not exceed the applicable dollar amount under Code Section 402(g)(1)(B), provided any other such aggregated amounts are also distributed in a lump sum at the same time.

5.6

Acceleration of or Delay in Payments. Notwithstanding anything to the contrary in this Article V, the Committee, in its sole and absolute discretion, may elect to accelerate the time or form of payment of an Account, provided such acceleration is permitted under Treas. Reg. Section 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of an Account, to the extent permitted under Treas. Reg. Section 1.409A-2(b)(7).

5.7

Rules Applicable to Installment Payments. If a Payment Schedule specifies installment payments, payments will be made beginning as of the payment commencement date for such installments and shall continue to be made in each subsequent payment period until the number of installment payments specified in the Payment Schedule has been paid. The amount of each installment payment shall be determined by dividing (a) by (b), where (a) equals the Account Balance as of the last Valuation Date in the month preceding the month of payment and (b) equals the remaining number of installment payments. For purposes of Section 5.8, installment payments will be treated as a single payment. If an Account is payable in installments, the Account will continue to be credited with Earnings in accordance with Article VI hereof until the Account is completely distributed.

5.8

Modifications to Payment Schedules. A Participant may modify the Payment Schedule elected by him or her with respect to an Account, consistent with the permissible Payment Schedules available under the Plan for the applicable payment event, provided such modification complies with the requirements of this Section 5.8.

(a)

Time of Election. The modification election must be submitted to the Committee not less than 12 months prior to the date payments would have commenced under the Payment Schedule in effect prior to modification (the “Prior Election”).

(b)

Date of Payment under Modified Payment Schedule. The date payments are to commence under the modified Payment Schedule must be no earlier than five (5) years after the date payment would have commenced under the Prior Election. Under no circumstances may a modification election result in an acceleration of payments in violation of Code Section 409A. If the Participant modifies only the form, and not the commencement date for payment, payments shall commence on the fifth anniversary of the date payment would have commenced under the Prior Election.

(c)

Irrevocability; Effective Date. A modification election is irrevocable when filed and becomes effective 12 months after the filing date.

(d)

Effect on Accounts. An election to modify a Payment Schedule is specific to the Account or payment event to which it applies, and shall not be construed to affect the Payment Schedules or payment events of any other Accounts.

ARTICLE VI

6.1

Stock Unit Accounting. All amounts deferred under the Plan shall be held as Stock Units. With respect to all amounts for which a deferral election is made, the Bank shall transfer such amounts to the Trust as soon as is reasonably practicable after the time when the Compensation otherwise would have been payable in cash to the Participant or at such other times as the Committee shall determine in its sole discretion. Thereafter, the Plan recordkeeper shall determine the number of Stock Units to be credited to an

individual Participant’s Account by reference to the total number of shares of Bank Stock acquired by the Trust with the proceeds of each transfer and the proportion that the Compensation included in such transfer bears to the total of all Compensation transferred to the Trust.

(a)

No Segregation of Assets. A Participant’s Account is a bookkeeping device used to track the value of the Participant’s deferred Compensation (and the Employer’s liability therefor). No assets shall be reserved or segregated in connection with any Account, and no Account shall be insured or otherwise secured.

(b)

Dividends. All Stock Units credited to a Participant’s Account shall be credited with hypothetical cash dividends equal to the cash dividends that are declared and paid on Bank Stock. On each record date, the Committee or its designee shall determine the amount of cash dividends to be paid per share of Bank Stock. On the payment date of such dividend, the Committee or its designee, shall credit an equal amount of hypothetical cash dividends to each Stock Unit. The hypothetical cash dividends shall be converted into Stock Units by reference to the reinvestment of such dividends by the trustee of the Trust,

(c)

No Assignment. Stock Units may not be sold, assigned, transferred, disposed of, pledged, hypothecated or otherwise encumbered.

(d)

Medium of Payment. All payments from this Plan shall be made in a number of shares of Bank Stock equal to the number of whole Stock Units credited to the Participant’s Account on the distribution date. Fractional shares shall be disregarded.

(e)

Expenses. The Bank shall bear all expenses associated with the acquisition of Bank Stock by an trust established for this Plan, as well as the maintenance of said trust.

ARTICLE VII

Administration

7.1

Plan Administration. This Plan shall be administered by the Committee or its designee, which shall have discretionary authority to make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Plan and to utilize its discretion to decide or resolve any and all questions, including but not limited to eligibility for benefits and interpretations of this Plan and its terms, as may arise in connection with the Plan. Claims for benefits shall be filed with the Committee and resolved in accordance with the claims procedures in Article X.

7.2

Administration Upon Change in Control. Upon a Change in Control affecting TBOP, the Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Committee. The Committee, by a vote of a majority of its members, shall have the authority (but shall not be obligated) to appoint an independent third party to act as the Committee.

TBOP shall, with respect to the Committee identified under this Section: (i) pay all reasonable expenses the Committee, (ii) indemnify the Committee (including individuals serving as Committee members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Committee’s duties hereunder, except with respect to matters resulting from the Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Committee may reasonably require.

7.3	Withholding. Non-Employee Directors are not subject to mandatory tax-withholding.

7.4

Indemnification. TBOP shall indemnify and hold harmless each employee, officer, director, agent or organization, to whom or to which are delegated duties, responsibilities, and authority under the Plan or otherwise with respect to administration of the Plan, including, without limitation, the Committee, its delegees and its agents, against all claims, liabilities, fines and penalties, and all expenses reasonably incurred by or imposed upon him or it (including but not limited to reasonable attorney fees) which arise as a result of his, her or its actions or failure to act in connection with the operation and administration of the Plan to the extent lawfully allowable and to the extent that such claim, liability, fine, penalty, or expense is not paid for by liability insurance purchased or paid for by TBOP.

7.5	Delegation of Authority. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with legal counsel who may be legal counsel to TBOP.

7.6

Binding Decisions or Actions. The decision or action of the Committee in respect of any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations thereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

ARTICLE VIII

Amendment and Termination

8.1	Amendment and Termination. TBOP may at any time and from time to time amend the Plan or may terminate the Plan as provided in this Article VIII. TBOP may also terminate its participation in the Plan.

8.2

Amendments. TBOP, by action taken by its Board of Directors or its designee, may amend the Plan at any time and for any reason, provided that any such amendment shall not reduce the vested Account Balances of any Participant accrued as of the date of any such amendment or restatement (as if the Participant had incurred a voluntary Separation from Service on such date). The Board of Directors may delegate to the Committee the authority to amend the Plan without the consent of the Board of Directors for the purpose of: (i) conforming the Plan to the requirements of law; (ii) facilitating the administration of the Plan; (iii) clarifying provisions based on the Committee’s interpretation of the Plan documents; and (iv) making such other amendments as the Board of Directors may authorize.

8.3	Termination. TBOP, by action taken by its Board of Directors, may terminate the Plan and pay Participants and Beneficiaries their Account Balances in a single lump sum at any time, to the extent and in accordance with Treas. Reg. Section 1.409A-3(j)(4)(ix).

8.4

Accounts Taxable Under Code Section 409A. The Plan is intended to constitute a plan of deferred compensation that meets the requirements for deferral of income taxation under Code Section 409A. The Committee, pursuant to its authority to interpret the Plan, may sever from the Plan or any Deferral Election and Distribution Form any provision or exercise of a right that otherwise would result in a violation of Code Section 409A.

ARTICLE IX

Informal Funding

9.1

General Assets. Obligations established under the terms of the Plan may be satisfied from the general funds of TBOP, or a trust described in this Article IX. No Participant, spouse or Beneficiary shall have any right, title or interest whatever in assets of TBOP. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between TBOP and any Participant, spouse, or Beneficiary. To the extent that any person acquires a right to receive payments hereunder, such rights are no greater than the right of an unsecured general creditor of TBOP.

9.2

Rabbi Trust. TBOP may, in its sole discretion, establish a grantor trust, commonly known as a rabbi trust, as a vehicle for accumulating assets to pay benefits under the Plan. Payments under the Plan may be paid from the general assets of TBOP or from the assets of any such rabbi trust. Payment from any such source shall reduce the obligation owed to the Participant or Beneficiary under the Plan.

ARTICLE X

Claims

10.1

Filing a Claim. Any controversy or claim arising out of or relating to the Plan shall be filed in writing with the Committee, which shall make all determinations concerning such claim. Any claim filed with the Committee and any decision by the Committee denying such claim shall be in writing and shall be delivered to the Participant or Beneficiary filing the claim (the “Claimant”). Notice of a claim for payments shall be delivered to the Committee within 90 days of the latest date upon which the payment could have been timely made in accordance with the terms of the Plan and Code Section 409A and, if not paid, the Participant or Beneficiary must file a claim under this Article X not later than 180 days after such latest date. If the Participant or Beneficiary fails to file a timely claim, the Participant forfeits any amounts to which he or she may have been entitled to receive under the claim.

(a)

In General. Notice of a denial of benefits (other than claims based on disability) will be provided within 90 days of the Committee’s receipt of the Claimant’s claim for benefits. If the Committee determines that it needs additional time to review the claim, the Committee will provide the Claimant with a notice of the extension before the end of the initial 90-day period. The extension will not be more than 90 days from the end of the initial 90-day period and the notice of extension will explain the special circumstances that require the extension and the date by which the Committee expects to make a decision.

(b)

Disability Benefits. Notice of denial of claims based on disability will be provided within forty-five (45) days of the Committee’s receipt of the Claimant’s claim for disability benefits. If the Committee determines that it needs additional time to review the disability claim, the Committee will provide the Claimant with a notice of the extension before the end of the initial 45-day period. If the Committee determines that a decision cannot be made within the first extension period due to matters beyond the control of the Committee, the time period for making a determination may be further extended for an additional 30 days. If such an additional extension is necessary, the Committee shall notify the Claimant prior to the expiration of the initial 30-day extension. Any notice of extension shall indicate the circumstances necessitating the extension of time, the date by which the Committee expects to furnish a notice of decision, the specific standards on which such entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim and any additional information needed to resolve those issues. A Claimant will be provided a minimum of 45 days to submit any necessary additional information to the Committee. In the event that a 30-day extension is necessary due to a Claimant’s failure to submit information necessary to decide a claim, the period for furnishing a notice of decision shall be tolled from the date on which the notice of the extension is sent to the Claimant until the earlier of the date the Claimant responds to the request for additional information or the response deadline.

(c)

Contents of Notice. If a claim for benefits is completely or partially denied, notice of such denial shall be in writing. Any electronic notification shall comply with the standards imposed by Department of Labor Regulation 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). The notice of denial shall set forth the specific reasons for denial in plain language. The notice shall: (i) cite the pertinent provisions of the Plan document, and (ii) explain, where appropriate, how the Claimant can perfect the claim, including a description of any additional material or information necessary to complete the claim and why such material or information is necessary.

10.2

Appeal of Denied Claims. A Claimant whose claim has been completely or partially denied shall be entitled to appeal the claim denial by filing a written appeal with a committee designated to hear such appeals (the “Appeals Committee”). A Claimant who timely requests a review of the denied claim (or his or her authorized representative) may review, upon request and free of charge, copies of all documents, records and other information relevant to the denial and may submit written comments, documents, records and other information relating to the claim to the Appeals Committee. All written comments, documents, records, and other information shall be considered “relevant” if the information: (i) was relied upon in making a benefits determination, (ii) was submitted, considered or generated in the course of making a benefits decision regardless of whether it was relied upon to make the decision, or (iii) demonstrates compliance with administrative processes and safeguards established for making benefit decisions. The review shall take into account all comments, documents, records, and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Appeals Committee may, in its sole discretion and if it deems appropriate or necessary, decide to hold a hearing with respect to the claim appeal.

(a)

In General. Appeal of a denied benefits claim (other than a disability benefits claim) must be filed in writing with the Appeals Committee no later than 60 days after receipt of the written notification of such claim denial. The Appeals Committee shall make its decision regarding the merits of the denied claim within 60 days following receipt of the appeal (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Appeals Committee expects to render the determination on review. The review will take into account comments, documents, records and other information submitted by the Claimant relating to the claim without regard to whether such information was submitted or considered in the initial benefit determination.

(b)

Disability Benefits. Appeal of a denied disability benefits claim must be filed in writing with the Appeals Committee no later than 180 days after receipt of the written notification of such claim denial. The review shall be conducted in accordance with applicable Department of Labor regulations.

The Appeals Committee shall make its decision regarding the merits of the denied claim within 45 days following receipt of the appeal (or within 90 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). If an extension of time for reviewing the appeal is required because of special circumstances, written notice of the extension shall be furnished to the Claimant prior to the commencement of the extension. The notice will indicate the special circumstances requiring the extension of time and the date by which the Appeals Committee expects to render the determination on review. Following its review of any additional information submitted by the Claimant, the Appeals Committee shall render a decision on its review of the denied claim.

(c)

Contents of Notice. If a benefits claim is completely or partially denied on review, notice of such denial shall be in writing. Any electronic notification shall comply with the standards imposed by Department of Labor Regulation 29 CFR 2520.104b-1(c)(1)(i), (iii), and (iv). Such notice shall set forth the reasons for denial in plain language.

The decision on review shall set forth: (i) the specific reason or reasons for the denial, (ii) specific references to the pertinent Plan provisions on which the denial is based, and (iii) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, or other information relevant (as defined above) to the Claimant’s claim.

10.3

Claims Appeals Upon Change in Control. Upon a Change in Control involving TBOP, the Appeals Committee, as constituted immediately prior to such Change in Control, shall continue to act as the Appeals Committee. TBOP may not remove any member of the Appeals Committee, but may replace resigning members if 2/3rds of the members of the Board of Directors and a majority of Participants and Beneficiaries with Account Balances consent to the replacement.

The Appeals Committee shall have the exclusive authority at the appeals stage to interpret the terms of the Plan and resolve appeals under the Claims Procedure.

TBOP shall, with respect to the Appeals Committee identified under this Section: (i) pay its proportionate share of all reasonable expenses and fees of the Appeals Committee, (ii) indemnify the Appeals Committee (including individual committee members) against any costs, expenses and liabilities including, without limitation, attorneys’ fees and expenses arising in connection with the performance of the Appeals Committee hereunder, except with respect to matters resulting from the Appeals Committee’s gross negligence or willful misconduct, and (iii) supply full and timely information to the Appeals Committee on all matters related to the Plan, any rabbi trust, Participants, Beneficiaries and Accounts as the Appeals Committee may reasonably require.

10.4

Legal Action. A Claimant may not bring any legal action, including commencement of any arbitration, relating to a claim for benefits under the Plan unless and until the Claimant has followed the claims procedures under the Plan and exhausted his, her or their administrative remedies under Sections 10.1 and 10.2. No such legal action may be brought more than twelve (12) months following the notice of denial of benefits under Section 11.2, or if no appeal is filed by the applicable appeals deadline, twelve (12) months following the appeals deadline.

If a Participant or Beneficiary prevails in a legal proceeding brought under the Plan to enforce the rights of such Participant or any other similarly situated Participant or Beneficiary, in whole or in part, TBOP shall reimburse such Participant or Beneficiary for all legal costs, expenses, attorneys’ fees and such other liabilities incurred as a result of such proceedings. If the legal proceeding is brought in connection with a Change in Control involving TBOP, the Participant or Beneficiary may file a claim directly with the trustee for reimbursement of such costs, expenses and fees. For purposes of the preceding sentence, the amount of the claim shall be treated as if it were an addition to the Participant’s or Beneficiary’s Account Balance and will be included in determining TBOP’s trust funding obligation under Section 9.2.

10.5	Discretion of Appeals Committee. All interpretations, determinations and decisions of the Appeals Committee with respect to any claim shall be made in its sole discretion, and shall be final and conclusive.

ARTICLE XI

General Provisions

11.1

Assignment. No interest of any Participant, spouse or Beneficiary under this Plan and no benefit payable hereunder shall be assigned as security for a loan, and any such purported assignment shall be null, void and of no effect, nor shall any such interest or any such benefit be subject in any manner, either voluntarily or involuntarily, to anticipation, sale, transfer, assignment or encumbrance by or through any Participant, spouse or Beneficiary. TBOP may assign any or all of its liabilities under this Plan in connection with any restructuring, recapitalization, sale of assets or other similar transactions affecting TBOP without the consent of the Participant.

11.2

No Legal or Equitable Rights or Interest. No Participant or other person shall have any legal or equitable rights or interest in this Plan that are not expressly granted in this Plan. Participation in this Plan does not give any person any right to be retained in the service of TBOP. The right and power of TBOP to dismiss or discharge an Employee is expressly reserved. TBOP makes no representations or warranties as to the tax consequences to a Participant or a Participant’s beneficiaries resulting from a deferral of income pursuant to the Plan.

11.3	No Right to Continued Board Service. Nothing contained herein shall be construed to constitute a contract of continued Board service between a Non-Employee Director and TBOP or an affiliate of TBOP.

11.4

Notice. Any notice or filing required or permitted to be delivered to the Committee under this Plan shall be delivered in writing, in person, or through such electronic means as is established by the Committee. Notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Written transmission shall be sent by certified mail to the Committee at the headquarters of TBOP.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing or hand-delivered, or sent by mail to the last known address of the Participant.

11.5	Headings. The headings of Sections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control.

11.6

Invalid or Unenforceable Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof and the Committee may elect in its sole discretion to construe such invalid or unenforceable provisions in a manner that conforms to applicable law or as if such provisions, to the extent invalid or unenforceable, had not been included.

11.7

Lost Participants or Beneficiaries. Any Participant or Beneficiary who is entitled to a benefit from the Plan has the duty to keep the Committee advised of his or her current mailing address. If benefit payments are returned to the Plan or are not presented for payment after a reasonable amount of time, the Committee shall presume that the payee is missing. The Committee, after making such efforts as in its discretion it deems reasonable and appropriate to locate the payee, shall stop payment on any uncashed checks and may discontinue making future payments until contact with the payee is restored. If the Committee is unable to locate the Participant or Beneficiary after five years of the date payment is scheduled to be made the Participant’s Account will be forfeited, provided that a Participant’s Account shall not be credited with Earnings following the first anniversary of such date on which payment is to be made and further provided, however, that such benefit shall be reinstated, without further adjustment for interest, if a valid claim is made by or on behalf of the Participant or Beneficiary for all or part of the forfeited benefit.

11.8

Facility of Payment to a Minor. If a distribution is to be made to a minor, or to a person who is otherwise incompetent, then the Committee may, in its discretion, make such distribution: (i) to the legal guardian, or if none, to a parent of a minor payee with whom the payee maintains his or her residence, or (ii) to the conservator or committee or, if none, to the person having custody of an incompetent payee. Any such distribution shall fully discharge the Committee, TBOP, and the Plan from further liability on account thereof.

11.9	Governing Law. To the extent not preempted by ERISA, the laws of the State of New Jersey shall govern the construction and administration of the Plan.

11.10

Compliance With Code Section 409A; No Guarantee. This Plan is intended to be administered in compliance with Code Section 409A and each provision of the Plan shall be interpreted consistent with Code Section 409A. Although intended to comply with Code Section 409A, this Plan shall not constitute a guarantee to any Participant or Beneficiary that the Plan in form or in operation will result in the deferral of federal or state income tax liabilities or that the Participant or Beneficiary will not be subject to the additional taxes imposed under Code Section 409A. TBOP shall have any legal obligation to a Participant with respect to taxes imposed under Code Section 409A.

Exhibit 31.1

RULE 13A-14(a) CERTIFICATION

OF THE PRINCIPAL EXECUTIVE OFFICER

I, Edward Dietzler, Chief Executive Officer and President of Princeton Bancorp, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Princeton Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, considering the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

RULE 13A-14(a) CERTIFICATION

OF THE PRINCIPAL FINANCIAL OFFICER

I, George Rapp, Executive Vice President and Chief Financial Officer of Princeton Bancorp, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Princeton Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 32

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of Princeton Bancorp, Inc. on Form 10-Q for the period ended March 31, 2023 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Princeton Bancorp, Inc.

/s/ Edward Dietzler

Edward Dietzler

Chief Executive Officer and President

(Principal Executive Officer)

/s/ George Rapp

George Rapp

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

Date: May 11 , 2023