UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20429

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 2023

Or

☐ 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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 8, 2023, there were 6,298,313 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—September 30, 2023 and December 31, 2022	1
	Unaudited Consolidated Statements of Income—Three and Nine Months Ended September 30, 2023 and 2022	2
	Unaudited Consolidated Statements of Comprehensive Income—Three and Nine Months Ended September 30, 2023 and 2022	3
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity—Three and Nine Months Ended September 30, 2023 and 2022	4
	Unaudited Consolidated Statements of Cash Flows—Nine Months Ended September 30, 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	28
Item 3	Quanitative and Qualitative Disclosure about Market Risk	41
Item 4	Controls and Procedures	41
PART II OTHER INFORMATION
Item 1	Legal Proceedings	42
Item 1A	Risk Factors	42
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	42
Item 3	Defaults Upon Senior Securities	42
Item 4	Mine Safety Disclosures	42
Item 5	Other Information	42
Item 6	Exhibits	43

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 Reorganization, 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)

	September 30, 2023			December 31, 2022
ASSETS
Cash and due from banks	$	14,799		$	12,161
Interest-earning bank balances		17,245			13,140
Federal funds sold		174,887			28,050
Total cash and cash equivalents		206,931			53,351
Securities available-for-sale, at fair value		88,064			83,402
Securities held-to-maturity (fair value $189 and $200, at September 30, 2023 and December 31, 2022, respectively)		195			201
Loans receivable, net of deferred fees and costs		1,498,500			1,370,368
Less: allowance for credit lossess		(17,992	)		(16,461	)
Loan receivable, net		1,480,508			1,353,907
Bank-owned life insurance		58,483			52,617
Premises and equipment, net		14,567			11,722
Accrued interest receivable		5,783			4,756
Restricted investment in bank stock		1,385			1,742
Deferred taxes, net		13,908			7,599
Goodwill		8,853			8,853
Core deposit intangible		1,546			1,825
Mortgage servicing rights		1,562			—
Operating lease right-of-use asset		24,090			16,026
Other assets		7,248			5,778
TOTAL ASSETS	$	1,913,123		$	1,601,779
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits:
Non-interest-bearing	$	264,197		$	265,078
Interest-bearing		1,373,769			1,082,652
Total deposits		1,637,966			1,347,730
Borrowings		—			10,000
Accrued interest payable		10,243			1,027
Operating lease liability		24,941			16,772
Other liabilities		7,765			6,649
TOTAL LIABILITIES		1,680,915			1,382,178
STOCKHOLDERS’ EQUITY:
Common stock, no par value; 15,000,000 shares authorized, 6,299,331 shares issued and outstanding at September 30 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		97,779			81,291
Treasury stock, at cost 663,805 shares at December 31, 2022		—			(19,452	)
Retained earnings		146,022			131,488
Accumulated other comprehensive loss		(11,593	)		(8,273	)
TOTAL STOCKHOLDER’S EQUITY		232,208			219,601
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,913,123		$	1,601,779

See accompanying notes to unaudited consolidated financial statements.

1

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2023			2022		2023			2022
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees	$	23,503		$	18,336	$	64,914		$	51,596
Securities available-for-sale:
Taxable		357			242		927			698
Tax-exempt		285			286		853			882
Securities held-to-maturity		3			2		8			8
Other interest and dividend income		2,852			225		3,924			441
TOTAL INTEREST AND DIVIDEND INCOME		27,000			19,091		70,626			53,625
INTEREST EXPENSE
Deposits		10,316			1,392		21,502			3,785
Borrowings		—			3		118			3
TOTAL INTEREST EXPENSE		10,316			1,395		21,620			3,788
NET INTEREST INCOME		16,684			17,696		49,006			49,837
(Credit) provision for credit losses		(182	)		200		2,546			200
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		16,866			17,496		46,460			49,637
NON-INTEREST INCOME
(Loss) gain on call/sale of securities available-for-sale		(6	)		—		(6	)		2
Income from bank-owned life insurance		331			287		916			852
Fees and service charges		479			469		1,391			1,441
Loan fees, including preypayment penalties		1,184			850		2,565			1,248
Gain on bargain purchase		—			—		9,696			—
Gain on sale of other real estate owned		203			—		203			—
Other		212			101		577			322
TOTAL NON-INTEREST INCOME		2,403			1,707		15,342			3,865
NON-INTEREST EXPENSE
Salaries and employee benefits		6,177			5,442		17,352			15,251
Occupancy and equipment		2,142			1,539		5,188			4,446
Professional fees		614			786		1,635			1,929
Data processing and communications		1,242			1,043		3,860			3,134
Federal deposit insurance		258			249		701			788
Advertising and promotion		139			140		375			379
Office expense		117			52		392			168
Other real estate expenses		—			—		1			112
Core deposit intangible		116			135		378			434
Acquisition-related expenses		(1,391	)		—		5,635			—
Other		745			739		2,228			2,180
TOTAL NON-INTEREST EXPENSE		10,159			10,125		37,745			28,821
INCOME BEFORE INCOME TAX EXPENSE		9,110			9,078		24,057			24,681
INCOME TAX EXPENSE		1,512			2,103		3,574			5,358
NET INCOME	$	7,598		$	6,975	$	20,483		$	19,323
Earnings per common share-basic	$	1.21		$	1.12	$	3.26		$	3.05
Earnings per common share-diluted	$	1.19		$	1.09	$	3.21		$	2.98
Dividends declared per common share	$	0.30		$	0.25	$	0.90		$	0.75

See accompanying notes to unaudited consolidated financial statements.

2

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
NET INCOME	$	7,598		$	6,975		$	20,483		$	19,323
Other comprehensive income (loss)
Unrealized losses arising during period on securities available-for-sale		(4,321	)		(4,989	)		(4,656	)		(15,070	)
Reclassification adjustment for losses (gains) realized in income 1		6			—			6			(2	)
Net unrealized loss		(4,315	)		(4,989	)		(4,650	)		(15,072	)
Tax effect		1,236			1,570			1,330			4,287
Total other comprehensive income (loss)		(3,079	)		(3,419	)		(3,320	)		(10,785	)
COMPREHENSIVE INCOME	$	4,519		$	3,556		$	17,163		$	8,538

1 Amounts are included in gain on call/sale of securities available-for-sale on the Consolidated Statements of Income as a separate element within total non-interest income. There was no income tax expense or benefit for the three or nine months ended September 30, 2023 or for the nine months ended September 30, 2022.

See accompanying notes to unaudited consolidated financial statements.

3

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)

Three Months Ended September 30, 2023 and 2022	Common Stock		Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total
Balance, July 1, 2022	$	34,338	$	80,883	$	(17,832	)	$	120,487		$	(6,527	)	$	211,349
Net income		—		—		—			6,975			—			6,975
Other comprehensive loss		—		—		—			—			(3,419	)		(3,419	)
Stock options exercised (38,450 shares)		193		336		—			—			—			529
Dividends declared $0.25 per share		—		—		—			(1,558	)		—			(1,558	)
Purchase of treasury stock (49,717 shares)		—		—		(1,358	)		—			—			(1,358	)
Dividend reinvestment plan (875 shares)		4		22		—			(26	)		—			—
Balance, September 30, 2022	$	34,535	$	81,241	$	(19,190	)	$	125,878		$	(9,946	)	$	212,518
Balance, July 1, 2023	$	—	$	97,103	$	—		$	140,310		$	(8,514	)	$	228,899
Net income		—		—		—			7,598			—			7,598
Other comprehensive loss		—		—		—			—			(3,079	)		(3,079	)
Stock options exercised (16,750 shares)		—		507		—			—			—			507
Dividends declared $0.30 per share		—		—		—			(1,864	)		—			(1,864	)
Dividend reinvestment plan (1,061 shares)		—		22		—			(22	)		—			—
Stock-based compensation expense		—		147		—			—			—			147
Balance, September 30, 2023	$	—	$	97,779	$	—		$	146,022		$	(11,593	)	$	232,208

Nine Months Ended September 30, 2023 and 2022	Common stock			Paid-in Capital		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total
Balance, January 1, 2022	$	34,100		$	80,220	$	(10,032	)	$	111,451		$	839		$	216,578
Net income		—			—		—			19,323			—			19,323
Other comprehensive loss		—			—		—			—			(10,785	)		(10,785	)
Stock options exercised (74,851 shares)		378			675		—			—			—			1,053
Restricted stock (8,741 shares)		44			165		—			—			—			209
Dividends declared $0.75 per share		—			—		—			(4,825	)		—			(4,825	)
Purchase of treasury stock (315,058 shares)		—			—		(9,158	)		—			—			(9,158	)
Dividend reinvestment plan (2,608 shares)		13			58		—			(71	)		—			—
Stock-based compensation expense		—			123		—			—			—			123
Balance, September 30, 2022	$	34,535		$	81,241	$	(19,190	)	$	125,878		$	(9,946	)	$	212,518
Balance, January 1, 2023	$	34,547		$	81,291	$	(19,452	)	$	131,488		$	(8,273	)	$	219,601
Net income		—			—		—			20,483			—			20,483
Other comprehensive loss		—			—		—			—			(3,320	)		(3,320	)
Adoption of CECL		—			—		—			(284	)		—			(284	)
Formation of Princeton Bancorp, Inc.		(34,547	)		15,095		19,452			—			—			—
Stock options exercised (33,057 shares)		—			779		—			—			—			779
Dividends declared $0.90 per share		—			—		—			(5,583	)		—			(5,583	)
Dividend reinvestment plan (3,102 shares)		—			82		—			(82	)		—			—
Stock-based compensation expense		—			532		—			—			—			532
Balance, September 30, 2023	$	—		$	97,779	$	—		$	146,022		$	(11,593	)	$	232,208

See accompanying notes to unaudited consolidated financial statements.

4

PRINCETON BANCORP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	20,483		$	19,323
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		2,546			200
Depreciation and amortization		1,070			1,121
Stock-based compensation expense		532			123
Amortization of premiums and accretion of discount on securities		257			33
Accretion of net deferred loan fees and costs		(1,937	)		(4,407	)
Loss (gain) on call/sale of securities available-for-sale		6			(2	)
Income earned from small business investment company (“SBIC”) investment		(307	)		(115	)
Increase in cash surrender value of bank-owned life insurance		(916	)		(851	)
Deferred income tax (benefit)		(671	)		(11	)
Amortization of core deposit intangible		378			435
Bargain purchase gain		(9,696	)		—
Gain on sale of other real estate owned		(203	)		—
Write down on other real estate owned		—			101
Decrease in accrued interest receivable and other assets		2,747			1,728
Increase (decrease) in accrued interest payable and other liabilities		5,860			(1,443	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		20,149			16,235
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities		(7,319	)		(5,154	)
Principal repayments of securities available-for-sale		4,173			5,514
Maturities and calls of securities available-for-sale		1,071			3,659
Maturities, calls and principal repayments of securities held-to-maturity		6			5
Net decrease (increase) in loans		59,696			(38,784	)
Cash paid for acquisition		(25,414	)		—
Cash received from acquisition		23,181			—
Purchases of premises and equipment		(1,420	)		(541	)
Purchases of bank-owned life insurance		(4,950	)		—
Sales of restricted bank stock		357			40
Proceeds from other real estate owned		236			125
NET CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES		49,617			(35,136	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		98,536			(79,129	)
Repayment of overnight borrowings		(10,000	)		—
Cash dividends		(5,583	)		(4,896	)
Dividend reinvestment program		82			71
Purchase of treasury stock		—			(9,158	)
Proceeds from exercise of stock options		779			1,053
Release of restricted stock units		—			209
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		83,814			(91,850	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		153,580			(110,751	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		53,351			158,716
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	206,931		$	47,965
SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid	$	12,404		$	4,187
Income taxes paid	$	3,455		$	3,255
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	)	$	—
Net assets acquired from Noah Bank 1	$	239,451		$	—
Net liabilities assumed from Noah Bank 1	$	204,341		$	—

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

See accompanying notes to unaudited consolidated financial statements.

5

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 29 branches, is generally an area within an approximate 50-mile radius of Princeton, NJ, including parts of Burlington, Camden, Gloucester, Hunterdon, Mercer, Middlesex, Ocean, and Somerset Counties in New Jersey, and additional areas in portions of Philadelphia, Montgomery and Bucks Counties in Pennsylvania. The Bank also has two retail branches and conducts loan origination activities in select areas of New York.

The Bank offers traditional retail banking services, one-to-four-family residential mortgage loans, multi-family and commercial mortgage loans, construction loans, commercial business loans and consumer loans, including home equity loans and lines of credit.

On January 10, 2023, Princeton Bancorp, Inc., a Pennsylvania corporation formed by the Bank (the “Company”), acquired all the outstanding stock of the Bank in a corporate reorganization. As a result, the Bank became the sole direct subsidiary of the Company, the Company became the holding company for the Bank and the stockholders of the Bank became stockholders of the Company. As of September 30, 2023, the Company had 212 total employees and 208 full-time equivalent employees.

On May 19, 2023, the Company completed the acquisition of Noah Bank, a Pennsylvania chartered state bank headquartered in Elkins Park, Pennsylvania that primarily served the Philadelphia, North New Jersey and New York City markets. On that date the Company acquired 100% of the outstanding common stock, for cash, of Noah Bank and Noah Bank was merged with and into the Bank.

Basis of Financial Statement Presentation

The unaudited consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, the Bank and 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, the valuation of acquired assets and liabilities, and evaluation of the potential impairment of goodwill.

6

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 1 – Summary of Significant Accounting Policies (continued)

Management believes that the allowance for credit losses is adequate as of September 30, 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.

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 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 thousand, a reduction to the allowance for credit losses of $301 thousand and an increase in the reserve for unfunded liabilities of $695 thousand.

Effective January 1, 2023 the Company adopted the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses Troubled Debt Restructurings and Vintage Disclosures,” (“ASU 2022-22”). ASU 2022-22 eliminates the accounting guidance for troubled debt restructurings (“TDR’s”) for entities that have adopted the CECL model. ASU 2022-22 also requires that public business entities disclose current period gross charge-offs by year of origination for financing receivables and net investments in leases. The adoption of ASU 2022-22 did not have a material effect on the Company’s consolidated financial statements.

7

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 – Business Combinations

On May 19, 2023, the Company completed its acquisition of Noan Bank, a Pennsylvania chartered state bank headquartered in Elkins Park, Pennsylvania that primarily served the Philadelphia, North New Jersey and New York City markets. On that date the Company acquired 100% of the outstanding common stock of Noah Bank and Noah Bank was merged with and into the Bank.

In accordance with the terms of the acquisition agreement, the Company paid $6.00 per share of Noah’s common stock outstanding on the closing date.

The acquisition of Noah Bank was accounted for as a business combination using the acquisition method of accounting, and accordingly, the assets acquired, the liabilities assumed, and consideration transferred were recorded at their estimated fair value as of the acquisition. The $9.7 million below was recorded as a “Bargain Purchase” in non-interest income on the Consolidated Statement of Income. This item was not taxable for the recording of income taxes on the Consolidated Statement of Income.

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

	Fair Value
(Dollars in thousands except per share data)
Purchase Price Consideration in Cash for Noah Bank’s Outstanding Shares
Noah Bank number of common shares outstanding		4,235,666
Purchase price per share assigned to cash consideration	$	6.00
Cash consideration	$	25,414
Assets Acquired:
Cash and cash equivalents	$	23,181
Securities available-for-sale		6,454
Loans receivable, net of allowance		185,891
Core deposit intangible		99
Premises and equipment		2,495
Operating leases right-of-use		10,523
Deferred tax assets		4,308
Other assets		6,500
Fair value of assets acquired		239,451
Liabilities Assumed:
Deposits		191,700
Operating lease liability		10,523
Other liabilities assumed		2,118
Fair value of liabilities assumed		204,341
Total identifiable net assets		35,110
Bargain purchase gain	$	(9,696	)

The Company recorded merger-related expenses of $5.6 million, consisting of $2.5 million for termination of a branch lease, $1.7 million related to termination of data processing contract, $287 thousand for legal related expenses, $243 thousand for investment banker services, $184 thousand in severance payments, $115 thousand in professional services provided and $619

8

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 2 – Business Combinations (continued)

thousand in other miscellaneous related expenses. In addition, the Company recorded a $1.7 million provision for the non-purchase credit deteriorated loans in connection with the acquisition.

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

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

Cash and due from banks: The estimated fair values of cash and due from banks approximated their state value.

Investment securities: The acquired portfolio had a fair value of $6.5 million, primarily consisting of mortgage-backed securities and small business administration securities.

Loans: The Company recorded $185.9 million of acquired loans that were recorded at their estimated fair values as of the date of the acquisition. Fair values for loans were based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The probability of default (“PD”), loss given default (“LGD”), exposure of default and prepayment assumptions are the key factors driving credit losses that are embedded in the estimated cash flows. The Company determined that $37.3 million of the acquired loans were purchased credit deteriorated (“PCD”) of which $34.5 million were performing and $2.6 million were non-performing at the time of the acquisition.

Allowance for credit losses: The acquisition resulted in the addition of $2.3 million in the allowance for credit losses, including $537 thousand identified for purchase credit deteriorated loans.

Other assets: The Company acquired $2.5 million of premises and equipment and $10.5 million of operating lease right-of-use assets and recorded the assets at fair value.

Time deposits: Time deposits were valued at the account level based on their remaining maturity dates and comparing the contractual cost of the portfolio to similar instruments. The valuation adjustment of $407 thousand will be accreted to expense over a five-year period.

9

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 - Earnings Per Share

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

The following schedule presents earnings per share data for the three-month periods ended September 30, 2023 and 2022 (in thousands, except per share data):

	Three months ended September 30,
	2023		2022
Net income applicable to common stock	$	7,598	$	6,975
Weighted average number of common shares outstanding		6,295		6,269
Basic earnings per share	$	1.21	$	1.12
Net income applicable to common stock	$	7,598	$	6,975
Weighted average number of common shares outstanding		6,295		6,269
Dilutive effect on common shares outstanding		95		109
Weighted average number of diluted common shares outstanding		6,390		6,378
Diluted earnings per share	$	1.19	$	1.09

The following schedule presents earnings per share data for the nine-month periods ended September 30, 2023 and 2022 (in thousands, except per share data):

	Nine months ended September 30,
	2023		2022
Net income applicable to common stock	$	20,483	$	19,323
Weighted average number of common shares outstanding		6,275		6,345
Basic earnings per share	$	3.26	$	3.05
Net income applicable to common stock	$	20,483	$	19,323
Weighted average number of common shares outstanding		6,275		6,345
Dilutive effect on common shares outstanding		105		130
Weighted average number of diluted common shares outstanding		6,380		6,475
Diluted earnings per share	$	3.21	$	2.98

10

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 3 - Earnings Per Share (continued)

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- and nine-month periods ended September 30, 2023 and 2022:

	Three months ended September 30,
	2023				2022
	Options		Weighted Ave Exercise Price		Options		Weighted Ave Exercise Price
Options to purchase		276,704	$	19.56		278,627	$	18.35
Anti-dilutive		95,750	$	32.45		95,750	$	32.45
	Nine months ended September 30,
	2023				2022
	Options		Weighted Ave Exercise Price		Options		Weighted Ave Exercise Price
Options to purchase		280,732	$	19.49		316,513	$	17.73
Anti-dilutive		95,750	$	32.45		95,750	$	32.45

11

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Investment Securities

The following summarizes the amortized cost and fair value of securities available-for-sale at September 30, 2023 and December 31, 2022 with gross unrealized gains and losses therein:

	September 30, 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)	$	47,917	$	1	$	(7,875	)	$	40,043
U.S. government agency securities		6,260		—		(1,356	)		4,904
Obligations of state and political subdivisions		44,063		—		(6,436	)		37,627
Small business association (SBA) securities		2,817		2		(1	)		2,818
Subordinated debentures		453		—		—			453
Small business investment company securities		2,799		—		(580	)		2,219
Total	$	104,309	$	3	$	(16,248	)	$	88,064
	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

12

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Investment Securities (continued)

The unrealized losses, categorized by the length of time of continuous loss position, and the fair value of related securities available-for-sale at September 30, 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
September 30, 2023	(In thousands)
Mortgage-backed securities—U.S. government sponsored enterprises (GSEs)	$	4,695	$	(180	)	$	30,434	$	(7,695	)	$	35,129	$	(7,875	)
U.S. government agency securities		—		—			4,904		(1,356	)		4,904		(1,356	)
Obligations of state and political subdivisions		7,757		(473	)		28,401		(5,963	)		36,158		(6,436	)
Small business association (SBA) securities		778		(1	)		—		—			778		(1	)
Small business investment company securities		—		—			2,219		(580	)		2,219		(580	)
Total	$	13,230	$	(654	)	$	65,958	$	(15,594	)	$	79,188	$	(16,248	)
	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	)
	$	52,026	$	(5,235	)	$	25,574	$	(6,370	)	$	77,600	$	(11,605	)

The amortized cost and fair value of securities available-for-sale at September 30, 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	$	—	$	—
Due after one year through five years		7,951		7,607
Due after five years through ten years		25,038		21,381
Due after ten years		17,787		13,996
Mortgage-backed securities (GSEs)		47,917		40,043
Small business association (SBA) securities		2,817		2,818
SBIC securities		2,799		2,219
	$	104,309	$	88,064

13

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 4 – Investment Securities (concluded)

Proceeds from calls and maturities of available-for-sale securities amounted to $ 241 thousand for the three-month period ended September 30, 2023, for which there was a $6 thousand loss, and $1.1 million for the nine-month period ended September 30, 2023, for which there was a $6 thousand loss Proceeds from calls and maturities of available-for-sale securities amounted to $3.0 million for the nine-month period ended September 30, 2022, for which there was a $2 thousand gain.

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 September 30, 2023.

The Company’s securities primarily consist of the following types of instruments; U.S. guaranteed mortgage-backed securities, U.S guaranteed agency bonds, state and political subdivision issued bonds, one small business investment company security guaranteed by the U.S. government and a subordinate debenture acquired from Noah Bank. We believe it is reasonable to expect that the securities with a credit guarantee of the U.S. government, will have a zero-credit loss. Therefore, no reserve was recorded for U.S. guaranteed securities or bonds at September 30, 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 September 30, 2023.

At September 30, 2023, the Company’s available-for-sale securities portfolio consisted of approximately 222 securities, of which 157 available-for-sale securities were in an unrealized loss position for more than twelve months and 47 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 96 municipal securities aggregating $28.4 million with a loss of $6.0 million, 57 mortgage-backed securities-GSE aggregating $30.4 million with a loss of $7.7 million and four agency securities aggregating $4.9 million with a loss of $1.4 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 credit loss charges were recorded for the three and nine months ended September 30, 2023 and 2022.

There are no securities pledged as of September 30, 2023 and December 31, 2022.

Note 5 – Loans Receivable

Loans receivable, net at September 30, 2022 and December 31, 2022 were comprised of the following:

	September 30, 2023			December 31, 2022
	(In thousands)
Commercial real estate	$	1,080,288		$	873,573
Commercial and industrial		52,157			28,859
Construction		320,824			417,538
Residential first-lien mortgage		39,682			43,125
Home equity/consumer		7,860			9,729
Total loans		1,500,811			1,372,824
Deferred fees and costs		(2,311	)		(2,456	)
Loans, net	$	1,498,500		$	1,370,368

Except as discussed in Note 2 regarding the Noah Bank acquisition, the Company did not purchase any loans during the three and nine months ended September 30, 2023 and 2022, respectively.

14

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Notes to Note 5 – Loans Receivable (continued)

Upon adoption of CECL the Company 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.

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

	September 30, 2023			December 31, 2022
	(In thousands)
Allowance for credit losses—loans	$	(17,992	)	$	(16,461	)
Allowance for credit losses—off balance sheet		(517	)		(332	)
	$	(18,509	)	$	(16,793	)

The following table presents nonaccrual loans by segment of the loan portfolio as of September 30, 2023 and December 31, 2022:

	September 30, 2023				December 31, 2022
	With a Related Allowance		Without a Related Allowance		With a Related Allowance		Without a Related Allowance
	(In thousands)
Commercial real estate	$	—	$	4,485	$	—	$	—
Commercial and industrial		—		2,159		—		—
Construction		—		—		148		—
Residential first-lien mortgage		—		109		—		118
Total nonaccrual loans	$	—	$	6,753	$	148	$	118

The calculation of the allowance for credit losses does not include any accrued interest receivable. The Company’s policy is to write off any interest not collected after 90 days. During the nine-month period ending September 30, 2023, the Company wrote off $366 thousand in accrued interest receivable for loans. The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loan receivables by the length of time a recorded payment is past due. The following table presents the segments of the loan portfolio, summarized by the past due status as of September 30, 2023:

	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
	(In thousands)
Commercial real estate	$	152	$	1,844	$	4,485	$	7,896	$	1,072,392	$	1,080,288	$	—
Commercial and industrial		34		873		2,159		1,651		50,506		52,157		—
Construction		—		—		—		—		320,824		320,824		—
Residential first-lien mortgage		—		31		109		140		39,542		39,682		—
Home equity/consumer		—		47		—		47		7,813		7,860		—
Total	$	186	$	2,795	$	6,753	$	9,734	$	1,491,077	$	1,500,811	$	—

15

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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

	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 days		Total Past Due		Current		Total Loans Receivable		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		255		—		184		439		9,290		9,729		184
Total	$	1,547	$	6,193	$	450	$	8,190	$	1,364,634	$	1,372,824	$	184

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.

16

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of September 30, 2023.

	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
							(Dollars in thousands)
Commercial real estate
Pass	$	47,531	$	235,341	$	119,682	$	54,153	$	173,138	$	428,018	$	15,164	$	1,073,027
Special mention		—		—		—		—		—		2,776		—		2,776
Substandard		—		—		—		—		—		4,485		—		4,485
Total commercial real estate		47,531		235,341		119,682		54,153		173,138		435,279		15,164		1,080,288
Current-period gross charge-offs		—		—		—		—		—		1,718		—		1,718
Commercial and industrial
Pass		1,749		6,041		1,143		1,987		8,019		23,809		6,564		49,312
Special mention		—		—		—		—		—		686		—		686
Substandard		—		—		—		—		—		2,159		—		2,159
Total commercial and industrial		1,749		6,041		1,143		1,987		8,019		26,654		6,564		52,157
Current-period gross charge-offs		—		—		—		—		—		2		—		2
Construction
Pass		792		4,409		89,500		14,682		5,000		4,414		202,027		320,824
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total construction		792		4,409		89,500		14,682		5,000		4,414		202,027		320,824
Current-period gross charge-offs		—		—		—		—		—		148		—		148
Residential first-lien mortgage
Performing		—		993		5,635		2,863		1,562		28,520		—		39,573
Nonperforming		—		—		—		—		—		109		—		109
Total residential first-lien mortgage		—		993		5,635		2,863		1,562		28,629		—		39,682
Home equity/consumer
Performing		1,045		38		319		4		—		3,548		2,906		7,860
Nonperforming		—		—		—		—		—		—		—		—
Total home equity/consumer		1,045		38		319		4		—		3,548		2,906		7,860
Total loans receivable
Pass		51,117		246,822		216,279		73,689		187,719		488,309		226,661		1,490,596
Special mention		—		—		—		—		—		3,462		—		3,462
Substandard		—		—		—		—		—		6,753		—		6,753
Total loans receivable	$	51,117	$	246,822	$	216,279	$	73,689	$	187,719	$	498,524	$	226,661	$	1,500,811

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		9,729		—		—		—		9,729
Total with no related allowance	$	1,362,973	$	3,392	$	6,459	$	—	$	1,372,824

17

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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

	Commercial real estate		Commercial and industrial			Construction			Residential first-lien mortgage		Home equity/ consumer			Unallocated		Total
									(In thousands)
Allowance for credit losses:
Beginning balance	$	12,123	$	407		$	4,529		$	661	$	250		$	—	$	17,970
Provision1		3,301		(81	)		(3,219	)		160		(161	)		—		—
Charge-offs		—		—			—			—		—			—		—
Recoveries		4		18			—			—		—			—		22
Total	$	15,428	$	344		$	1,310		$	821	$	89		$	—	$	17,992
Ending Balance:
Individually evaluated	$	—	$	—		$	—		$	—	$	—		$	—	$	—
Collectively evaluated		15,428		344			1,310			821		89			—		17,992
	$	15,428	$	344		$	1,310		$	821	$	89		$	—	$	17,992

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

The following table presents the recorded investment in loans receivable at September 30, 2023:

	Commercial real estate		Commercial and industrial		Construction		Residential first-lien mortgage		Home equity/ consumer		Unallocated		Total
							(In thousands)
Loans:
Ending balance:
Individually evaluated	$	4,485	$	2,232	$	2,925	$	111	$	—	$	—	$	9,753
Collectively evaluated		1,075,803		49,925		317,899		39,571		7,860		—		1,491,058
Ending balance	$	1,080,288	$	52,157	$	320,824	$	39,682	$	7,860	$	—	$	1,500,811

The following table presents the allowance for loan losses on loans receivables at and for the three months ended September 30, 2022:

	Commercial real estate			Commercial and industrial		Construction			Residential first-lien mortgage			Home equity/ consumer			Unallocated		Total
									(In thousands)
Allowance for loan losses:
Beginning balance	$	8,683		$	279	$	6,430		$	259		$	50		$	965	$	16,666
Provision		413			11		(304	)		(8	)		(5	)		93		200
Charge-offs		(200	)		—		—			—			—			—		(200	)
Recoveries		—			—		—			—			—			—		—
Total	$	8,896		$	290	$	6,126		$	251		$	45		$	1,058	$	16,666

18

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

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

	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer			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	)
CECL day 1 provision		1,586			105			—			16			—			—			1,707
Purchased credit deteriorated loans		499			102			—			—			—			—			601
Provision1		4,994			(84	)		(3,562	)		143			(151	)		—			1,340
Charge-offs		(1,718	)		—			(148	)		(2	)		—			—			(1,868	)
Recoveries		29			23			—			—			—			—			52
Total	$	15,428		$	344		$	1,310		$	821		$	89		$	—		$	17,992

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

The following table presents the allowance for credit losses on loans receivable at and for the nine months ended September 30, 2022:

	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer			Unallocated		Total
										(In thousands)
Allowance for loan losses:
Beginning balance	$	7,458		$	713		$	7,228		$	267		$	48		$	906	$	16,620
Provision		1,592			(423	)		(1,102	)		(16	)		(3	)		152		200
Charge-offs		(400	)		—			—			—			—			—		(400	)
Recoveries		246			—			—			—			—			—		246
Total	$	8,896		$	290		$	6,126		$	251		$	45		$	1,058	$	16,666

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		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		9,658		—		1,360,447
Ending balance	$	873,573	$	28,859	$	417,538	$	43,125	$	9,729	$	—	$	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

19

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 5 – Loans Receivable (continued)

With the adoption of CECL, 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. There were no loans modified during the nine months ended September 30, 2023.

Note 6 – Deposits

The components of deposits were as follows:

	September 30, 2023					December 31, 2022
			(Dollars in thousands)
Demand, non-interest-bearing checking	$	264,197		16.13	%	$	265,078	19.67	%
Demand, interest-bearing checking		239,902		14.65	%		269,737	20.01	%
Savings		147,113		8.98	%		190,686	14.15	%
Money market		349,505		21.34	%		283,652	21.05	%
Time deposits, $250,000 and over		144,158		8.80	%		83,410	6.19	%
Time deposits, other		493,091		30.10	%		255,167	18.93	%
	$	1,637,966		100.00	%	$	1,347,730	100.00	%

Note 7 – Borrowings

At September 30, 2023, the Company had no overnight borrowings outstanding. At December 31, 2022, the Company had $10.0 million of overnight borrowings outstanding at a rate of 4.61%.

Note 8 – Fair Value Measurements and Disclosures

The Company follows the guidance on fair value measurements now codified as FASB ASC Topic 820, Fair Value Measurement (“Topic 820”). Fair value measurements are not adjusted for transaction costs. Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments, however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in sales transactions on the dates indicated. The estimated fair value amounts have been measured as of their respective period-end and have not been re-evaluated or updated for 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 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: 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.

20

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

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

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 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 September 30, 2023
			(In thousands)
Mortgage-backed securities -U.S. government sponsored enterprise (GSEs)	$	—	$	40,043	$	—	$	40,043
U.S. government agency securities		—		4,904		—		4,904
Obligations of state and political subdivisions		—		37,627		—		37,627
Small Business Association (SBA) securities		—		2,818		—		2,818
Subordinated debentures		—		453		—		453
SBIC securities		—		—		2,219		2,219
Securities available-for-sale at fair value	$	—	$	85,845	$	2,219	$	88,064

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

21

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 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 September 30, 2023
			(In thousands)
Collateral dependent loan	$	—	$	—	$	4,485	$	4,485
	$	—	$	—	$	4,485	$	4,485

The following table presents quantitative information using Level 3 fair value measurements at September 30, 2023.

Description	September 30, 2023		Valuation Technique			Unobservable Input		Range (Weighted Average)
			(Dollars in thousands)
							Discount		0.0	%
Collateral dependent loan	$	4,485		Collateral	1		adjustment		(0.0	%)

1 Value based on third party offer to purchase note from the Bank.

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

22

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

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 nine months ended September 30, 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 and not adjusted by management. Level 2 fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, live trading levels, trade execution date, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

Level 3 securities are securities with no observable market prices. The SBIC fund’s underlying collateral is valued using prices obtained from pricing vendors or brokers, typically using at least two pricing vendors for the subject or similar securities. When vendor pricing is not available, a fair value is composed of quotes for the subject or quotes for similar securities from broker dealers.

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.

23

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

The carrying amounts and estimated fair value of financial instruments at September 30, 2023 are as follows.

	September 30, 2023
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
					(In thousands)
Financial Assets:
Cash and cash equivalents	$	206,931	$	206,931	$	206,931	$	—	$	—
Securities available-for-sale at fair value		88,064		88,064		—		85,845		2,219
Securities held-to-maturity		195		189		—		189		—
Loans receivable, net		1,480,508		1,470,144		—		—		1,470,144
Restricted investments in bank stock		1,385		1,385		—		1,385		—
Accrued interest receivable		5,783		5,783		—		5,783		—
Financial Liabilities:
Deposits	$	1,637,966	$	1,534,774	$	—	$	1,534,774	$	—
Accrued interest payable		10,243		10,243		—		10,243		—

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, deposits and borrowings 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).

24

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 8 – Fair Value Measurements and Disclosures (continued)

Limitations

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

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

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

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

Note 9 – Leases

Leases (Topic 842) establishes a right of use model that requires a lessee to record a right of use asset (“ROU”) and a lease liability for all leases with terms longer than 12 months. The Company is obligated under 26 operating lease agreements for 25 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	September 30, 2023			December 31, 2022
	(In thousands)
Operating Lease Right of Use Asset:
Gross carrying amount		$	16,026		$	17,919
Increased asset from new leases			9,799			—
Accumulated amortization			(1,735	)		(1,893	)
Net book value	Operating lease right-of-use asset	$	24,090		$	16,026
Operating Lease Liability:
Lease liability	Operating lease liability	$	24,941		$	16,772

As of September 30, 2023, the weighted-average remaining lease terms for operating leases was 12.4 years and the weighted-average discount rate used in the measurement of operating lease liabilities was 3.35%. The Company used FHLB fixed rate advances or at the time the lease was placed in service for the term most closely aligning with remaining lease term.

25

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 9 – Leases (continued)

Future minimum payments under operating leases with terms longer than 12 months are as follows at September 30, 2023 (in thousands):

Twelve months ended September 30,
2024	$	3,279
2025		3,110
2026		2,969
2027		2,719
2028		2,503
Thereafter		16,918
Total future operating lease payment		31,498
Amounts representing interest		(6,557	)
Present value of net future lease payments	$	24,941

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Lease cost:
Operating lease	$	1,194	$	622	$	2,789	$	2,027
Short-term lease cost		31		39		96		73
Total lease cost	$	1,225	$	661	$	2,885	$	2,100
Other information:
Cash paid for amounts included in the measurement of lease liabilities	$	898	$	577	$	2,179	$	1,728

Note 10 – 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 a quantitative test would be performed at May 31, 2023, primarily due to the Company’s common stock trading at 68.0% of book value and a reduction in return on assets for the first five months of 2023 compared to the same period of 2022. Based on the results of the quantitative impairment test the Company’s goodwill was not impaired as of May 31, 2023.

26

PRINCETON BANCORP, INC.

Notes to Consolidated Financial Statements (unaudited)

Note 10 – 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
Acquisition of Noah Bank		—		99
Amortization expense		—		(378	)
Balance at September 30, 2023	$	8,853	$	1,546

As of September 30, 2023, the remaining current fiscal year and future fiscal periods amortization for the core deposit intangible is (in thousands):

2023	$	127
2024		432
2025		353
2026		274
2027		195
Thereafter		165
Total	$	1,546

Note 11 – Subsequent Event

On October 25, 2023, the Board of Directors declared a cash dividend of $0.30 per share of common stock to shareholders of record on November 13, 2023, payable on November 30, 2023.

Note 12 – Risk and Uncertainties

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

Government economic programs intended to backstop and bolster the economy through the pandemic, 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.

27

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 factors that could cause future results to differ materially from those anticipated by our forward-looking statements include the ongoing impact of higher inflation levels, higher interest rates and general economic and recessionary concerns, all of which could impact economic growth and could cause a reduction in financial transactions and business activities, including decreased deposits and reduced loan originations, our ability to manage liquidity in a rapidly changing and unpredictable market, supply chain disruptions, labor shortages, additional interest rate increases by the Federal Reserve and the economic and market impacts of the military conflicts in Ukraine and the Middle East. 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 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 acquisition of Noah; 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; the ability to recruit and retain qualified employees and implement adequate succession planning to mitigate the loss of key members of our senior management team; those risks under the heading “Risk Factors” set forth in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A of our quarterly report on Form 10-Q for the quarter-ended March 31, 2023, and the success of the Company at managing the risks involved in the foregoing.

The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company, except as required by applicable law or regulation.

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

Executive Overview

Princeton Bancorp, Inc. is the holding company for The Bank of Princeton, a community bank founded in 2007. The Bank is a New Jersey state-chartered commercial bank with 22 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Fort Lee, Hamilton, Kingston, Lakewood, Lambertville, Lawrenceville, Monroe, New Brunswick, Palisades Park, Pennington, Piscataway, Princeton Junction, Quakerbridge and Sicklerville. There are also five branches in the Philadelphia, Pennsylvania area and two in the New York City metropolitan area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation (“FDIC”).

28

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 and the changes related to the acquisition of Noah Bank as noted in Note 2 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 Russia’s war with Ukraine. However, the unemployment rate in New Jersey is below the national average.

Comparison of Financial Condition at September 30, 2023 and December 31, 2022

General

Total assets were $1.91 billion at September 30, 2023, an increase of $311.3 million, or 19.4% when compared to $1.60 billion at the end of 2022. The primary reason for the increase in total assets was the acquisition of Noah Bank on May 19, 2023, which had approximately $239.4 million in assets at closing. When looking at specific components of the balance sheet, including acquired assets, the Company recorded an increase in net loans of $128.1 million, an increase in cash and cash equivalents of approximately $153.6 million, an increase in its right of use asset of $8.1 million, an increase of $6.3 million in deferred tax assets and an increase in other assets of $1.5 million. The increase in the Company’s net loans consisted of a $206.7 million increase in commercial real estate loans and a $23.3 million increase in commercial and industrial loans, partially offset by a decrease of $96.7 million in construction loans.

Cash and cash equivalents

Cash and cash equivalents increased $153.6 million, or 287.9%, to $206.9 million at September 30, 2023 compared to December 31, 2022. This increase was primarily due to loan payoffs during the period, which caused a reduction in total loans of $57.8 million (not including the loans acquired in connection with the Noah transaction), and an increase in outstanding deposits of approximately $98.5 (not including the deposits assumed from the Noah acquisition).

Investment securities

Total available-for-sale investment securities increased slightly to $88.1 million at September 30, 2023 compared to $83.4 million at December 31, 2022. This increase was primarily the result of approximately $6.5 million added to the available-for-sale securities portfolio due to the Noah acquisition.

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Loans

Loans, net of deferred loan fees and costs, increased $128.1 million, or 9.4%, to $1.50 billion at September 30, 2023 compared to $1.37 billion at December 31, 2022. This increase was primarily due to the $186.0 million of loans acquired from Noah Bank, partially offset by payoffs and principal repayments. Including the loans acquired, the following changes occurred within individual loan segments: commercial real estate loans increased by $206.7 million, commercial and industrial loans increased by $23.3 million, and construction loans decreased by $96.7 million.

Net recoveries for the third quarter of 2023 were $22 thousand and net charge-offs for the nine months ended September 30, 2023 were $1.8 million. For the three-month and nine-month periods ended September 30, 2022, the Bank recorded net charge-offs of $200 thousand and $154 thousand. With the adoption of CECL, the Bank 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 third quarter and the first nine months of 2023, the Bank reduced the reserve for unfunded liabilities by $183 thousand and $510 thousand, respectively. The coverage ratio of the allowance for credit losses to period end loans was 1.20% at both September 30, 2023 and December 31, 2022.

At September 30, 2023, non-performing assets totaled $6.8 million, an increase of $6.5 million, when compared to the amount at December 31, 2022. This increase was due to the delinquency of a $4.5 million commercial real estate loan, in addition to $2.5 million of non-performing loans acquired from Noah Bank.

With the adoption of CECL, 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. There were no loan modifications during the nine months ended September 30, 2023.

Deferred Taxes

Deferred taxes increased $6.3 million at September 30, 2023 compared to December 31, 2022. The increase was primarily due to purchase accounting entries and net operating loss carryforwards related to the Noah acquisition.

Deposits

Total deposits at September 30, 2023 increased $290.2 million, or 21.5%, when compared to December 31, 2022. The primary reasons for the increase in total deposits were the $191.7 million in deposits acquired from Noah Bank and a $98.5 million increase from existing operations. When comparing deposit products between the two periods, certificates of deposit increased $298.7 million and money market deposits increased $65.9 million. Partially offsetting these increases were decreases in savings deposits of $43.6 million and interest-bearing demand deposits of $29.8 million for the nine months ended September 30, 2023.

At September 30, 2023, the Company had approximately $533.1 million in uninsured deposits, consisting of $74.4 million in non-interest-bearing demand deposits, $171.4 million in interest-bearing demand deposits, $102.9 million in money market accounts, $20.0 million in savings deposits and $164.4 million in certificates of deposits.

Borrowings

The Company had no outstanding borrowings at September 30, 2023 compared to $10.0 million at December 31, 2022.

Stockholders’ equity

Total stockholders’ equity at September 30, 2023 increased $12.6 million or 5.7% when compared to the end of 2022. The increase was primarily due to the $14.5 million increase in retained earnings, consisting of $20.5 million in net income partially offset by $5.7 million of cash dividends recorded during the period. The ratio of equity to total assets at September 30, 2023 and at December 31, 2022, was 12.1% and 13.7%, respectively. The current period ratio decrease was primarily due to the Noah Bank acquisition.

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Liquidity

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

As a member of the FHLB we are eligible to borrow funds in an aggregate amount of up to 50% of the Company’s total assets, subject to its collateral requirements. Based on available eligible securities and qualified real estate loan collateral, and a $60.0 million line of credit with the FHLB supporting municipal deposits, the Company had the ability to borrow $183.4 million as of September 30, 2023.

The bank failures that occurred in early 2023 caused significant disruption in the United States banking industry. The closures of these banks triggered a surge in deposit outflows and stock price volatility at many banks. In response to these bank failures, the Federal Reserve announced the Bank Term Funding Program, which offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral valued at par. Under this program, the Bank has access to $101.5 million in borrowing capacity.

The Company is also a shareholder of Atlantic Community Bancshares, Inc., the parent company of Atlantic Community Bankers Bank (“ACBB”). As of September 30, 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 September 30, 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 September 30, 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 September 30, 2023, that the Bank meets all capital adequacy requirements to which it is subject and is “well capitalized” under applicable regulations.

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The Bank’s actual capital amounts and ratios and the regulatory requirements at September 30, 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 thousands)
September 30, 2023:
Total capital (to risk-weighted assets)	$	250,865		14.959	%	$	176,081		10.500	%	$	167,696		10.000	%
Tier 1 capital (to risk-weighted assets)	$	232,873		13.887	%	$	142,542		8.500	%	$	134,157		8.000	%
Common equity tier 1 capital (to-risk weighted assets	$	232,873		13.887	%	$	117,387		7.000	%	$	109,003		6.500	%
Tier 1 leverage capital (to average assets)	$	232,873		12.380	%	$	122,268		6.500	%	$	94,052		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 September 30, 2023 and 2022

General

The Company reported net income of $7.6 million, or $1.19 per diluted common share, for the third quarter of 2023, compared to net income of $7.0 million, or $1.09 per diluted common share, for the third quarter of 2022. The increase in net income for the third quarter of 2023 compared to the same period in 2022 was primarily due to an increase of $700 thousand in non-interest income, a $600 thousand decrease in income tax expense and a $400 thousand reduction in its provision for credit losses, partially offset by a $1.0 million decrease in net interest income.

Interest income

Interest income increased $7.9 million for the three months ended September 30, 2023 compared to the same period in 2022. Interest income on loans increased $5.2 million due to increases in both the average balance of loans of $78.2 million and the yield of 112 basis points. Other interest and dividend income increased $2.6 million due to an increase in average balance of $173.5 million and an increase in the yield of 298 basis points. Interest on taxable available-for-sale securities increased $116 thousand due to a 100-basis-point increase in yield and a $318 thousand increase in the average balance of taxable available-for-sale securities.

Interest expense

Interest expense on deposits increased $8.9 million to $10.3 million for the three-month period ended September 30, 2023, due to increases in both the rate paid on interest-bearing deposits of 251 basis points and in the average balance of interest-bearing deposits of $260.9 million over the same prior year period.

Interest expense on borrowings was not significant during the three-month periods ended September 30, 2023 and 2022.

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Provision for credit losses

The Company reduced its allowance for credit losses by $182 thousand during the three months ended September 30, 2023 and increased its allowance for credit losses by $200 thousand during the three months ended September 30, 2022. The credit recorded in the current quarter was the result of a reduction in the reserve for unfunded liabilities in the amount of $182 thousand. The provision for credit losses on loans was zero. Net recoveries during the three-month period ended September 30, 2023 were $22 thousand. Net charge-offs of $200 thousand were recorded during the three-month period ended September 30, 2022.

Non-interest income

Total non-interest income of $2.4 million for the third quarter of 2023 increased $696 thousand, when compared to the quarter ended September 30, 2022. The increase over the third quarter of 2022 was due to an increase in loan fees of $334 thousand and the gain on sale of other real estate owned of $203 thousand during the third quarter of 2023.

Non-interest expense

Total non-interest expense for the third quarter of 2023 was almost the same as the third quarter of 2022. During the third quarter of 2023, $1.4 million of merger costs associated with the Noah acquisition that were expensed in the second quarter were reversed. The amounts reversed were primarily the result of a lease termination cost that was lower than the original estimate based on a negotiated settlement of the remaining lease on a Noah branch office and a legal reserve of $150 thousand. The expenses reversed in 2023 were offset by increases in salaries and employee benefits and occupancy and equipment expenses of $735 thousand and $603 thousand, respectively, over the prior-year period associated with the Noah acquisition.

Provision for income taxes

For the three-month period ended September 30, 2023, the Company recorded an income tax expense of $1.5 million, resulting in an effective tax rate of 16.6%, compared to an income tax expense of $2.1 million resulting in an effective tax rate of 23.2% for the three-month period ended September 30, 2022. The effective tax rate for the current period was reduced as a result of the year-to-date impact of the non-taxable bargain purchase gain related to the Noah acquisition.

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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 have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.

	Three Months Ended September 30,
	2023							2022
	Average Balance		Interest		Average Yield/Rate			Average Balance		Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,464,798	$	23,503		6.37	%	$	1,386,589	$	18,336		5.25	%
Securities
Taxable available-for-sale		46,599		357		3.06	%		46,281		241		2.06	%
Tax-exempt available-for-sale		40,118		285		2.84	%		42,220		286		2.68	%
Held-to-maturity		196		3		5.28	%		204		2		3.92	%
Federal funds sold		199,350		2,702		5.38	%		35,081		183		2.28	%
Other interest-earning assets		10,506		150		5.67	%		1,322		43		5.85	%
Total interest-earning assets		1,761,567	$	27,000		6.08	%		1,511,697	$	19,091		5.01	%
Other non-earnings assets		127,682							115,159
Total assets	$	1,889,249						$	1,626,856
Interest-bearing liabilities
Demand	$	243,359	$	1,031		1.68	%	$	240,948	$	174		0.29	%
Savings		149,215		788		2.10	%		217,133		173		0.32	%
Money market		337,491		2,979		3.50	%		350,901		376		0.43	%
Certificates of deposit		629,082		5,518		3.48	%		289,274		669		0.92	%
Total deposits		1,359,147		10,316		3.01	%		1,098,256		1,392		0.50	%
Borrowings		—		—		N/A			391		3		2.65	%
Total interest-bearing liabilities		1,359,147	$	10,316		3.01	%		1,098,647	$	1,395		0.51	%
Non-interest-bearing deposits		255,775							285,665
Total cost of funds		1,614,922				2.53	%		1,384,312				0.40	%
Other liabilities		45,923							28,136
Total liabilities		1,660,845							1,412,448
Stockholders’ equity		228,404							214,408
Total liabilities and stockholder’s equity	$	1,889,249						$	1,626,856
Net interest-earnings assets	$	402,420						$	413,050
Net interest income; interest rate spread			$	16,684		3.07	%			$	17,696		4.50	%
Net interest margin						3.76	%						4.64	%
Net interest margin FTE 1						3.81	%						4.71	%

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

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Rate/Volume Analysis

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

	Three Months Ended September 30, 2023 vs 2022 Increase (Decrease) Due to
	Rate			Volume			Net
	(In thousands)
Interest and dividend income:
Loans receivable, including fees	$	998		$	4,169		$	5,167
Securities available-for-sale
Taxable		82			34			116
Tax-exempt		32			(33	)		(1	)
Securities held-to-maturity		1			—			1
Federal funds sold		511			2,008			2,519
Other interest and dividend income		(2	)		109			107
Total interest and dividend income	$	1,622		$	6,287		$	7,909
Interest expense
Demand	$	828		$	29		$	857
Savings		1,487			(872	)		615
Money markets		2,834			(231	)		2,603
Certificates of deposit		634			4,215			4,849
Borrowings		—			(3	)		(3	)
Total interest expense	$	5,783		$	3,138		$	8,921
Change in net interest income	$	(4,161	)	$	3,149		$	(1,012	)

Comparison of Operating Results for the Nine Months Ended September 30, 2023 and 2022

General

For the nine-month period ended September 30, 2023, the Company recorded net income of $20.5 million, or $3.21 per diluted common share, compared to $19.3 million, or $2.98 per diluted common share for the same period in 2022. The increase was primarily due to an increase of $11.5 million in non-interest income and a $1.8 million decrease in income tax expense, partially offset by an $8.9 million increase in non-interest expense, and a $2.3 million increase in its provision for credit losses.

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Interest income

Interest income increased $17.0 million for the nine months ended September 30, 2023 compared to the same period in 2022. Interest income on loans increased $13.3 million due to increases in both the average balance and yield earned on loans of $49.5 million and 107 basis points, respectively. Other interest and dividend income increased $3.5 million due to an increase in the average balance of $21.0 million and an increase in the yield of 455 basis points. Interest on taxable available-for-sale securities increased $229 thousand due to an 82-basis-point increase in yield, partially offset by a $3.1 million decrease in the average balance of taxable available-for-sale securities.

Interest expense

Interest expense on deposits increased $17.7 million to $21.5 million for the nine-month period ended September 30, 2023, due primarily to a 195-basis-point increase in the rate on interest-bearing deposits, and an increase in the average balance of interest-bearing deposits of $71.0 million over the same prior-year period.

Interest expense on borrowings was not significant during the nine-month periods ended September 30, 2023 and 2022.

Provision for credit losses

The Company recorded a $2.5 million provision for credit losses for the nine-month period ended September 30, 2023 and a $200 thousand provision for loan losses for the nine-month period ended September 30, 2022. The $2.5 million provision for the nine months ended September 30, 2023 consists of a $2.9 million provision associated with the Company’s loan portfolio, offset by a credit to the provision of $501 thousand associated with unfunded commitments. The provision for credit losses on loans includes $1.7 million related to non-purchased credit deteriorated loans acquired in the Noah Bank acquisition and was also a result of loan charge-offs of $1.8 million recorded during the period. See Note 1 to the consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a discussion of the CECL methodology. See the section titled “Item 1. Business – Lending Activities —Analysis of 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 prior to our adoption of CECL on January 1, 2023, including additional information regarding the determination of the provision for loan losses.

Non-interest income

For the nine-month period ended September 30, 2023, non-interest income increased $11.5 million or 296.9%, from the same nine-month period in 2022, primarily due to the $9.7 million bargain purchase gain from the Noah acquisition and an increase of $1.3 million in loan fees over the same period in 2022.

Non-interest expense

For the nine-month period ended September 30, 2023, non-interest expense was $37.7 million, compared to $28.8 million for the same period in 2022. This increase was primarily due to merger-related expenses of $5.6 million, increases in salaries and employee benefits of $2.1 million, occupancy and equipment expenses of $742 thousand and data processing and communications of $726 thousand all primarily associated with the Noah Bank acquisition and general increases.

Provision for income taxes

For the nine-month period ended September 30, 2023, the Bank recorded an income tax expense of $3.6 million, resulting in an effective tax rate of 14.9%, compared to an income tax expense of $5.4 million resulting in an effective tax rate of 21.7% for the nine-month period ended September 30, 2022. The effective tax rate was substantially reduced as a result of the non-taxable bargain purchase gain related to the Noah acquisition.

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

The following table shows for the nine-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 have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.

	Nine Months Ended September 30,
	2023							2022
	Average Balance		Interest		Average Yield/Rate			Average Balance		Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans receivable	$	1,424,768	$	64,914		6.09	%	$	1,375,233	$	51,596		5.02	%
Securities
Taxable available-for-sale		44,517		927		2.78	%		47,626		698		1.96	%
Tax exempt available-for-sale		40,974		853		2.78	%		44,832		882		2.63	%
Held-to-maturity		198		8		5.28	%		205		8		5.29	%
Federal funds sold		91,761		3,639		5.30	%		76,559		361		0.68	%
Other interest earning-assets		7,086		285		5.36	%		1,328		80		4.96	%
Total interest-earning assets		1,609,304		70,626		5.87	%		1,545,783		53,625		4.64	%
Other non-earnings assets		114,545							112,573
Total assets	$	1,723,849						$	1,658,356
Interest-bearing liabilities
Demand	$	250,100	$	2,417		1.29	%	$	257,284	$	508		0.26	%
Savings		163,516		1,888		1.54	%		226,532		447		0.26	%
Money markets		297,360		6,251		2.81	%		374,571		887		0.34	%
Certificates of deposit		504,237		10,946		2.90	%		285,855		1,943		0.91	%
Total deposit		1,215,213		21,502		2.37	%		1,144,242		3,785		0.42	%
Borrowings		3,133		118		5.01	%		132		3		2.65	%
Total interest-bearing liabilities		1,218,346		21,620		2.37	%		1,144,374		3,788		0.45	%
Non-interest-bearing deposits		244,718							280,761
Total cost of funds		1,463,064				1.97	%		1,425,135				0.36	%
Other liabilities		34,312							18,680
Total liabilities		1,497,376							1,443,815
Stockholders’ equity		226,471							214,541
Total liabilities and stockholder’s equity	$	1,723,847						$	1,658,356
Net interest-earnings assets	$	390,958						$	401,409
Net interest income; interest rate spread			$	49,006		3.50	%			$	49,837		4.19	%
Net interest margin						4.07	%						4.31	%
Net interest margin FTE 1						4.13	%						4.37	%

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

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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.

	Nine Months Ended September 30, 2023 vs . 2022 Increase (Decrease) Due to
	Rate		Volume			Net
	(In thousands)
Interest and dividend income:
Loans receivable, including fees	$	10,214	$	3,104		$	13,318
Securities available-for-sale
Taxable		306		(77	)		229
Tax-exempt		64		(93	)		(29	)
Securities held-to-maturity		—		—			—
Federal funds sold		3,167		111			3,278
Other interest and dividend income		6		199			205
Total interest and dividend income	$	13,757	$	3,244		$	17,001
Interest expense:
Demand	$	1,983	$	(74	)	$	1,909
Savings		2,091		(650	)		1,441
Money market		6,406		(1,042	)		5,364
Certificates of deposit		1,119		7,884			9,003
Borrowings		—		115			115
Total interest expense	$	11,599	$	6,233		$	17,832
Change in net interest income	$	2,158	$	(2,989	)	$	(831	)

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

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regular basis and is responsible for reviewing our asset/liability policies and interest rate risk position. Both the extent and direction of shifts in interest rates are uncertainties that could have a negative impact on future earnings.

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

The table on the next page sets forth the amounts of our interest-earning assets and interest-bearing liabilities outstanding at September 30, 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 September 30, 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.

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(Dollars in thousands)	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
Interest-earning assets: (1)
Investment securities	$	9,734		$	3,156		$	8,266		$	9,660		$	73,386		$	(15,943	)	$	88,259
Loans receivable		426,183			280,830			360,138			363,637			67,712			(17,992	)		1,480,508
Other interest-earnings assets (2)		192,132			—			—			—			—			14,799			206,931
Other non-interest assets		—			—			—			—			—			137,425			137,425
Total interest-earning assets	$	628,049		$	283,986		$	368,404		$	373,297		$	141,098		$	(19,136	)	$	1,913,123
Interest-bearing liabilities:
Checking and savings accounts	$	10,018		$	376,997		$	—		$	—		$	—		$	—		$	387,015
Money market accounts		18,992			330,513			—			—			—			—			349,505
Certificate accounts		123,285			414,322			96,635			2,994			13			—			637,249
Borrowings		—			—			—			—			—			—			—
Total interest-bearing liabilities	$	152,295		$	1,121,832		$	96,635		$	2,994		$	13		$	—		$	1,373,769
Interest-earning assets less interest-bearing liabilities	$	475,754		$	(837,846	)	$	271,769		$	370,303		$	141,085		$	(19,136	)	$	539,354
Cumulative interest-rate sensitivity gap (3)	$	475,754		$	(362,092	)	$	(90,323	)	$	279,980		$	421,065
Cumulative interest-rate gap as a percentage of total assets at September 30, 2023		24.87	%		-18.93	%		-4.72	%		14.63	%		22.01	%
Cumulative interest-earning assets as a percentage of cumulative interest-bearing liabilities at September 30, 2023		412.39	%		71.58	%		93.41	%		120.38	%		130.65	%

(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.

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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 September 30, 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
	Amonts		$Change			% Change			NPV Ratio			Change
	(Dollars in thousands)
300	$	302,867	$	(20,618	)		-6.37	%		-6.20	%		-5.61	%
200	$	316,146	$	(7,339	)		-2.27	%		-4.20	%		-3.61	%
100	$	324,202	$	717			0.22	%		-2.26	%		-1.67	%
Static	$	323,485	$	—						-0.59	%
(100)	$	326,123	$	2,638			0.82	%		0.82	%		1.41	%
(200)	$	323,998	$	513			0.16	%		1.95	%		2.54	%
(300)	$	307,890	$	(15,595	)		-4.82	%		3.05	%		3.64	%

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 September 30, 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 September 30, 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.

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Changes in Internal Control Over Financial Reporting

Due to implementation of CECL, the Bank has made updates to its internal control over financial reporting. Controls around the allowance for loan losses were replaced with CECL controls, including processes and control owners. With the exception of these changes, there was no change in the Company’s internal control over financial reporting identified during the quarter ended September 30, 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

There have been no material changes to the risk factors set forth under the Part I, Item 1.A. Risk Factors as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as amended by the risk factors set forth under the Part II, Item 1.A. Risk Factor set forth in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

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

During the fiscal quarter ended September 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement”.

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Item 6. Exhibits

Exhibit Number	Description
31.1	Rule 13a-14(a) Certification on the Principal Executive Officer
31.2	Rule 13a-14(a) Certification on the Principal Financial Officer
32	Section 1350 Certifications
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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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: November 13, 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)

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