Organic
Innovation
Annual Report 2014
At The Bank of Princeton...
We listen to you -
we appreciate your business, and we’re committed to
being a true resource for our community.
We understand -
and we show it by providing you with the highest level of
friendly, helpful, and personalized banking services.
We get it -
we know you want to be treated with respect,
and we thank you, genuinely, for entrusting us
with your banking.
Most important, we believe that our own success is
achieved only when yours is, when we deliver our unique
banking experience to you… and everyone we meet.
For you, in that way,
We make a difference.
$955
MM
The Bank of Princeton
Annual Report 2014
Table of Contents
Letter to the Shareholders ................................................................................ i
2014 Form 10-K ..................................................................................................
1
Who We Are ......................................................................................................
92
At The Bank of Princeton...
We listen to you -
we appreciate your business, and we’re committed to
being a true resource for our community.
We understand -
and we show it by providing you with the highest level of
friendly, helpful, and personalized banking services.
We get it -
we know you want to be treated with respect,
and we thank you, genuinely, for entrusting us
with your banking.
Most important, we believe that our own success is
achieved only when yours is, when we deliver our unique
banking experience to you… and everyone we meet.
For you, in that way,
We make a difference.
$955
MM
Letter to Shareholders
Dear Fellow Shareholders,
The Bank of Princeton (the “Bank”) earned $9 million in 2014, an increase of 2% from 2013. We were able to build on
our strong results from 2013 and continued to grow loans, deposits and net income in 2014. Book value per share was
$17.13 at December 31, 2014, an increase of $3.10 per share, or 22%, from December 31, 2013.
Total assets at year-end 2014 were $955 million, an increase of 9% from $877 million at year-end 2013. The resulting
increase in assets was driven by growing organically through the Bank’s existing branch network. Gross loans were $733
million at year-end 2014, an increase of $99 million, or 16% from year-end 2013. Deposit balances at year-end 2014 were
$848 million, an increase of $99 million, or 13%, compared to year-end 2013 deposit balances of $749 million.
The growth in our net income was a direct result of our ability to grow our balance sheet by leveraging our existing
network. Despite increased competition as the economy continued to recover, we were able to maintain our net interest
margin at 3.80% in 2014 compared to 3.75% in 2013. Our cost of funds, a component of net interest margin, decreased
to 0.86% in 2014, down 0.07% from 2013. The Bank remains focused on maintaining high-quality assets as evidenced
by our non-performing assets to total assets ratio, which was 1.12% at year end. The collective result of all the aforemen-
tioned numbers was the continued strength of the Bank’s return on equity at 12.53% for 2014. We remain committed to
improving our financial performance while remaining focused on high-quality asset growth in 2015 so that we may con-
tinue to increase value to our shareholders. We are especially delighted to report some of the Bank’s major achievements
in 2014. They include:
• Our Lending team, consisting of 13 individuals, successfully closed $250 million in Commercial Loans.
Collectively their efforts grew the loan portfolio $99 million to $733 million at year end.
• A campaign highlighting Business and Personal Checking products featured No Monthly Service Charges was
our focus at both The Bank of Princeton and MoreBank.
• A “Go Green” partnership with our customers was a huge success. A large portion of our customer base began
to receive e-statements reducing mailings and paper. In addition, the Bank rolled out environmentally friendly
options such as tablet and smartphone apps.
• Digital marketing efforts provided a platform of introduction to the Bank, and included useful product and pro-
motional information.
• Committed to our philanthropic spirit, our staff participated in supporting 250 plus local non-profit organizations
by accepting monetary donations and hosting collection drives of food, clothing, and school supplies at each of
our locations.
The strength of our balance sheet, coupled with our disciplined growth, was illustrated in the Bank’s record performance
for 2014. The Bank of Princeton continues to show an accelerated progression compared to banks in our peer group.
“Our focus” rests on establishing, enriching and retaining customer relationships as we meet the needs of the communities
we serve. “Our passion” for supporting non-profit and charitable organizations endures. “Our success” as an institution
is a result of the hard work and persistence of the Bank’s employees coupled with the partnerships developed throughout
our footprint. We are appreciative and motivated by the support of our customers, shareholders, and community partners.
The Directors, Management and Staff would like to Thank You, genuinely, for your efforts and for joining with us as we
continue to listen, understand and… together… make a difference
Edward J. Dietzler, President
Andrew M. Chon, Chairman
i
The Bank of Princeton
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal
Year Ended December 31, 2014
- OR -
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[ ]
For the transition period from ________________________________ to _______________________________
FDIC Certificate Number: 58513
THE BANK OF PRINCETON
(Exact name of Registrant as specified in its Charter)
New Jersey
(State or other Jurisdiction of
Incorporation or Organization)
183 Bayard Lane, Princeton, NJ
(Address of Principal Executive Offices)
68-0645074
(I.R.S. Employer
Identification No.)
08540
(Zip Code)
Registrant’s telephone number, including area code: (609) 921-1700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $5.00 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] YES [ X ] NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] YES [ X ] NO
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. [ X ] YES [ ] NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that
the registrant was required to submit and post such files). [ ] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange
Act (Check one):
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] YES [ X ] NO
As of March 17, 2015 there were 4,582,599 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Bank’s definitive proxy statement to be filed with the Federal Deposit Insurance Corporation in connection with its 2015
Annual Meeting of Stockholders to be held April 29, 2015 is incorporated by reference into Part III of this annual report on Form 10-K.
The Bank of Princeton
TABLE OF CONTENTS
PART I
Item 1 Business
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Mine Safety Disclosures
PART II
Item 5 Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Item 6 Selected Financial Data
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures about Market Risk
Item 8 Financial Statements and Supplementary Data
Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A Controls and Procedures
Item 9B Other Information
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14 Principal Accounting Fees and Services
PART IV
Item 15 Exhibits, Financial Statement Schedules
Signatures
2
PAGE
3
12
12
12
14
14
14
15
15
31
31
73
73
73
73
74
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74
74
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76
The Bank of Princeton
Cautionary Note Regarding Forward-Looking Statements
The Bank of Princeton (the “Bank”) may from time to time make written or oral “forward-looking statements,”
including statements contained in the Bank’s filings with the Federal Deposit Insurance Corporation (the “FDIC”) (including
this Annual Report on Form 10-K and the exhibits thereto), in its reports to stockholders and in other communications by the
Bank, which are made in good faith by the Bank pursuant to the “safe harbor” provisions of Section 21E of the Securities
Exchange Act of 1934, as amended (referred to as the “Exchange Act”).
These forward-looking statements involve risks and uncertainties, such as statements of the Bank’s plans, objectives,
expectations, estimates and intentions that are subject to change based on various important factors (some of which are
beyond the Bank’s control). The following factors, among others, could cause the Bank’s financial performance to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:
the strength of the United States economy in general and the strength of the local economies in which the Bank conducts
operations; the effects of, and changes in 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 our products and services as perceived by actual and prospective customers, including the features, pricing and
quality compared to competitors’ products and services; our borrowers’ ability to repay their loans; changes in the real estate
market that can affect real estate that serves as collateral for some of our loans; the adequacy of our allowance for loan losses
and our methodology for determining such allowance; the willingness of customers to substitute competitors’ products and
services for the Bank’s products and services; the impact of changes in applicable laws and regulations; changes in
technology or interruptions and breaches in security of our information systems; acquisitions; changes in consumer spending
and saving habits; and the success of the Bank at managing the risks involved in the foregoing.
The Bank cautions that the foregoing list of important factors is not exclusive. The Bank does not undertake to
update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the
Bank, except as required by applicable law or regulation.
Throughout this document, references to “we,” “us,” or “our” refer to the Bank and its consolidated subsidiaries.
PART I
Item 1. Business
General
The Bank of Princeton was incorporated on March 5, 2007 under the laws of the State of New Jersey as a New
Jersey state-chartered bank. We received a certificate of authority from the New Jersey Department of Banking and
Insurance on April 17, 2007, and commenced operations on April 23, 2007. We are a full service bank providing personal
and business lending and deposit services. As a state-chartered bank, we are regulated by the New Jersey Department of
Banking and Insurance and the FDIC. Our market area, which we serve through our twelve branches, is generally an area
within an approximate 50 mile radius of Princeton, NJ, including parts of Mercer, Somerset, Hunterdon, Monmouth and
Middlesex Counties in central New Jersey, and additional areas in portions of Philadelphia, Montgomery and Bucks Counties
in Pennsylvania.
Since we commenced operations, we have grown through both de novo branching and acquisitions. In May 2010,
we acquired our Montgomery Township branch from The Provident Bank and, in September 2010, we acquired three
Pennsylvania branches through a merger with MoreBank. We continue to operate two of the former MoreBank branches as a
division of The Bank of Princeton under the “MoreBank” name and in the fourth quarter of 2012 we opened one additional
MoreBank branch in Philadelphia, Pennsylvania.
Our headquarters and one of our branches are located at 183 Bayard Lane, Princeton, New Jersey 08540. Our
telephone number is (609) 921-1700 and our website address is www.thebankofprinceton.com.
3
The Bank of Princeton
Competition
We have substantial competition in originating commercial and consumer loans in our market area. This
competition comes principally from other banks, savings institutions, mortgage banking companies and other lenders. Many
of our competitors enjoy advantages over us, including greater financial resources and higher lending limits, a wider
geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable
pricing alternatives, as well as lower origination and operating costs. Among other things, this competition could reduce our
interest income and net income by decreasing the number and size of loans that we originate and the interest rates we may
charge on these loans.
In attracting business and consumer deposits, we face substantial competition from other insured depository
institutions such as banks, savings institutions and credit unions, as well as institutions offering uninsured investment
alternatives, including money market funds. Many of our competitors enjoy advantages over us, including greater financial
resources, more aggressive marketing campaigns, better brand recognition and more branch locations. These competitors
may offer higher interest rates on deposits, which could decrease the deposits that we attract, or require us to increase the
rates we pay to retain existing deposits or attract new deposits. Deposit competition could adversely affect our net interest
income and net income, and our ability to generate the funds we require for our lending or other operations. As a result, we
may need to seek other sources of funds that may be more expensive to obtain and could increase our cost of funds.
Lending Activities
Our loan portfolio consists of variable-rate and fixed-rate loans with a significant concentration in commercial real
estate lending. While most loans and other credit facilities are appropriately collateralized, major emphasis is placed upon
the financial condition of the borrower and the borrower’s cash flow versus debt service requirements.
Loan growth is driven by customer demand, which in turn is influenced by individual and business indebtedness and
consumer demand for goods. Loaning money will always entail some risk. Without loaning money, however, a bank cannot
generate enough net interest income to be profitable. The risk involved in each loan must be carefully evaluated before the
loan is made. The interest rate at which the loan is made should always reflect the risk factors involved, including the term of
the loan, the value of collateral, if any, the reliability of the projected source of repayment, and the amount of the loan
requested. Credit quality and repayment capacity are generally the most important factors in evaluating loan applications.
Loan Portfolio Composition. The following table presents our loan portfolio by segment at December 31, 2014,
2013, 2012, 2011 and 2010:
(in thousands)
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total loans
$
2014
450,250
127,469
78,822
45,383
30,711
2,654
735,289
$
2013
372,273
118,274
76,477
40,242
28,204
132
635,602
As of December 31,
2012
2011
$
317,946
103,627
62,702
29,127
25,617
1,480
540,499
$
233,504
85,527
56,453
15,396
19,341
1,957
412,178
$
2010
166,472
60,768
25,970
11,870
19,285
1,441
285,806
-
Deferred fees and costs
Allowance for loan losses
Loans, net
(2,150)
(10,008)
723,131
$
(1,769)
(8,493)
625,340
$
(1,351)
(7,033)
532,115
(955)
(5,362)
405,861
(540)
(3,693)
281,573
$
$
$
Substantially all of our loans are to borrowers in our immediate markets. We believe that no single borrower or
group of borrowers presents a credit concentration whereby the borrowers’ loan default would have a material adverse effect
on our financial condition or results of operations.
4
The Bank of Princeton
Commercial Real Estate, Commercial and Industrial, and Construction Loans. We originate various types of
commercial loans, including construction loans, secured by collateral such as real estate, business assets and personal
guarantees. The loans are solicited on a direct basis and through various professionals with whom we maintain contacts and
by referral from our directors, stockholders and customers.
Construction lending represents a segment of our loan portfolio, and is driven primarily by market conditions. Local
builders of one-to-four family homes have been the primary source of these types of loans.
Residential First-Lien Mortgage Loans. We offer a narrow range of prime residential first-lien mortgage loans at
competitive rates. Our customers, stockholders and local real estate brokers are a significant source of these loans. We strive
to process, approve and fund loans in a timeframe that meets the needs of our borrowers. Generally, we originate and retain
non-conforming residential first-lien mortgage loans and refer conforming residential first-lien mortgage loans to a third
party, whereby we may earn a fee.
Home Equity Loans and Lines of Credit. We generate these loans and lines of credit primarily through direct
marketing at our branch locations, referrals from local real estate brokers and, to a lesser extent, by targeted direct marketing
programs such as mail and electronic mail.
Consumer Loans. We solicit consumer loans on a direct basis and upon referrals from our directors, stockholders
and existing customers.
Deposits
Our deposit services are generally comprised of a traditional range of deposit products, including checking accounts,
savings accounts, attorney trust accounts, money market accounts, and certificates of deposit.
We offer our customers access to automated teller machines (ATMs) and other services which increase customer
convenience and encourage continued and additional banking relationships.
We endeavor to maintain competitive rates on deposit accounts, and actual rates are established at the time that they
are offered, and subsequently, based on contractual terms, take into consideration competitor offerings. Although from time
to time we advertise in local newspapers, our primary source of deposit relationships is satisfied customers. We offer a range
of direct deposit products ranging from social security and disability payments to direct deposit of payroll checks.
As of December 31, 2014, we had one customer whose deposits with us represented 5.9 percent of our total deposits.
We believe we have sufficient liquidity to fund our operations should this customer withdraw its deposits. See the liquidity
discussion within Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations within
this Form 10-K for more information regarding our available funds. No other customers accounted for more than 5 percent
of our total deposits as of December 31, 2014.
Other Services
To further attract and retain customer relationships, we provide a standard array of additional community banking
services, which include the following:
Money orders
Cashier’s checks
Wire transfers
EE and I U.S. savings bonds redemption
Debit cards
Direct deposit
Safe deposit boxes
Night depository
Bank-by-mail
Automated teller machines
On-line banking
Remote deposit capture
Automated telephone banking
We also offer, on a somewhat limited basis, payroll-related services, credit card and merchant credit card processing
through third parties whereby we do not undertake credit or fraud risk.
5
The Bank of Princeton
Internet Banking
We advertise but do not actively solicit new deposits or loans through our website, but utilize a qualified and
experienced internet service provider to furnish the following types of customer account services:
Full on-line statements
On-line bill payment
Account inquiries
Transaction histories
Transaction details
Account-to-account transfers
Fee Income
Fee income is a component of our non-interest income. By charging non-customers fees for using our ATMs and
charging customers for banking services such as money orders, cashier’s checks, wire transfers and check orders, as well as
other deposit and loan-related fees, we earn fee income. Prudent fee income opportunities are sought to supplement net
interest income, but may be limited by our efforts to remain competitive.
Bank Premises and Market Area
Our principal office and corporate headquarters is in a full-service banking facility located at 183 Bayard Lane,
Princeton, New Jersey. We have eleven additional branches in New Jersey and Pennsylvania, as well as an operations center
in Princeton, New Jersey.
The market area served by us through our twelve branches is generally an area within an approximate 50 mile radius
of Princeton, including parts of Mercer, Somerset, Hunterdon, Monmouth and Middlesex Counties in central New Jersey, and
additional areas in portions of Philadelphia, Montgomery and Bucks Counties in Pennsylvania. Our market area is
dominated by offices of large statewide, regional and interstate banking institutions. We believe that banking services
provided in a friendly and courteous manner with timely response to customer needs will fill a niche that has arisen due to the
loss of small, local community-focused institutions. Our Pennsylvania branches provide us with a market in the greater
Philadelphia area and access to a growing Asian-American market.
Staffing
As of December 31, 2014, we had 131 total employees and approximately 128 full-time equivalent employees.
Supervision and Regulation
General. We are extensively regulated under both federal and state law. These laws restrict permissible activities
and investments and require compliance with various consumer protection provisions applicable to lending, deposit,
brokerage and fiduciary activities. They also impose capital adequacy requirements and conditions to our ability to
repurchase stock or to pay dividends. We are also subject to comprehensive examination and supervision by the New Jersey
Department of Banking and Insurance (the “Department”) and the FDIC. The Department and the FDIC have broad
discretion to impose restrictions and limitations on our operations. This supervisory framework could materially impact the
conduct and profitability of our activities.
To the extent that the following information describes statutory and regulatory provisions, it is qualified in its
entirety by reference to the particular statutory and regulatory provisions. Proposals to change the laws and regulations
governing the banking industry are frequently raised at both the state and federal levels. The likelihood and timing of any
changes in these laws and regulations, and the impact such changes may have on us, are difficult to ascertain. Changes in
applicable laws and regulations, or in the manner such laws or regulations are interpreted by regulatory agencies or courts,
may have a material effect on our business, financial condition and results of operations.
We are subject to various requirements and restrictions under federal and state law, including requirements to
maintain reserves against deposits, restrictions on the types, amount and terms and conditions of loans that may be originated,
and limits on the type of other activities in which we may engage and the investments we may make. Under the Gramm-
Leach-Bliley Act, or “GLBA,” we may engage in expanded activities, such as insurance sales and securities underwriting,
6
The Bank of Princeton
through the formation of a “financial subsidiary.” In order to be eligible to establish or acquire a financial subsidiary, we
must be “well capitalized” and “well managed” and may not have less than a “satisfactory” CRA rating. At this time, we do
not engage in any activity which would require us to maintain a financial subsidiary. We are also subject to federal laws that
limit the amount of transactions between us and any nonbank affiliates. Under these provisions, transactions, such as a loan
or investment, by us with any nonbank affiliate are generally limited to 10 percent of our capital and surplus for all covered
transactions with such affiliate or 20 percent of capital and surplus for all covered transactions with all affiliates. Any
extensions of credit, with limited exceptions, must be secured by eligible collateral in specified amounts. We are also
prohibited from purchasing any “low quality” assets from an affiliate. The Dodd-Frank Act significantly expands the
coverage and scope of the limitations on affiliate transactions within a banking organization.
Monetary Policy. Our business, financial condition and results of operations are and will be affected by domestic
economic conditions and the monetary and fiscal policies of the United States government and its agencies. The monetary
policies of the Federal Reserve System, or “Federal Reserve,” have a significant effect upon the operating results of
commercial banks such as ours. The Federal Reserve has a major effect upon the levels of bank loans, investments and
deposits through its open market operations in United States government securities transactions and through its regulation of,
among other things, the discount rate on borrowings of member banks and the reserve requirements against member banks’
deposits. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.
Deposit Insurance. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the
FDIC (“DIF”). No institution may pay a dividend if in default of the federal deposit insurance assessment.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was
signed into law. The Dodd-Frank Act changed the assessment base for federal deposit insurance from the amount of insured
deposits held by the depository institution to the depository institution’s average total consolidated assets less average
tangible equity, eliminating the ceiling on the size of the DIF and increasing the floor on the size of the DIF. The Dodd-
Frank Act established a minimum designated reserve ratio (“DRR”) of 1.35 percent of the estimated insured deposits,
mandates the FDIC to adopt a restoration plan should the DRR fall below 1.35 percent, and provides dividends to the
industry should the DRR exceed 1.50 percent.
On February 7, 2011, the Board of Directors of the FDIC approved a final rule on Assessments, Dividend
Assessment Base and Large Bank Pricing (the “Final Rule”). The Final Rule implements the changes to the deposit
insurance assessment system as mandated by the Dodd-Frank Act. The Final Rule became effective April 1, 2011.
The Final Rule changed the assessment base for insured depository institutions from adjusted domestic deposits to
the average consolidated total assets during an assessment period less average tangible equity capital during that assessment
period. Tangible equity is defined in the Final Rule as Tier 1 Capital and shall be calculated monthly, unless, like us, the
insured depository institution has less than $1 billion in assets, in which case the insured depository institution will calculate
Tier 1 Capital on an end-of-quarter basis.
The Final Rule retains the unsecured debt adjustment, which lowers an insured depository institution’s assessment
rate for any unsecured debt on its balance sheet. In general, the unsecured debt adjustment in the Final Rule will be measured
to the new assessment base and will be increased by 40 basis points. The Final Rule also contains a brokered deposit
adjustment for assessments. The Final Rule provides an exemption to the brokered deposit adjustment to financial
institutions that are “well capitalized” and have composite CAMEL ratings of 1 or 2. CAMEL ratings are confidential ratings
used by the federal and state regulators for assessing the soundness of financial institutions. These ratings range from 1 to 5,
with a rating of 1 being the highest rating.
The Final Rule also creates a new rate schedule that intends to provide more predictable assessment rates to
financial institutions. The revenue under the new rate schedule will be approximately the same. Moreover, it indefinitely
suspends the requirement that it pay dividends from the DIF when it reaches 1.50 percent of insured deposits, to increase the
probability that the fund reserve ratio will reach a sufficient level to withstand a future crisis. In lieu of the dividend
payments, the FDIC has adopted progressively lower assessment rate schedules that become effective when the reserve ratio
exceeds 2.0 percent and 2.5 percent.
The Dodd-Frank Act made permanent the $250,000 limit for federal deposit insurance and increased the cash limit
of Securities Investor Protection Corporation protection from $100,000 to $250,000.
7
The Bank of Princeton
In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in
the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. This payment is established
quarterly and, during the four quarters ended December 31, 2014, averaged 1.28 basis points of average assets.
The FDIC has authority to increase insurance assessments. A significant increase in insurance assessments would
likely have an adverse effect on our operating expenses and results of operations. Management cannot predict what insurance
assessment rates will be in the future.
Deposit insurance may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or
unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation,
rule, order or condition imposed the FDIC.
Dividend Restrictions. Under the New Jersey Banking Act of 1948, as amended (the “Banking Act”), a bank may
declare and pay cash dividends only if, after payment of the dividend, the capital stock of the bank will be unimpaired and
either the bank will have a surplus of not less than 50 percent of its capital stock or the payment of the dividend will not
reduce the bank’s surplus. The FDIC prohibits payment of cash dividends if, as a result, the institution would be
undercapitalized or the institution is in default with respect to any assessment due to the FDIC.
Risk-Based Capital Requirements. The federal banking regulators have adopted certain risk-based capital
guidelines to assist in assessing capital adequacy of a banking organization’s operations for both transactions reported on the
balance sheet as assets and transactions, such as letters of credit, and recourse agreements, which are recorded as off-balance
sheet items. Under these guidelines, nominal dollar amounts of assets and credit-equivalent amounts of off-balance sheet
items are multiplied by one of several risk adjustment percentages, which range from 0 percent for assets with low credit risk,
such as certain US Treasury securities, to 100 percent for assets with relatively high credit risk, such as business loans.
A banking organization’s risk-based capital ratios are obtained by dividing its qualifying capital by its total risk
adjusted assets. The regulators measure risk-adjusted assets, which include off-balance-sheet items, against both Tier 1
Capital and total qualifying capital, which is the sum of Tier 1 capital and limited amounts of Tier 2 capital.
•
•
“Tier 1”, or core capital, includes common equity, perpetual preferred stock and minority interest in equity
accounts of consolidated subsidiaries, less goodwill and other intangibles, subject to certain exceptions.
“Tier 2”, or supplementary capital, includes, among other things, limited life preferred stock, hybrid capital
instruments, mandatory convertible securities, qualifying subordinated debt, and the allowance for loan and
lease losses, subject to certain limitations and less restricted deductions. The inclusion of elements of Tier
2 capital is subject to certain other requirements and limitations of the federal banking agencies.
Banks and bank holding companies subject to the risk-based capital guidelines are required to maintain a ratio of
Tier 1 capital to risk-weighted assets of at least 4.00 percent and a ratio of total capital to risk-weighted assets of at least 8.00
percent. The appropriate regulatory authority may set higher capital requirements when particular circumstances warrant. At
December 31, 2014, we met both requirements with Tier 1 and Total capital ratios of 9.9 percent and 11.2 percent,
respectively. In addition to risk-based capital, banks and bank holding companies are required to maintain a minimum
amount of Tier 1 capital to total assets, referred to as the leverage capital ratio, of at least 4.00 percent. At December 31,
2014, our leverage ratio was 8.2 percent.
Failure to meet applicable capital guidelines could subject a banking organization to a variety of enforcement
actions including:
•
•
limitations on its ability to pay dividends; and
the issuance by the applicable regulatory authority of a capital directive to increase capital, and in the case
of depository institutions, the termination of deposit insurance by the FDIC, and the measures described
under the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) as applicable to
undercapitalized depository institutions.
8
The Bank of Princeton
In addition, future changes in regulations or practices could further reduce the amount of capital recognized for
purposes of capital adequacy. Such a change could affect our ability to grow and could restrict the amount of profits, if any,
available for the payment of dividends.
Regulatory Capital Changes. In July 2013, the federal banking agencies issued final rules to implement the Basel
III regulatory capital reforms and changes required by the Dodd-Frank Act. The phase-in period for community banking
organizations began January 1, 2015, while larger institutions (generally those with assets of $250 billion or more) began
compliance on January 1, 2014. The final rules call for the following capital requirements:
•
•
•
•
A minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5 percent;
A minimum ratio of tier 1 capital to risk-weighted assets of 6 percent;
A minimum ratio of total capital to risk-weighted assets of 8 percent (no change from the current rule); and
A minimum leverage ratio of 4 percent.
In addition, the final rules establish a common equity Tier 1 capital conservation buffer of 2.5 percent of risk-
weighted assets applicable to all banking organizations. If a banking organization fails to hold capital above the minimum
capital ratios and the capital conservation buffer, it will be subject to certain restrictions on capital distributions and
discretionary bonus payments. The phase-in period for the capital conservation and countercyclical capital conservation
buffers for all banking organizations will begin on January 1, 2016.
Under the proposed rules, accumulated other comprehensive income (“AOCI”) would have been included in a
banking organization’s common equity Tier 1 capital. The final rules allow community banks to make a one-time election
not to include these additional components of AOCI in regulatory capital and instead use the existing treatment under the
general risk-based capital rules that excludes most AOCI components from regulatory capital. The opt-out election must be
made in the first call report or FR Y-9 series report that is filed after the financial institution becomes subject to the final rule.
The final rules permanently grandfather non-qualifying capital instruments (such as trust preferred securities and
cumulative perpetual preferred stock) issued before May 19, 2010 for inclusion in the Tier 1 capital of banking organizations
with total consolidated assets less than $15 billion as of December 31, 2009 and banking organizations that were mutual
holding companies as of May 19, 2010.
Consistent with the Dodd-Frank Act, the new rules replace the ratings-based approach to securitization exposures,
which is based on external credit ratings, with the simplified supervisory formula approach in order to determine the
appropriate risk weights for these exposures. Alternatively, banking organizations may use the existing gross-up approach to
assign securitization exposures to a risk weight category or choose to assign such exposures a 1,250 percent risk weight.
Under the new rules, mortgage servicing assets (“MSAs”) and certain deferred tax assets (“DTAs”) are subject to
stricter limitations than those applicable under the current general risk-based capital rule. The new rules also increase the risk
weights for past-due loans, certain commercial real estate loans, and some equity exposures, and makes selected other
changes in risk weights and credit conversion factors.
Prompt Corrective Action. In addition to the required minimum capital levels described above, federal law
establishes a system of “prompt corrective actions” which federal banking agencies are required to take, and certain actions
which they have discretion to take, based upon the capital category into which a federally-regulated depository institution
falls. Regulations set forth detailed procedures and criteria for implementing prompt corrective action in the case of any
institution which is not adequately capitalized. Under the rules, an institution will be deemed “well capitalized” or better if
its leverage ratio exceeds 5 percent, its Tier 1 risk-based capital ratio exceeds 6 percent, and its Total risk-based capital ratio
exceeds 10 percent. An institution will be deemed to be “adequately capitalized” or better if it exceeds the minimum federal
regulatory capital requirements. However, it will be deemed “undercapitalized” if it fails to meet the minimum capital
requirements; “significantly undercapitalized” if it has a Total risk-based capital ratio that is less than 6 percent, a Tier 1 risk-
based capital ratio that is less than 3 percent, or a leverage ratio that is less than 3 percent, and “critically undercapitalized” if
the institution has a ratio of tangible equity to total assets that is equal to or less than 2 percent.
The prompt corrective action rules require an undercapitalized institution to file a written capital restoration plan,
along with a performance guaranty by a holding company or a third party. In addition, an undercapitalized institution
9
The Bank of Princeton
becomes subject to certain automatic restrictions including a prohibition on payment of dividends, a limitation on asset
growth and expansion, in certain cases, a limitation on the payment of bonuses or salary increases to senior executive
officers, and a prohibition on the payment of certain “management fees” to any “controlling person.” Institutions that are
classified as undercapitalized are also subject to certain additional supervisory actions, including: increased reporting burdens
and regulatory monitoring; a limitation on the institution’s ability to make acquisitions, open new branch offices, or engage in
new lines of business; obligations to raise additional capital; restrictions on transactions with affiliates; and restrictions on
interest rates paid by the institution on deposits. In certain cases, bank regulatory agencies may require replacement of senior
executive officers or directors, or sale of the institution to a willing purchaser. If an institution is deemed to be “critically
undercapitalized” and continues in that category for four quarters, the statute requires, with certain narrowly limited
exceptions, that the institution be placed in receivership.
As of December 31, 2014, we met the criteria to be classified as “well capitalized.” This classification is primarily
for the purpose of applying the federal prompt corrective action provisions and is not intended to be and should not be
interpreted as a representation of our overall financial condition or prospects.
Beginning January 1, 2015, all insured depository institutions must incorporate the revised regulatory capital
requirements into the prompt corrective action framework, including the new common equity Tier 1 capital to risk-weighted
assets ratio and the higher minimum Tier 1 risk-based capital ratio requirements.
Community Reinvestment Act. The Community Reinvestment Act, or “CRA,” requires that banks meet the credit
needs of all of their assessment area, as established for these purposes in accordance with applicable regulations based
principally on the location of branch offices, including those of low-income areas and borrowers. The CRA also requires that
the FDIC assess all financial institutions that it regulates to determine whether these institutions are meeting the credit needs
of the community they serve. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to
improve” or “unsatisfactory.” Our record in meeting the requirements of the CRA is made publicly available and is taken
into consideration in connection with any applications with federal regulators to engage in certain activities, including
approval of a branch or other deposit facility, mergers and acquisitions, office relocations, or expansions into non-banking
activities. As of December 31, 2014, we maintained a “satisfactory” CRA rating.
Dodd-Frank Act. The Dodd-Frank Act became law on July 21, 2010. The Dodd-Frank Act implements far-
reaching changes across the financial regulatory landscape.
Among other things, the Dodd-Frank Act created the Bureau of Consumer Financial Protection (the “CFPB”), which
is an independent bureau within the Federal Reserve System with broad authority to regulate the consumer finance industry,
including regulated financial institutions such as us, and non-banks and others who are involved in the consumer finance
industry. The CFPB has exclusive authority through rulemaking, orders, policy statements, guidance and enforcement
actions to administer and enforce federal consumer finance laws, to oversee non-federally regulated entities, and to impose its
own regulations and pursue enforcement actions when it determines that a practice is unfair, deceptive or abusive (“UDA”).
The federal consumer finance laws and all of the functions and responsibilities associated with them were transferred to the
CFPB on July 21, 2011. While the CFPB has the exclusive power to interpret, administer and enforce federal consumer
finance laws and UDA, the Dodd-Frank Act provides that the FDIC continues to have examination and enforcement powers
over us relating to the matters within the jurisdiction of the CFPB because we have less than $10 billion in assets. The Dodd-
Frank Act also gives state attorneys general the ability to enforce federal consumer protection laws.
The Dodd-Frank Act also:
•
•
•
Applies the same leverage and risk-based capital requirements to most bank holding companies (“BHCs”)
that apply to insured depository institutions;
Requires the FDIC to make its capital requirements for insured depository institutions countercyclical, so
that capital requirements increase in times of economic expansion and decrease in times of economic
contractions;
Requires BHCs and banks to be both well-capitalized and well-managed in order to acquire banks located
outside their home state and requires any BHC electing to be treated as a financial holding company to be
both well-capitalized and well-managed;
10
The Bank of Princeton
•
•
•
•
•
•
•
Changes the assessment base for federal deposit insurance from the amount of insured deposits held by the
depository institution to the depository institution’s average total consolidated assets less tangible equity;
eliminates the ceiling on the size of the DIF and increases the floor on the size of the DIF;
Makes permanent the $250,000 limit for federal deposit insurance and increases the cash limit of Securities
Investor Protection Corporation protection from $100,000 to $250,000
Eliminates all remaining restrictions on interstate banking by authorizing national and state banks to
establish de novo branches in any state that would permit a bank chartered in that state to open a branch at
that location;
Repeals Regulation Q, the federal prohibitions on the payment of interest on demand deposits, thereby
permitting depository institutions to pay interest on business transaction and other accounts;
Enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal
Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount
of time for which collateral requirements regarding covered transactions must be maintained;
Expands insider transaction limitations through the strengthening of loan restrictions to insiders and the
expansion of the types of transactions subject to the various limits, including derivative transactions,
repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions.
Restrictions are also placed on certain asset sales to and from an insider to an institution, including
requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s
board of directors; and
Strengthens the previous limits on a depository institution’s credit exposure to one borrower which limited
a depository institution’s ability to extend credit to one person (or group of related persons) in an amount
exceeding certain thresholds. The Dodd-Frank Act expanded the scope of these restrictions to include
credit exposure arising from derivative transactions, repurchase agreements, and securities lending and
borrowing transactions.
While designed primarily to reform the financial regulatory system, the Dodd Frank Act also contains a number of
corporate governance provisions that will affect companies with securities registered under the Securities Exchange Act of
1934 (the “Exchange Act”). The Dodd-Frank Act requires the Securities and Exchange Commission to adopt rules which
may affect our executive compensation policies and disclosure. It also exempts smaller issuers, such as us, from the
requirement, originally enacted under Section 404(b) of the Sarbanes-Oxley Act of 2002, that our independent auditor also
attest to and report on management’s assessment of internal control over financial reporting.
Although a significant number of the rules and regulations mandated by the Dodd-Frank Act have been finalized,
including rules regulating compensation of residential mortgage loan originators, residential mortgage loan servicing
practices, and defining qualified mortgage loans and the ability to repay a mortgage loan, many of the new requirements
called for have yet to be implemented and will likely be subject to implementing regulations over the course of several years.
Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the
various agencies, the full extent of the impact such requirements will have on financial institutions’ operations is unclear.
The Dodd-Frank Act could require us to make material expenditures, in particular personnel training costs and additional
compliance expenses, or otherwise adversely affect our business, financial condition, results of operations or cash flow. It
could also require us to change certain of our business practices, adversely affect our ability to pursue business opportunities
that we might otherwise consider pursuing, cause business disruptions and/or have other impacts that are as of yet unknown
to us. Failure to comply with these laws or regulations, even if inadvertent, could result in negative publicity, fines or
additional expenses, any of which could have an adverse effect on our business, financial condition, results of operations or
cash flow.
Jumpstart Our Business Startups (JOBS) Act. In April 2012, the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”) became law. The JOBS Act is aimed at facilitating capital-raising by smaller companies and banks and bank
holding companies by implementing the following changes:
•
•
•
Raising the threshold requiring registration under the Exchange Act for banks and bank holding companies
from 500 to 2,000 holders of record;
Raising the threshold for triggering deregistration under the Exchange Act for banks and bank holding
companies from 300 to 1,200 holders of record;
Raising the limit for Regulation A offerings from $5 million to $50 million per year and exempting some
Regulation A offerings from state blue sky laws;
11
The Bank of Princeton
•
•
•
Permitting advertising and general solicitation in Rule 506 and Rule 144A offerings;
Allowing private companies to use “crowd funding” to raise up to $1 million in any 12-month period,
subject to certain conditions; and,
Creating a new category of issuer, called an “Emerging Growth Company,” for companies with less than
$1 billion in annual gross revenue, which will benefit from certain changes that reduce the cost and burden
of carrying out an equity initial public offering and complying with public company reporting obligations
for up to five years.
Federal Home Loan Bank Membership. We are a member of the Federal Home Loan Bank of New York (the
“FHLB-NY”). Each member of the FHLB-NY is required to maintain a minimum investment in capital stock of the FHLB-
NY. The Board of Directors of the FHLB-NY can increase the minimum investment requirements in the event it has
concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the
minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Agency.
Because the extent of any obligation to increase our investment in the FHLB-NY depends entirely upon the occurrence of a
future event, potential payments to the FHLB-NY are not determinable.
Additionally, in the event that we fail, the right of the FHLB-NY to seek repayment of funds loaned to us will take
priority over certain other creditors.
Other Laws and Regulations. We are subject to a variety of laws and regulations which are not limited to banking
organizations. For example, in lending to commercial and consumer borrowers, and in owning and operating our own
property, we are subject to regulations and potential liabilities under state and federal environmental laws.
We are heavily regulated by regulatory agencies at the federal and state levels. As a result of events in the financial
markets and the economy in recent years, we, like most of our competitors, have faced and expect to continue to face
increased regulation and regulatory and political scrutiny, which creates significant uncertainty for us and the financial
services industry in general.
Future Legislation and Regulation. Regulators have increased their focus on the regulation of the financial
services industry in recent years. Proposals that could substantially intensify the regulation of the financial services industry
have been and are expected to continue to be introduced in the U.S. Congress, in state legislatures and by applicable
regulatory authorities. These proposals may change banking statutes and regulation and our operating environment in
substantial and unpredictable ways. If enacted, these proposals could increase or decrease the cost of doing business, limit or
expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other
financial institutions. We cannot predict whether any of these proposals will be enacted and, if enacted, the effect that it, or
any implementing regulations, would have on our business, financial condition and results of operations.
Item 1A. Risk Factors
As a smaller reporting company, the Bank is not required to provide the information otherwise required by this Item.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We conduct our operations from our headquarters and branch located at 183 Bayard Lane, Princeton, New Jersey, an
operations center at 403 Wall Street, Princeton, New Jersey, and from eleven other branch locations in New Jersey and
Pennsylvania. The following table sets forth certain information regarding the Bank’s properties as of December 31, 2014:
12
The Bank of Princeton
Leased or
Owned
Leased
Date of Lease
Expiration
October 31, 2018
Leased
August 11, 2021
Leased
October 31, 2015
Leased
April 30, 2017
Leased
December 31, 2016
Leased
July 31, 2020
Leased
April 30, 2015
Owned
N/A
Leased
November 30, 2021
Leased
March 31, 2017
Leased
September 30, 2016
Leased
January 25, 2016
Leased
November 30, 2017
Location
Corporate Headquarters and Branch
183 Bayard Lane
Princeton, NJ
Operations Center
403 Wall Street
Princeton, NJ
Hamilton Branch
339 Route 33
Hamilton, NJ
Pennington Branch
2 Route 31
Pennington, NJ
Chambers Street Branch
21 Chambers Street
Princeton, NJ
Monroe Branch
1 Rossmoor Drive, Suite 1200
Monroe Township, NJ
Montgomery Branch
1185 Route 206 North
Princeton, NJ
Lambertville Branch
10-12 Bridge Street
Lambertville, NJ
Nassau Street Branch
194 Nassau Street
Princeton, NJ
New Brunswick Branch
1 Spring Street, Suite 102
New Brunswick, NJ
North Wales Branch (MoreBank Division)
1222 North Welsh Road
North Wales, PA
Cheltenham Branch (MoreBank Division)
470 West Cheltenham Avenue
Philadelphia, PA
Arch Street Branch (MoreBank Division)
921 Arch Street
Philadelphia, PA
13
The Bank of Princeton
Item 3. Legal Proceedings
On February 3, 2015, the FDIC terminated its Consent Order with us (the “Consent Order”). The Consent Order was
issued on January 30, 2014 and required us to strengthen our BSA/AML program and internal audit function, and to address
other related matters. Concurrently with the termination of the Consent Order, a related Acknowledgement and Consent
between us and the NJDOBI also terminated.
From time to time, we may be a party to ordinary routine litigation incidental to our business. Except for the
Consent Order and the related Acknowledgement and Consent, there were no material legal proceedings to which we were a
party or of which any of our property was the subject, pending or, to our knowledge, contemplated by governmental
authorities, at December 31, 2014 or the date of this report.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
There is no established public trading market for our common stock. Although shares of our common stock are
transferable, our common stock is not listed on any stock exchange or quoted in any over-the-counter securities market.
There can be no assurance that a trading market for our common stock will develop in the future, and stockholders wishing to
sell common stock may have to seek buyers and negotiate a transaction price by themselves.
Holders
As of March 17, 2015, there were approximately 672 holders of our common stock.
Dividends
We have not declared or paid cash dividends on our common stock since we began operations. Under the New
Jersey Banking Act of 1948, as amended, we may declare and pay cash dividends only if, after payment of the dividend, our
capital stock will be unimpaired and either we will have a surplus of not less than 50 percent of our capital stock or the
payment of the dividend will not reduce our surplus. The FDIC prohibits payment of cash dividends if, as a result, we would
be undercapitalized or are in default with respect to any assessment due to the FDIC. Our board of directors intends to follow
a policy of retaining earnings for the purpose of increasing our capital and therefore the Bank does not anticipate declaring or
paying dividends for the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
The following table summarizes our equity compensation plan information as of December 31, 2014. See Note 13
to our audited financial statements included in this Annual Report on Form 10-K for a description of the material features of
each plan.
14
The Bank of Princeton
Number of
shares of
common stock
to be issued
upon exercise
of outstanding
options,
warrants and
rights
Weighted-
average
exercise price
of outstanding
options,
warrants and
rights
Number of
shares of
common stock
remaining
available for
future issuance
under
compensation
plans
229,667
299,867
1,200
97,500
46,000
674,234
$11.91
$14.07
$25.00
$10.00
$25.00
$13.51
23,133
300,133
-
-
-
323,266
Plan Category
Equity Compensation Plans approved by security
holders:
The Bank of Princeton 2007 Stock Option Plan
The Bank of Princeton 2012 Stock Option Plan
MoreBank 2004 Incentive Equity Compensation Plan
Equity compensation plan not approved by security
holders:
Organizer warrants
MoreBank Organizer options
Total
Item 6. Selected Financial Data
As a smaller reporting company, the Bank is not required to provide the information otherwise required
by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with "Part I—Item 1. Business" and our Consolidated Financial
Statements and the notes thereto included in this Form 10-K. The following discussion should also be read in conjunction
with the "Cautionary Note Regarding Forward-Looking Statements."
Our Management's Discussion and Analysis of Financial Condition and Results of Operations is presented in sections as
follows:
Overview and Strategy
Comparison of Financial Condition at December 31, 2014 and December 31, 2013
Comparison of Operating Results for the Years Ended December 31, 2014 and December 31, 2013
Rate/Volume Analysis
Liquidity, Commitments and Capital Resources
Off-Balance Sheet Arrangements
Impact of Inflation
Return on Equity and Assets
Critical Accounting Policies and Estimates
Recently Issued Accounting Standards
Overview and Strategy
We remain focused on establishing and retaining customer relationships by offering a broad range of traditional
financial services and products, competitively-priced and delivered in a responsive manner to small businesses, professionals
and individuals in our market area. As a locally-operated community bank, we seek to provide superior customer service that
is highly personalized, efficient and responsive to local needs. To better serve our customers, we endeavor to provide state-
of-the-art delivery systems with ATMs, current operating software, timely reporting, online bill pay and other similar up-to-
15
The Bank of Princeton
date products and services. We seek to deliver these products and services with the care and professionalism expected of a
community bank and with a special dedication to personalized customer service.
Our primary business objectives are:
•
•
•
to provide local businesses, professionals and individuals with banking services responsive to and
determined by their needs and local market conditions,
to attract deposits and loans through competitive pricing, responsiveness and service, and
to provide a reasonable return to stockholders on capital invested.
We strive to serve the financial needs of our customers while providing an appropriate return to our stockholders,
consistent with safe and sound banking practices. We expect that a financial strategy that utilizes variable rates and matching
assets and liabilities will enable us to increase our net interest margin, while managing interest rate risk. We also seek to
generate fee income from various sources, subject to our desire to maintain competitive pricing within our market area.
Our recognition of, and commitment to, the needs of the local community, combined with highly personalized and
responsive customer service, differentiate us from our competition. We continue to capitalize upon the personal contacts and
relationships of our organizers, directors, stockholders and officers to establish and grow our customer base.
Comparison of Financial Condition at December 31, 2014 and December 31, 2013
General. Our total assets increased from $877.4 million at December 31, 2013 to $955.3 million at December 31,
2014, an increase of $77.9 million, or nine percent. This increase was primarily due to increases in loans receivable, net of
$97.8 million and bank-owned life insurance of $9.1 million, partially offset by a decrease in securities available-for-sale of
$29.5 million. Total liabilities increased from $813.2 million at December 31, 2013 to $876.8 million at December 31, 2014,
an increase of $63.6 million, or eight percent. This increase was primarily the result of a $98.8 million increase in total
deposits, partially offset by a $36.1 million decrease in borrowings. Total stockholders’ equity increased from $64.2 million
at December 31, 2013 to $78.5 million at December 31, 2014, an increase of $14.3 million, or 22 percent. This increase was
primarily attributable to net income of $9.0 million and increases in additional paid-in capital of $0.7 million and
accumulated other comprehensive income of $4.5 million. The growth of our balance sheet has been a direct result of the
successful implementation of our business plan. Although we will continue to seek to grow our business through the
continued implementation of our business plan, the growth experienced in the past may not be indicative of future results.
We manage our balance sheet based on a number of interrelated criteria, such as changes in interest rates,
fluctuations in certain asset and liability categories whose changes are not totally controlled by us, such as swings in deposit
account balances driven by depositors’ needs, prepayments and issuer call options exercised on securities available for sale,
early payoffs on loans, investment opportunities presented by market conditions, lending originations, capital provided by
earnings, and active management of our overall liquidity positions. The management of these dynamic and interrelated
elements of our balance sheet result in fluctuations in balance sheet items throughout the year.
Cash and due from banks. Cash and cash equivalents increased from $27.4 million at December 31, 2013 to $31.9
million at December 31, 2014, an increase of $4.4 million, or 16 percent. The increase in cash was primarily attributable to
the timing of cash payments and cash receipts.
Investment Securities. We hold securities that are available to fund increased loan demand or deposit withdrawals
and other liquidity needs, and which provide an additional source of interest income. Securities are classified as held-to-
maturity (“HTM”) or available-for-sale (“AFS”) at the time of purchase. Securities are classified as HTM if we have the
ability and intent to hold them until maturity. HTM securities are carried at cost, adjusted for unamortized purchase
premiums and discounts. Securities that are classified as AFS are carried at fair value with unrealized gains and losses, net of
income taxes, reported as a component of equity within accumulated other comprehensive income.
16
The Bank of Princeton
The following table presents a summary of the amortized cost and fair value of our securities available-for-sale at
December 31, 2014, 2013 and 2012.
2014
December 31,
2013
2012
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
$
14,770 $
14,551 $
38,112 $
35,689 $
27,330 $
28,268
-
-
-
-
-
-
76,428
77,188
72,680
73,084
88,340
90,887
(in thousands)
U.S. Treasury securities
U.S. Government
agency securities
Mortgage-backed Securities-U.S.
Government-sponsored
Enterprises (GSEs)
Obligations of state and
political subdivisions
Corporate securities
Total
$
162,863 $
163,800 $
199,489 $
193,314 $
181,202 $
71,665
-
72,061
-
88,697
-
84,541
-
65,532
-
66,886
-
186,041
Securities available-for-sale, which is carried at fair value, decreased $29.5 million, or 15 percent, during the twelve
months ended December 31, 2014. This decrease was the result of security sales as we utilized cash proceeds to grow our
loan portfolio and repay borrowings.
The following table presents a summary of the amortized cost and fair value of our HTM securities at December 31,
2014, 2013 and 2012.
2014
December 31,
2013
2012
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(in thousands)
Mortgage-backed Securities-U.S.
Government-sponsored
Enterprises (GSEs)
$
420 $
456 $
423 $
454 $
600 $
643
HTM securities decreased minimally from December 31, 2013 to December 31, 2014. The decline in HTM
securities is the result of maturities and our strategy to not purchase additional securities for the HTM portfolio as we manage
our investment portfolio to allow for greater flexibility as our liquidity needs change.
The following table summarizes the maturity distribution schedule of the amortized cost of debt securities with
corresponding weighted-average yields at December 31, 2014. Interest income presented in this Form 10-K for tax-
advantaged obligations of state and political subdivisions has not been adjusted to reflect fully taxable-equivalent interest
income. Weighted-average yields presented below have also not been computed on a fully taxable-equivalent basis.
Expected maturities may differ from contractual maturities because the securities may be called without any penalties.
17
The Bank of Princeton
(in thousands)
One year
or less
After one
through five
years
December 31, 2014
After five
through ten
years
After ten
years
Total
U.S. Treasury Securities
Mortgage-backed Securities-U.S. Government-
sponsored Enterprises (GSEs)
Obligations of state and political subdivisions
Total
$
- $
- $
14,770 $
- $
14,770
622
-
622 $
1,041
2,896
3,937 $
37,424
42,060
37,341
76,428
71,665
26,709
78,820 $ 79,484 $ 162,863
$
Weighted average yield
2.19%
2.60%
2.17%
2.59%
2.39%
At December 31, 2014, there were no holdings of any one issuer, other than the U.S. government and its agencies, in
an amount greater than ten percent of our total stockholders’ equity. See Note 3 - Investment Securities in the Notes to
Consolidated Financial Statements within this Form 10-K for additional information regarding debt securities.
Loans receivable, net. Loans receivable, net increased from $625.3 million at December 31, 2013 to $723.1 million
at December 31, 2014, an increase of $97.8 million, or 16 percent. The increase was attributable to our efforts to grow our
loan portfolio through existing relationships and new business and was funded by a combination of a 13 percent year-over-
year increase in our total deposits and a decrease of securities available-for-sale.
The following table details our loan maturities by loan segment and interest rate type at December 31, 2014:
(in thousands)
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total loans
Type:
Fixed rate loans
Floating rate loans
Total loans
December 31, 2014
Due in
one year
or less
Due after
one
through
five years
Due after
five years
Total
$
9,312 $
92,110 $
36,215
20,893
1,045
609
2,585
30,336
16,429
-
354
33
$ 70,659 $ 139,262 $
348,828 $ 450,250
127,469
78,822
45,383
30,711
2,654
525,368 $ 735,289
60,918
41,500
44,338
29,748
36
$ 14,661 $
55,998
89,646 $
49,616
$ 70,659 $ 139,262 $
488,780
36,588 $ 140,895
594,394
525,368 $ 735,289
The accrual of interest is discontinued when the contractual payment of principal or interest is 90 days past due or
management has serious doubts about further collectability of the principal or interest, even if the loan is currently
performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well-secured.
18
The Bank of Princeton
The following table sets forth certain information regarding our nonaccrual loans, troubled debt restructurings,
accruing loans 90 days or more past-due, and other real estate owned as of December 31, 2014, 2013, 2012, 2011, and 2010.
(in thousands)
Nonaccrual loans:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total nonaccrual loans
Troubled debt restructurings (TDRs) – performing
Accrual loans 90 days or more past due:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total accrual loans 90 days or more past due
Total nonperforming loans and performing TDRs
Other real estate owned
Total nonperforming assets and performing TDRs
$
$
December 31,
2014
2013
2012
2011
2010
6,190 $ 2,535 $ 2,690 $
1,185
1,911
166
419
-
9,871
3,797
4,596
892
-
359
11
8,548
2,412
5,127
-
182
394
-
8,238
4,858
5,229 $ 3,488
1,782
-
-
276
-
5,546
3,788
2,135
892
-
456
-
8,712
2,332
-
-
-
-
-
-
-
13,668
804
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,334
10,960
1,140
1,550
14,472 $ 14,023 $ 12,510 $ 11,963 $ 10,474
-
-
-
-
-
-
-
11,044
919
-
-
-
-
-
-
-
13,096
927
See Note 4 - Loans Receivable in the Notes to Consolidated Financial Statements within this Form 10-K for
additional information regarding our loans not classified as nonperforming assets as of December 31, 2014 and for other
information on our loan ratings of special mention, substandard and doubtful, all of which contain varying degrees of
potential credit problems that could result in the loans being classified as nonaccrual, past-due 90 or more days or troubled
debt restructurings in a future period.
Analysis of Allowance for Loan Losses. Our allowance for loan losses (the “allowance”) is based on a documented
methodology, which includes an ongoing evaluation of the loan portfolio, and reflects management’s best estimate of
probable losses in the loan portfolio as of the reporting date. The determination of the allowance for loan losses involves a
high degree of judgment and complexity. In evaluating the adequacy of the allowance for loan losses, management gives
consideration to current economic conditions, statutory examinations of the loan portfolio by regulatory agencies, loan
reviews performed periodically by independent third parties, delinquency information, management’s internal review of the
loan portfolio, and other relevant factors. In determining and maintaining our allowance for loan losses, we comply with the
Federal Financial Institutions Examination Council (FFIEC) Interagency Policy Statements on the Allowance for Loan and
Lease Losses and on Allowance for Loan and Lease Losses Methodologies and Documentation for Banks and Savings
Associations.
Our allowance for loan losses is maintained at a level considered adequate to provide for probable losses. We
perform, at least quarterly, an evaluation of the adequacy of the allowance. The allowance is based on our past loan loss
experience (which is bound by our limited operating history), known and inherent risks in the portfolio, adverse situations
that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, the composition of the loan
portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires
material estimates that may be susceptible to significant revision as more information becomes available.
19
The Bank of Princeton
The allowance consists of specific and general components. The specific component relates to loans that are
classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows
(or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general
component covers pools of loans by loan segment including loans not considered impaired, as well as smaller balance
homogeneous loans, such as residential mortgage and other consumer loans. These pools of loans are evaluated for loss
exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors.
The allowance for loan losses increased from $8.5 million at December 31, 2013 to $10.0 million at December 31,
2014, an increase of $1.5 million, or approximately 18 percent. This increase was primarily attributable to applying our
allowance methodology to our loan portfolio at December 31, 2014, which increased approximately 16 percent from
December 31, 2013 to December 31, 2014. The amount of allowance attributable to qualitative factors increased in 2014 as a
result of increasing concentrations within the commercial real estate loan segment. Qualitative factors also account for our
relatively unseasoned loan portfolio as compared to peers. Other factors affecting the increase in our allowance were the
year-over-year increase in past due loans as a percentage of total loans receivable and the year-over-year increase in loans
classified special mention, substandard and doubtful in accordance with our loan rating system as a percentage of total loans.
Additionally, there was a nominal year-over-year increase in nonperforming assets and performing TDRs. Offsetting these
factors was a marked year-over-year decrease in charged-off loans, net of recoveries. The large decrease in charged-off loans
in 2014 compared to 2013 had the direct effect of reducing the provision for loan losses year-over-year. As a consequence of
these changing attributes within our loan portfolio, our ratio of allowance for loan losses to total loans receivable increased
slightly at December 31, 2014 compared to December 31. 2013.
The following table presents a summary of changes in our allowance for loan losses and includes information
regarding charge-offs, and selected coverage ratios for the years ended December 31, 2014, 2013, 2012, 2011 and 2010:
(in thousands)
Balance at beginning of year
Charge offs:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total charge offs
Recoveries:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total recoveries
2014
Year Ended December 31,
2012
2013
2011
2010
$
8,493 $
7,033 $ 5,362
$
3,693 $ 2,147
(116)
-
-
-
-
(29)
(145)
(73)
(156)
(370)
-
-
-
(599)
-
(388)
-
-
-
(5)
(393)
5
70
-
-
-
5
80
(65)
1,580
10,008 $
-
12
95
15
-
-
-
-
1
-
-
-
96
27
(297)
(572)
2,032
1,968
8,493 $ 7,033
$
(286)
(217)
(143)
-
(80)
-
(726)
(1,251)
(446)
(7)
-
(52)
-
(1,756)
1
-
-
18
-
-
-
-
-
-
-
-
1
18
(1,755)
(708)
2,377
3,301
5,362 $ 3,693
Net charge-offs
Additions charged to operations (provision for loan losses)
$
Balance at end of year
Net charge offs to average loans outstanding
0.01 %
0.10 %
0.06 %
0.21 %
0.84 %
20
The Bank of Princeton
Our allowance for loan losses is allocated to the various segments of our portfolio identified above. The unallocated
component of the allowance for loan losses is maintained to cover uncertainties that could affect our estimate of probable
losses. The unallocated component reflects the margin of imprecision inherent in the underlying assumptions used in the
methodologies for estimating specific and general losses in the portfolio. Additions to the allowance charged to operations
are the result of applying our allowance methodology to the existing loan portfolio. Increases in the additions charged to
operations were primarily the result of increases in the loan portfolio, combined with adjustments to qualitative factors
impacting the allowance as discussed above.
The following table presents the allocation of the allowance for loan losses by portfolio segment for the years ended
December 31, 2014, 2013, 2012, 2011 and 2010. The allocation of a portion of the allowance for loan losses to one category
of loans does not preclude its availability to absorb losses in other categories.
2014
2013
2012
2011
December 31,
(in thousands)
Amount
Commercial real estate
Commercial and industrial
Construction
Residential first-lien
mortgage
Home equity
Consumer
Unallocated
$
3,621
1,530
2,719
318
307
17
1,496
% of
Loans to
Total
Loans Amount
% of
Loans
to Total
Loans Amount
% of
Loans to
Total
Loans
Amount
% of
Loans to
Total
Loans
61.2 % $
17.3
10.7
2,994
1,419
2,638
58.6 % $ 2,557
1,244
18.6
2,163
12.0
58.8 % $ 2,082
1,011
19.2
1,965
11.6
56.6 %
20.8
13.7
6.2
4.2
.4
-
282
282
1
877
6.3
4.5
-
-
204
256
10
599
5.4
4.7
0.3
-
101
179
12
12
3.7
4.7
0.5
-
Total
$ 10,008
100.0 % $
8,493
100.0 % $ 7,033
100.0 % $ 5,362
100.0 %
2010
(in thousands)
Amount
Commercial real estate
Commercial and industrial
Construction
Residential first-lien
mortgage
Home equity
Consumer
Unallocated
$
1,484
718
904
78
178
9
322
% of
Loans to
Total
Loans
58.1 %
21.3
9.1
4.2
6.8
0.5
-
Total
$
3,693
100.0 %
See Note 4 Loans Receivable in the Notes to Consolidated Financial Statements within this Form 10-K for
additional information regarding our allowance for loan losses.
21
The Bank of Princeton
Premises and equipment. Premises and equipment, net increased slightly from December 31, 2013 to December
31, 2014, as additions to premises and equipment that were primarily the result of leasehold improvements in our expanded
operations center and purchases of additional computer equipment were mostly offset by depreciation expense.
Accrued interest receivable and other assets. Accrued interest receivable and other assets decreased $3.9 million,
or 26 percent, from December 31, 2013 to December 31, 2014, primarily due to decreases of $2.2 million in our deferred tax
asset and $1.8 million in restricted investments in bank stocks. The decrease in our deferred tax asset was primarily due to
the tax effect of the year-over-year decrease in unrealized losses on securities available-for-sale. The decrease in unrealized
losses on securities available-for-sale, which are carried at fair value, was due to an increase in market interest rates from
December 31, 2013 to December 31, 2014. The decrease in restricted investments in bank stocks was primarily the result of
a $36.1 million decrease in FHLB-NY borrowings from December 31, 2013 to December 31, 2014. We are required to own
restricted investments in the form of stock of the FHLB-NY. The amount of FHLB-NY stock we are required to hold is
determined in part by the amount of FHLB-NY borrowings outstanding.
Deposits. Total deposits increased from $749.0 million at December 31, 2013 to $847.9 million at December 31,
2014, an increase of $98.8 million, or 13 percent. Non-interest-bearing deposits increased $27.5 million, or 26 percent, to
$135.2 million at December 31, 2014, compared to $107.6 million at December 31, 2013. Interest-bearing deposits increased
$71.3 million, or 11 percent, to $712.7 million at December 31, 2014, compared to $641.4 million in the prior year. Our
deposit growth was primarily related to the competitive pricing of our deposit products coupled with the continued
development of relationships with local small businesses and the high level of individualized customer service we provide.
The following table presents our time deposit maturities as of December 31, 2014.
December 31, 2014
(in thousands)
Time deposits of $100,000 or more
Time deposits of less than $100,000
Total
Total
172,652
122,020
294,672
Three
months
or less
Over
three
through
six
months
$
20,944 $
10,249 13,867
17,474
$
Over six
through
twelve
months
Over
twelve
months
62,299 $
71,935 $
38,319
59,585
$
27,723 $ 34,811 $ 100,618 $ 131,520 $
22
The Bank of Princeton
The following table presents the average balance of our deposit accounts for the years ended December 31, 2014,
2013 and 2012, and the average cost of funds for each category of our deposits.
2014
Avg.
Rate
Paid
Average
Amount
2013
% of
Average
Total
Deposits
Average
Amount
Avg.
Rate
Paid
% of
Average
Total
Deposits
Average
Amount
2012
Avg.
Rate
Paid
% of
Average
Total
Deposits
$ 125,472
0.00 %
15.9 % $ 99,650
0.00 %
13.6 % $ 65,333 0.00 %
10.3
%
151,917
148,462
89,647
0.75
0.62
0.91
19.2
18.8
11.3
148,969
155,438
0.78
0.60
89,044
0.86
20.3
21.2
12.1
119,121 0.99
140,405 0.61
87,604 0.77
18.7
22.1
13.8
153,039
1.48
19.3
120,504
1.71
16.3
103,222 2.32
16.2
(in thousands)
Demand, non-
interest-bearing
checking
Demand Interest-
bearing
Money market
Savings deposits
Time deposits of
$100,000 or
more
Other time
deposits
122,406
1.51
15.5
119,464
1.70
16.5
120,525 1.93
Total
$ 790,943
.88 %
100.0 % 733,069
.95 %
100.0 % 636,210 1.17 %
18.9
100.0 %
Borrowings. Borrowings decreased from $60.4 million at December 31, 2013 to $24.3 million at December 31,
2014, a decrease of $36.1 million, or 60 percent. The Bank utilizes its available capacity with FHLB-NY as an additional
source of liquidity to fund increases in asset classes not funded by increases in our deposits. The deposit growth experienced
by the Bank during the year ended December 31, 2014 and amounts realized from the decrease in securities available-for-sale
were sufficient to fund our loan growth and increase in bank-owned life insurance, causing us to reduce our borrowings with
the FHLB-NY.
FHLB-Pittsburgh advances were among the liabilities assumed in connection with our acquisition of MoreBank in
September, 2010. The FHLB-Pittsburgh fixed-rate term advances that remained at December 31, 2013 were paid off during
2014 in accordance with their terms. We do not have additional borrowing capacity with the FHLB-Pittsburgh as our
relationship with FHLB-Pittsburgh terminated once these advances were repaid.
Accrued interest payable and other liabilities. Accrued interest payable and other liabilities increased from $3.8
million at December 31, 2013 to $4.6 million at December 31, 2014, an increase of $0.8 million, or 22 percent. This increase
was attributable to increases in accrued salary expense of $0.1 million and accrued expenses and other liabilities of $0.8
million, partially offset by a decrease of $0.1 million in accrued interest payable. The increase in accrued expenses and other
liabilities was primarily attributable to an increase in FDIC assessments payable and income taxes payable. The increase in
FDIC assessments payable is the result of a higher assessment rate due to the Consent Order. The increase in income taxes
payable was attributable to the timing of cash payments at December 31, 2014 as compared to the prior year.
Stockholders’ equity. Stockholders’ equity increased from $64.2 million at December 31, 2013 to $78.5 million at
December 31, 2014, an increase of $14.3 million, or 22 percent. The increase in stockholders’ equity was due to a $9.0
million increase in retained earnings from current year net income, a $4.5 million increase in accumulated other
comprehensive income due to unrealized net gains in the securities available-for-sale portfolio at December 31, 2014
compared to December 31, 2013, and a $0.7 million increase in paid-in-capital due to an increase in stock-based
compensation expense in the current year compared to the prior year.
23
The Bank of Princeton
Comparison of Operating Results for the Years Ended December 31, 2014 and December 31, 2013
General. Net income for the year ended December 31, 2014 was $9.0 million, an increase of approximately $0.2
million, or two percent, from $8.8 million for the year ended December 31, 2013. This increase was primarily attributable to
an increase in net interest income after provision for loan losses that was partially offset by increases in non-interest expense
and income tax expense.
Net interest income. Net interest income after provision for loan losses increased $3.9 million, or 14 percent, to
$31.8 million for the year ended December 31, 2014, compared to $28.0 million for the year ended December 31, 2013. Our
interest rate spread increased from 3.55 percent for the year ended December 31, 2013 to 3.61 percent for the year ended
December 31, 2014, an increase of six basis points. Our average interest-earning assets increased $77.7 million, or ten
percent, while the average yield on those assets was relatively unchanged. The increase in average interest-earning assets
was primarily the result of our ability to continue to increase the size of our loan portfolio. Our average interest-bearing
liabilities increased $49.0 million, or seven percent, while the average cost of those liabilities decreased seven basis points.
Total interest and dividend income. Total interest and dividend income increased $3.5 million, or nine percent, to
$40.6 million for the year ended December 31, 2014, compared to $37.1 million for the prior year. The improvement in
interest income resulted from an increase in the average balance of interest-earning assets as further discussed below.
Interest income and fees on loans increased $3.9 million, or 12 percent, to $36.2 million for the year ended
December 31, 2014, compared to $32.3 million for the prior year. The increase was attributable to an increase in the average
balance of loans receivable, net of $107.3 million from $570.7 million in 2013 to $678.1 million in 2014. This increase was
partially offset by a 33 basis point decrease in the year-over-year average yield on loans. The increase in average loans was
due to increased loan production. The decrease in the average yield on loans was due to lower interest rates on new loan
production that was caused primarily by increasing competition throughout the year ending December 31, 2014.
Interest income on securities available-for-sale decreased approximately $464,000, or ten percent, for the year ended
December 31, 2014 compared to the prior year. This increase was primarily attributable to a $30.2 million decrease in
average balances and a 13 basis point increase in the average yield. Average balances decreased due to sales of securities
that provided cash to fund the increase in our loan portfolio.
Interest income on securities held-to-maturity changed minimally during the year ended December 31, 2014
compared to the prior year period. We continue to maintain our strategy to not purchase additional securities for the held-to-
maturity portfolio as we manage our investment portfolio to allow for greater flexibility as our liquidity needs change.
Interest Expense. Total interest expense increased $42,000 for the year ended December 31, 2014, compared to the
prior year period. This slight increase was due to a $49.0 million increase in average interest-bearing liabilities, which was
almost entirely offset by a seven basis point decrease in the cost of interest-bearing liabilities.
Interest expense on deposits increased $28,000 for the year ended December 31, 2014 compared to the prior year.
Average interest-bearing deposits increased $32.1 million, or five percent, to $665.5 million for the year ended December 31,
2014, compared to $633.4 million in 2013. The cost of interest-bearing deposits decreased five basis points from year to
year. The Bank worked to grow its total deposits during 2014 through organic growth; average interest-bearing demand and
savings deposits as well as average time deposits all increased for the year ended December 31, 2014 compared to the prior
year period. The lower cost of interest-bearing deposits was reflective of our efforts to optimally manage our deposit mix
and the overall market trend for deposit rates, as higher-rate time deposits matured and were replaced by lower-rate time
deposits. Additionally, current market interest rates for other interest-bearing deposits continued to decrease, thereby
allowing us to reduce the interest rate we pay on those deposits as well.
Provision for Loan Losses. The provision for loan losses decreased $452,000 in 2014 compared to the prior year.
The decrease in the 2014 provision for loan losses reflected, among other things, our increase in the allowance for loan losses
attributable to increasing concentrations within the commercial real estate and construction loan categories, the overall
increase in our loan portfolio year-over-year, and the decrease in loan charge-offs, net of recoveries (“net charge-offs”)
recorded in our allowance for loan losses during the year ended December 31, 2014 compared to the prior period. The net
charge-offs recorded in our allowance for loan losses were $65,000 in 2014, compared to $572,000 in 2013. See the section
24
The Bank of Princeton
above titled “Financial Condition —Allowance for Loan Losses” for a discussion of our allowance for loan losses
methodology, including additional information regarding the determination of the provision for loan losses.
Non-Interest Income. Non-interest income increased $71,000 in the year ended December 31, 2014 compared to
the prior year. In 2014, non-interest income included gains of $1.0 million on sales of securities available-for-sale, $1.2
million from service charges and other fees earned in the normal course of banking operations, and $430,000 from bank-
owned life insurance. In 2013, non-interest income included gains of $259,000 on sales of securities available-for-sale, $1.1
million from service charges and other fees earned in the normal course of banking operations, $264,000 from bank-owned
life insurance and an $851,000 gain on life insurance proceeds. The 2013 gain from life insurance proceeds was the result of
the death benefit paid to us on a life insurance policy covering one of our former employees who remained an insured person
in our bank-owned life insurance program following his separation of employment.
Non-Interest Expense. Non-interest expense increased approximately $3.5 million, or 19 percent, to $22.4 million
in 2014, compared to $18.9 million in the prior year. The increase was due to the growth that the Bank experienced during
2014 and additional expenses incurred as a result of the Consent Order.
Salaries and employee benefits increased approximately $1.4 million, or 15 percent, to $11.3 million in 2014,
compared to $9.8 million in the prior year. The increases in costs were related to an increase in average FTEs associated with
the growth of the bank, and included the full-year impact of personnel added within the BSA department during the fourth
quarter of 2013. These 2013 additions to the BSA department were a result of our efforts in the fourth quarter of 2013 to
enhance our BSA/AML compliance program in accordance with the Consent Order.
Occupancy and equipment expenses increased approximately $325,000, or 10 percent, to $3.5 million in 2014
compared to $3.2 million in the prior year. The increase was primarily attributable to the impact of costs associated with an
expanded operations center that was opened in the second quarter of 2014.
Professional fees increased $537,000, or 37 percent, to approximately $2.0 million in 2014 compared to $1.4 million
in 2013. The increase was primarily attributable to a range of professional services procured pursuant to various
requirements of the Consent Order, including those related to internal audit and BSA analytical services. A significant
portion of these incremental expenses were related to Consent Order remediation activities that are not anticipated to be
incurred going forward.
Data processing and communications expense increased $187,000, or 13 percent, to approximately $1.7 million in
2014 compared to $1.5 million in 2013. The increase was attributable to an increase in the number of customer accounts we
process as a direct result of continued growth in the number of loan and deposit accounts we service.
Federal deposit insurance assessments during the year ended December 31, 2014 were $1.2 million, compared to
$567,000 in the prior year. Our federal deposit insurance assessment increased substantially in 2014 as a direct result of the
Consent Order.
OREO, net increased $217,000 in 2014 compared to the prior year. The increase was primarily attributable to the
write-down of two properties below their initial net realizable values in 2014.
Other non-interest expense increased $193,000, or 11 percent, to $1.9 million in 2014, compared to $1.7 million in
the prior year. This increase was primarily attributable to an increase in losses on disposal of assets.
All other non-interest expenses changed minimally during 2014 as we sought to manage our non-interest expenses
and maintain our operating efficiency as we continue to organically grow the bank.
Income Tax Expense. The provision for income taxes increased $193,000, or six percent, to $3.2 million in 2014
compared to $3.0 million in the prior year. The increase was due to a three percent increase in pre-tax income and an increase
in our effective tax rate from 25.3 percent in 2013 to 26.0 percent in 2014. The increase in the effective tax rate was
primarily due to the receipt of an $851,000 tax-exempt gain from life insurance proceeds in 2013.
25
The Bank of Princeton
Average Balance Sheets. The average yields and costs of funds shown in the following table are derived by dividing
income or expense by the daily average balance of assets or liabilities, respectively, for the periods presented. Nonaccrual
loans are included in the average balance of loans receivable, net for all periods presented. No tax-equivalent adjustments
have been made.
(in thousands)
Interest-earning assets:
Loans receivable, net
Investment securities:
Available-for-sale
Held-to-maturity
Other interest-earning assets
Total interest-earning assets
Non-interest-earning assets
Total assets
Interest-bearing liabilities:
Demand, interest-bearing
and savings deposits
Money market
Time deposits
Total interest-bearing deposits
Federal Home Loan Bank
borrowings
Total interest-bearing
liabilities
Non-interest-bearing liabilities
Total liabilities
Stockholders’ equity
Total liabilities and
stockholders’ equity
Interest rate spread(1)
For the Year Ended December 31,
Average
Balance
2014
Interest
Average
Yield/Cost
Average
Balance
2013
Interest
Average
Yield/Cost
$
678,058
$
36,170
5.33 % $
570,720
$
32,285
5.66 %
177,073
421
22,953
878,505
32,167
910,672
241,564
148,462
275,445
665,471
$
$
4,206
21
170
40,567
2.38
4.99
0.74
4.62
1,953
918
4,109
6,980
0.81
0.62
1.49
1.05
207,227
497
22,341
800,785
27,017
827,802
238,012
155,438
239,968
633,418
$
$
42,839
177
0.41
25,903
708,310
130,498
838,808
71,864
7,157
1.01 %
659,321
105,558
764,879
62,923
$
910,672
$
827,802
4,670
23
135
37,113
2.25
4.70
0.60
4.63
1,925
936
4,091
6,952
163
0.81
0.60
1.71
1.10
0.63
7,115
1.08
%
3.61 %
3.55 %
Net interest income
$
33,410
$
29,998
Net yield on interest-
earning assets(2)
Ratio of average interest-
earning assets to average
interest-bearing liabilities
3.80 %
1.24x
3.75 %
1.21x
(1) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost
of interest-bearing liabilities.
(2) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets.
26
The Bank of Princeton
For the Year Ended December 31,
2012
Average
Balance
Interest
Average
Yield/Cost
$
477,366
$
29,133
6.10 %
212,464
922
17,362
708,114
26,977
735,091
206,725
140,405
223,747
570,877
$
$
4,369
37
134
33,673
2.06
4.01
0.77
4.76
1,859
863
4,259
6,981
0.90
0.61
1.90
1.22
34,273
273
0.80
7,254
1.20
%
605,150
70,730
675,880
59,211
$
735,091
(in thousands)
Interest-earning assets:
Loans receivable, net
Investment securities:
Available-for-sale
Held-to-maturity
Other interest-earning assets
Total interest-earning assets
Non-interest-earning assets
Total assets
Interest-bearing liabilities:
Demand, interest-bearing
and savings deposits
Money market
Time deposits
Total interest-bearing deposits
Federal Home Loan Bank
borrowings
Total interest-bearing
liabilities
Non-interest-bearing liabilities
Total liabilities
Stockholders’ equity
Total liabilities and
stockholders’ equity
Interest rate spread(1)
Net interest income
$
26,419
Net yield on interest-
earning assets(2)
Ratio of average interest-
earning assets to average
interest-bearing liabilities
3.56 %
3.72 %
1.17x
(1) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost
of interest-bearing liabilities.
(2) Net yield on interest-earning assets represents net interest income as a percentage of average interest-earning assets.
27
The Bank of Princeton
Rate/Volume Analysis
The following table reflects the sensitivity of our interest income and interest expense to changes in volume and in
yields on interest-earning assets and costs of interest-bearing liabilities during the periods indicated.
(in thousands)
Interest and dividend income:
Loans receivable
Investment securities:
Available-for-sale
Held-to-maturity
Other interest-earnings assets
Total interest-earning assets $
Year Ended December 31,
2014 vs. 2013
Increase (Decrease) Due to
Year Ended December 31,
2013 vs. 2012
Increase (Decrease) Due to
Volume
Rate
Net
Volume
Rate
Net
$
5,726 $
(1,841 ) $
3,885 $
5,281 $
(2,129 ) $
3,152
(665 )
(3 )
4
5,062
$
201
1
31
(1,608 ) $
(464 )
(2 )
35
3,454 $
54
(20 )
30
5,345 $
247
6
(29)
(1,905 ) $
301
(14 )
1
3,440
Interest expense:
Demand, interest-bearing and
savings
Money market
Time deposits
Federal Home Loan Bank
borrowings
$
Total interest-bearing
liabilities
$
29 $
(44 )
530
(1 ) $
26
(512 )
$
28
(18 )
18
253 $
90
277
(187 ) $
(18 )
(444 )
70
(56 )
14
(53)
(57 )
66
72
(167 )
(110 )
585 $
(543 ) $
42 $
567 $
(706 ) $
(139 )
Change in net interest income
$
4,477 $
(1,065)
$
3,412 $
4,778 $
(1,199) $
3,579
Liquidity, Commitments and Capital Resources
Liquidity. Our liquidity, represented by cash and due from banks, 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.
We strive to maintain sufficient liquidity to fund operations, loan demand and to satisfy fluctuations in deposit
levels. We are required to have enough investments that qualify as liquid assets in order to maintain sufficient liquidity to
ensure safe and sound banking operations. Liquidity may increase or decrease depending upon the availability of funds and
comparative yields on investments in relation to the return on loans. We attempt to maintain adequate but not excessive
liquidity, and liquidity management is both a daily and long-term function of our business management. We manage our
liquidity in accordance with a board of directors-approved asset liability policy, which is administered by our asset liability
committee (ALCO). ALCO reports interest rate sensitivity, liquidity, capital and investment-related matters on a quarterly
basis to our board of directors.
We review cash flow projections regularly and update them in order to maintain liquid assets at levels believed to
meet the requirements of normal operations, including loan commitments and potential deposit outflows from maturing
certificates of deposit and savings withdrawals.
While deposits are our primary source of funds, we are also able to generate cash through borrowings from the
FHLB-NY. At December 31, 2014, we had $24.3 million of overnight advances outstanding from the FHLB-NY. At
December 31, 2014, we had available capacity with FHLB-NY, subject to certain collateral restrictions, of $477.5 million.
28
The Bank of Princeton
Additionally, we are a member of the Atlantic Community Bankers Bank (“ACBB”) and as of December 31, 2014,
we had available capacity with ACBB of $10.0 million to provide short-term liquidity generally for a period of not more than
fourteen days.
Contractual Obligations. We have non-cancelable operating leases for branch offices and our operations center.
The following is a schedule by years of future minimum rental payments required under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year at December 31, 2014:
Years Ended December 31:
2015
2016
2017
2018
2019
Thereafter
Total minimum payments required
(in thousands)
$ 1,377
1,278
1,070
922
669
1,037
$ 6,353
Capital Resources. Consistent with our goals to operate as a sound and profitable financial institution, we actively
seek to maintain our status as a well-capitalized institution in accordance with regulatory standards. As of December 31,
2014, we met the capital requirements to be considered “well capitalized”. See Note 14 - Regulatory Capital Requirements in
the Notes to Consolidated Financial Statements included within this Form 10-K for more information regarding our capital
resources.
Off-Balance Sheet Arrangements
We are a party to financial instruments with off-balance sheet risk in the normal course of our business of investing
in loans and securities as well as in the normal course of maintaining and improving our facilities. These financial
instruments include significant purchase commitments, such as commitments related to capital expenditure plans and
commitments to purchase investment securities or mortgage-backed securities, and commitments to extend credit to meet the
financial needs of our customers.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the loan contract. Commitments generally have fixed expiration dates or other termination clauses and may
require payment of a fee by our customers. Our exposure to credit loss in the event of non-performance by the counterparty to
the financial instrument for commitments to extend credit is represented by the contractual notional amount of those
instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance-
sheet instruments. Since many of the commitments are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements.
We had the following off-balance sheet financial instruments whose contract amounts represent credit risk at
December 31:
(in thousands)
2014
2013
Performance and standby letters of credit
Commitments to fund loans
Unfunded commitments under lines of credit
$
$
8,843
91,228
11,320
111,391
$
$
7,561
76,027
9,255
92,843
For additional information regarding our outstanding lending commitments at December 31, 2014, see Note 10 –
Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in this Annual Report on Form
10-K.
29
The Bank of Princeton
Impact of Inflation
The financial statements included in this document have been prepared in accordance with accounting principles
generally accepted in the United States of America. These principles require the measurement of financial position and
results of operations in terms of historical dollars, without considering changes in the relative purchasing power of money,
over time, due to inflation. Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more
significant impact on our performance than the effects of general levels of inflation. Interest rates, however, do not
necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are
affected by inflation.
Return on Equity and Assets
The following table presents certain performance ratios for the years ended December 31, 2014, 2013 and 2012.
Return on Average Assets (ROA)
Return on Average Equity (ROE)
Average Equity to Average Assets
2014
0.99%
12.53%
7.89%
2013
1.06%
13.99%
7.60%
2012
0.86%
10.66%
8.05%
Our dividend payout ratio was zero for all periods presented above as we did not declare or pay dividends during
any of the years ended December 31, 2014, 2013 and 2012.
Critical Accounting Policies and Estimates
In the preparation of our financial statements, we have adopted various accounting policies that govern the
application of accounting principles generally accepted in the United States and in accordance with general practices within
the banking industry. Our significant accounting policies are described in our financial statements under Note 1- Summary
of Significant Accounting Policies. While all of these policies are important to understanding the financial statements,
certain accounting policies described below involve significant judgment and assumptions by management that have a
material impact on the carrying value of certain assets and liabilities. We consider these accounting estimates to be critical
accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we
believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions we make, actual
results could differ from these judgments and assumptions that could have a material impact on the carrying values of our
assets and liabilities and our results of operations.
Allowance for Credit Losses. The allowance for credit losses consists of the allowance for loan losses and the
reserve for unfunded lending commitments. The allowance for loan losses represents our estimate of losses inherent in the
loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending
commitments represents our estimate of losses inherent in our unfunded loan commitments and is recorded in other liabilities
on the balance sheet. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-
offs, net of recoveries. Generally, loans deemed to be uncollectible are charged-off against the allowance for loan losses, and
subsequent recoveries, if any, are credited to the allowance for loan losses. All, or part, of the principal balance of loans
receivable are charged-off to the allowance for loan losses when it is determined that the repayment of all, or part, of the
principal balance is highly unlikely. For a more detailed discussion of our allowance for loan loss methodology and the
allowance for loan losses see the section titled “Analysis of the Allowance for Loan Losses” in this “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Acquired Loans. Loans that we acquire in acquisitions subsequent to January 1, 2009 are recorded at fair value with
no carryover of the related allowance for loan losses. Determining the fair value of the loans involves estimating the amount
and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a
market rate of interest.
The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable
discount or premium and is recognized in interest income over the remaining life of the loans. The difference between the
contractually-required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the
non-accretable discount. The non-accretable discount represents estimated future credit losses expected to be incurred over
30
The Bank of Princeton
the life of the loans. Subsequent decreases to the expected cash flows require us to evaluate the need for an allowance for
loan losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the non-
accretable discount which we then reclassify as accretable discount that is recognized in interest income over the remaining
life of the loan using the level-yield method. Our evaluation of the amount of future cash flows that we expect to collect is
performed in a similar manner as that used to determine our allowance for loan losses. Charge-offs of the principal on
acquired loans would be first applied to the non-accretable discount portion of the fair value adjustment.
Income Taxes. We account for income taxes in accordance with income tax accounting guidance contained in
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, Income Taxes.
This includes guidance related to accounting for uncertainties in income taxes, which sets out a consistent framework to
determine the appropriate level of tax reserves to maintain for uncertain tax positions. We had no material unrecognized tax
benefits or accrued interest and penalties as of December 31, 2014 and 2013. Our policy is to account for interest and
penalties as a component of other expense.
We have provided for federal and state income taxes on the basis of reported income. The amounts reflected on our
tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for financial
reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted for as deferred taxes
applicable to future periods.
Deferred income tax expense or benefit is determined by recognizing deferred tax liabilities and assets, respectively,
for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred assets and liabilities of a change in tax rates is recognized in earnings in the period that
includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance provided for the full
amount which is not more-likely-than-not to be realized.
Recently Issued Accounting Standards
See Note 1 to the Consolidated Financial Statements contained in this Annual Report on Form 10-K for a discussion
of recently issued accounting standards.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
Item 8. Financial Statements and Supplementary Data
The following audited financial statements are set forth in this Annual Report on Form 10-K on the pages listed in
the Index to Consolidated Financial Statements below.
31
The Bank of Princeton
THE BANK OF PRINCETON
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
33
34
35
36
37
38
40
32
The Bank of Princeton
33
The Bank of Princeton
THE BANK OF PRINCETON
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
ASSETS
Cash and due from banks
Securities available-for-sale
Securities held-to-maturity (fair value of $456 and $454, respectively)
Loans receivable, net of allowance for loan losses of $10,008 and $8,493
at December 31, 2014 and 2013, respectively
Bank-owned life insurance
Other real estate owned (OREO)
Premises and equipment, net
Accrued interest receivable and other assets
December 31,
2014
2013
$
$
31,872
163,800
420
723,131
17,929
804
5,816
11,490
27,425
193,314
423
625,340
8,799
927
5,772
15,428
TOTAL ASSETS
$
955,262
$
877,428
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest-bearing
Interest-bearing
Total deposits
Borrowings
Accrued interest payable and other liabilities
TOTAL LIABILITIES
STOCKHOLDERS’ EQUITY:
Common stock, $5.00 par value, 10,000,000 authorized, 4,582,315 and
4,578,679 shares issued and outstanding at December 31, 2014 and
2013, respectively
Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
TOTAL STOCKHOLDERS’ EQUITY
$
135,157 $
712,700
847,857
24,300
4,603
876,760
22,912
29,755
25,259
576
78,502
107,616
641,394
749,010
60,412
3,774
813,196
22,893
29,011
16,258
(3,930)
64,232
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
955,262
$
877,428
See notes to consolidated financial statements.
34
The Bank of Princeton
THE BANK OF PRINCETON
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Years Ended
December 31,
2014
2013
$
36,170
$
32,285
INTEREST AND DIVIDEND INCOME
Loans receivable, including fees
Securities available-for-sale:
Taxable
Tax-exempt
Securities held-to-maturity
Other interest and dividend income
TOTAL INTEREST AND DIVIDEND INCOME
INTEREST EXPENSE
Deposits
Borrowings
TOTAL INTEREST EXPENSE
NET INTEREST INCOME
Provision for loan losses
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
NON-INTEREST INCOME
Gain on sale of securities available-for-sale, net
Income from bank-owned life insurance
Fees and service charges
Gain from life insurance proceeds
Other income
TOTAL NON-INTEREST INCOME
NON-INTEREST EXPENSE
Salaries and employee benefits
Occupancy and equipment
Professional fees
Data processing and communications
Federal deposit insurance assessment
Advertising and promotion
Office expense
Other real estate owned, net
Other
TOTAL NON-INTEREST EXPENSE
INCOME BEFORE INCOME TAX EXPENSE
INCOME TAX EXPENSE
NET INCOME
Earnings per common share-basic
Earnings per common share-diluted
See notes to consolidated financial statements.
$
$
$
35
2,055
2,151
21
170
40,567
6,980
177
7,157
33,410
1,580
31,830
1,006
430
1,193
-
117
2,746
11,288
3,479
1,975
1,665
1,223
208
311
316
1,942
22,407
12,169
3,168
9,001
1.97
1.92
$
$
$
2,417
2,253
23
135
37,113
6,952
163
7,115
29,998
2,032
27,966
259
264
1,141
851
160
2,675
9,844
3,154
1,438
1,478
567
208
328
99
1,749
18,865
11,776
2,975
8,801
1.92
1.90
The Bank of Princeton
THE BANK OF PRINCETON
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
For the Years ended
December 31,
2014
2013
NET INCOME
Other comprehensive income (loss)
Unrealized holding gains (losses) arising during period on securities
available-for-sale
Income tax effect on unrealized holding gains (losses)
Less: reclassification adjustment for gains on sales of securities
available-for-sale1
Income tax effect on reclassification adjustment for gains on sales of
securities available-for-sale2
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
$
9,001
$
8,801
8,118
(2,948 )
(1,006 )
342
4,506
13,507
$
(10,755)
3,602
(259 )
88
(7,324)
1,477
$
1 Amounts are included in Gain on sale of securities available-for-sale, net on the Consolidated Statements of
Income as a separate element within Total non-interest income.
2 Amounts are included in Income Tax Expense in the Consolidated Statements of Income.
See notes to consolidated financial statements.
36
The Bank of Princeton
THE BANK OF PRINCETON
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2014 and 2013
(in thousands, except share and per share data)
Common
stock
Paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
22,893
-
-
-
-
22,893
-
-
28,539
-
-
7,457
8,801
-
1
471
$ 29,011
-
-
-
-
$
16,258 $
9,001
-
3,394
-
(7,324)
-
-
(3,930)
-
4,506
$
62,283
8,801
(7,324)
1
471
64,232
9,001
4,506
19
-
22,912
$
22
722
$ 29,755
-
-
$
25,259 $
-
-
576
$
41
722
78,502
$
Balance, January 1, 2013
Net income
Other comprehensive loss
Stock options exercised (60 shares at
$10.50 per share and 50 shares at
$12.00 per share)
Stock-based compensation expense
Balance, December 31, 2013
Net income
Other comprehensive income
Stock options exercised (66 shares at
$13.75 per share, 3,520 shares at
various and 50 shares at $12.00
per share)
Stock-based compensation expense
Balance, December 31, 2014
See notes to consolidated financial statements.
37
The Bank of Princeton
THE BANK OF PRINCETON
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31,
2014
2013
$
9,001
$
8,801
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses
Depreciation and amortization
Stock-based compensation
Amortization of premiums and accretion of discounts on securities
Accretion of net deferred loan fees and costs
Amortization of premiums and accretion of discounts on deposits
Amortization of premiums on borrowings
Net realized gains on sale of securities available-for-sale
Increase in cash surrender value of bank-owned life insurance
Gain from life insurance proceeds
Loss on disposition of premises and equipment
Deferred income tax expense
Net loss on other real estate owned
Amortization of core deposit intangible
Increase in accrued interest receivable and other assets
Increase (decrease) in accrued interest payable and other liabilities
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities
Proceeds from sale of available-for-sale securities
Maturities, calls and principal repayments of available-for-sale securities
Maturities, calls and principal repayments of held-to-maturity securities
Net increase in loans
Purchases of bank-owned life insurance
Proceeds from bank-owned life insurance
Proceeds on sale of other real estate owned
Purchases of premises and equipment
Redemptions (purchases) of restricted bank stock
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits
Net (repayments) proceeds of overnight borrowings
Repayments of term borrowings
Proceeds from exercise of stock options
NET CASH PROVIDED BY FINANCING ACTIVITIES
1,580
959
722
(687)
763
158
(11)
(1,006)
(430)
-
57
(452)
197
126
(130)
829
11,676
(30,121)
46,256
22,183
4
(100,628)
(8,700)
-
420
(1,060)
1,788
(69,858)
98,689
(33,800)
(2,301)
41
62,629
2,032
920
471
(1,131)
621
59
(29)
(259)
(264)
(851)
-
(476)
51
125
(579)
(2,335)
7,156
(64,313)
10,257
37,159
177
(96,941)
-
1,234
1,635
(851)
(1,490)
(113,133)
76,587
35,900
(3,705)
1
108,783
2,806
24,619
27,425
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
4,447
27,425
31,872
$
$
See notes to consolidated financial statements.
38
The Bank of Princeton
THE BANK OF PRINCETON
CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)
(in thousands)
For the Years Ended December 31,
2014
2013
SUPPLEMENTARY CASH FLOWS INFORMATION:
Interest paid
Income taxes paid
$
$
7,259 $
3,198 $
7,008
4,392
SUPPLEMENTARY SCHEDULE OF NONCASH ACTIVITIES:
Transfers from loans receivable, net to other real estate owned (OREO)
$
494 $
1,063
See notes to consolidated financial statements.
39
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 twelve branches, is generally
an area within an approximate 50 mile radius of Princeton, NJ, including parts of Mercer, Somerset, Hunterdon,
Monmouth and Middlesex Counties in central New Jersey, and additional areas in portions of Philadelphia, Montgomery
and Bucks Counties in Pennsylvania.
The Bank offers traditional retail banking services, one-to-four-family residential mortgage loans, multi-family and
commercial mortgage loans, construction loans, commercial business loans and consumer loans, including home equity
loans and lines of credit. As of December 31, 2014, the Bank had 125 full-time employees and 6 part-time
employees. The Bank maintains a website at www.thebankofprinceton.com.
Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of 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 consolidated financial statements have been prepared in conformity with accounting principles generally accepted in
the United States of America (“GAAP”).
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 loan losses, the determination of
other-than-temporary impairment of securities and the valuation of deferred tax assets.
Management believes that the allowance for loan losses is adequate as of December 31, 2014 and 2013. While
management uses current information to recognize losses on loans, future additions to the allowance for loan 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 Bank’s
allowance for loan losses. Such agencies may require the Bank 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.
Subsequent Events
Management evaluated subsequent events until the date of issuance of this report and concluded that no events occurred
that were of a material nature.
40
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
Significant group concentrations of credit risk
Most of the Bank’s activities are with customers located within the Mercer County, New Jersey and surrounding areas as
well as certain Philadelphia, Pennsylvania metropolitan areas. The Bank does not have any portion of its business
dependent on a single or limited number of customers or industries, the loss of which would have a material adverse
effect on its business. No substantial portion of loans is concentrated within a single industry or group of related
industries, except that a significant majority of commercial loans are secured by real estate. There are numerous risks
associated with commercial and consumer lending that could impact the borrowers’ ability to repay on a timely basis.
They include, but are not limited to: the owner’s business expertise, changes in local, national, and in some cases
international economies, competition, governmental regulation, and the general financial stability of the borrowing
entity.
Transfers of financial assets
Transfers of financial assets, including loan and loan participation sales, are accounted for as sales when control over the
assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been
isolated from the Bank, (2) the transferee obtains the right, free of conditions that constrain it from taking advantage of
that right, to pledge or exchange the transferred assets, and (3) the Bank does not maintain effective control over the
transferred assets through an agreement to repurchase them before their maturity.
Cash and due from banks
Cash and due from banks include cash on hand, on deposit at other financial institutions and federal funds sold with
original maturities of 90 days or less. Generally, federal funds are purchased for one-day periods.
Securities
Investments in debt securities that the Bank has the positive intent and ability to hold to maturity are classified as held-
to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized
holding gains and losses included in earnings. Debt and equity securities not classified as trading securities or as held-to-
maturity securities are classified as available-for-sale securities and reported at fair value, with unrealized holding gains
or losses, net of deferred income taxes, reported in the accumulated other comprehensive income (loss) component of
stockholders’ equity. The Bank held no trading securities at December 31, 2014 and 2013. Discounts and premiums are
accreted and amortized, respectively, to income by use of the level-yield method. Gain or loss on sales of securities
available-for-sale is based on the specific identification method.
Management evaluates securities for other-than-temporary-impairment (“OTTI”) quarterly, and more frequently when
economic or market conditions warrant such an evaluation. In determining OTTI under Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities,
management considers many factors, including: (1) the length of time and the extent to which the fair value has been less
than amortized cost; (2) the financial condition and near term prospects of the issuer; (3) whether the market decline was
affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely
than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an OTTI
decline exists involves a high degree of subjectivity and judgment and is based on information available to management
at a point in time. OTTI is deemed to have occurred if there has been an adverse change in the remaining expected
future cash flows.
When an OTTI of debt securities occurs, the amount of the OTTI recognized in earnings depends on whether the Bank
intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized
cost basis. If the Bank intends to sell or more likely than not will be required to sell the security before recovery of its
amortized cost basis, the OTTI shall be recognized in earnings at an amount equal to the difference between the
security’s amortized cost basis and its fair value at the balance sheet date. If the Bank does not intend to sell the
41
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
security and it is not more likely than not that the Bank will be required to sell the security before recovery of its
amortized cost basis, the OTTI shall be separated into the amount representing the credit loss and the amount related to
all other factors. The amount of the total OTTI related to the credit loss is determined based on the present value of cash
flows expected to be collected and is recognized in earnings. The amount of the total OTTI related to other factors shall
be recognized in other comprehensive income, net of applicable tax benefit. The previous amortized cost basis less the
OTTI recognized in earnings shall become the new amortized cost basis of the investment.
For held-to-maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive
income for the noncredit portion of a previous other-than-temporary impairment will be amortized prospectively over the
remaining life of the security on the basis of the timing of future estimated cash flows of the security.
For equity securities, when the Bank decides to sell an impaired available-for-sale security and the entity does not expect
the fair value of the security to fully recover before the expected time of sale, the security is deemed other-than-
temporarily impaired in the period in which the decision to sell is made. The Bank recognizes an impairment loss when
the impairment is deemed other than temporary even if a decision to sell has not been made.
Loans Receivable
Loans receivable are reported at their outstanding unpaid principal balances, net of an allowance for loan losses, deferred
fees and costs, and fair value adjustments under the acquisition method of accounting, as applicable. Interest income is
accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, and fair value
adjustments under the acquisition method of accounting are deferred and recognized as an adjustment of the yield on the
related loans. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the
level-yield method.
The loan receivable portfolio is segmented into commercial real estate, commercial and industrial, construction,
residential first-lien mortgage, home equity and consumer loan segments.
For all segments of loans receivable, the accrual of interest is discontinued when the contractual payment of principal or
interest is 90 days past due or management has serious doubts about further collectability of principal or interest, even
though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is
either guaranteed or well-secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the
current year is reversed and unpaid interest accrued in prior years is charged against the allowance for loan
losses. Interest received on nonaccrual loans, including impaired loans, generally is either applied against principal or
reported as interest income, according to management’s judgment as to the collectability of principal. Generally, loans
are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual
terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual
principal and interest is no longer in doubt. The past due status of all segments of loans receivable is determined on
contractual due dates for loan payments.
Allowance for credit losses
The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending
commitments. The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as
of the balance sheet date and is recorded as a reduction to loans. The reserve for unfunded lending commitments
represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities
on the Consolidated Statements of Financial Condition. The allowance for loan losses is increased by the provision for
loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the
allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal
balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part,
of the principal balance is highly unlikely.
42
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
The allowance for loan losses is maintained at a level considered adequate to provide for probable losses. The Bank
performs, at least quarterly, an evaluation of the adequacy of the allowance. The allowance is based on past loan loss
experience (which is bound by the Bank’s limited operating history), known and inherent risks in the portfolio, adverse
situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, the
composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently
subjective as it requires material estimates that may be susceptible to significant revision as more information becomes
available.
The allowance consists of specific, general and unallocated components. The specific component relates to loans that
are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted
cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that
loan. The general component covers pools of loans by loan segment, including loans not considered impaired, as well as
smaller balance homogeneous loans, such as residential mortgage, home equity and consumer loans. These pools of
loans are evaluated for loss exposure based upon historical loss rates for each of these loan segments, adjusted for
qualitative factors. These qualitative risk factors include:
1. Lending policies and procedures, including underwriting standards and collection, charge-off, and recovery
practices;
2. National, regional, and local economic and business conditions, as well as the condition of various market
segments, including the value of underlying collateral for collateral-dependent loans;
3. Nature and volume of the portfolio and terms of loans;
4. Experience, ability, and depth of lending management and staff;
5. Volume and severity of past due, classified and nonaccrual loans, as well as other loan modifications;
6. Quality of the Bank’s loan review system, and the degree of oversight by the Bank’s board of directors;
7. Existence and effect of any concentrations of credit and changes in the level of such concentrations; and
8. Effect of external factors, such as competition and legal and regulatory requirements.
The Bank determines the allowance for credit losses by portfolio segment, which consists of commercial real estate
loans, commercial and industrial loans, construction loans, residential first-lien mortgage loans, home equity and
consumer loans. The Bank estimates the inherent risk of loss on all loans by portfolio segment, based primarily on the
risk factors identified above and by applying a weight factor to each element for each portfolio segment.
Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment
using relevant information available at the time of the evaluation. Adjustments to the factors are supported through
documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.
Residential first-lien mortgage loans and home equity loans involve certain risks such as interest rate risk and risk of
non-repayment. Adjustable-rate loans decrease the interest rate risk to the Bank that is associated with changes in
interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower rises to the
extent permitted by the terms of the loan, thereby increasing the potential for default. At the same time, the
marketability of the underlying property may be adversely affected by higher interest rates. Repayment risk can be
affected by job loss, divorce, illness and personal bankruptcy of the borrower.
43
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
Construction lending is generally considered to involve a high degree of risk due to the concentration of principal in a
limited number of loans and borrowers and the effects of general economic conditions on developers and
builders. Moreover, a construction loan can involve additional risks because of the inherent difficulty in estimating both
a property's value at completion of the project and the estimated cost, including interest, of the project. The nature of
these loans is such that they are generally difficult to evaluate and monitor. In addition, speculative construction loans to
a builder are not necessarily for projects which are pre-sold or leased, and thus pose a greater potential risk to the Bank
than construction loans to individuals on their personal residences.
Commercial real estate lending entails significant additional risks as compared with single-family residential real estate
lending. Such loans typically involve large loan balances to single borrowers or groups of related borrowers. The
payment experience on such loans is typically dependent on the successful operation of the real estate project. The
success of such projects is sensitive to changes in supply and demand conditions in the market for commercial real estate
as well as economic conditions generally.
Commercial and industrial lending is generally considered higher risk due to the concentration of principal in a limited
number of loans and borrowers and the effects of general economic conditions on the business. Commercial business
loans are primarily secured by inventories and other business assets. In most cases, any repossessed collateral for a
defaulted commercial business loan will not provide an adequate source of repayment of the outstanding loan balance.
Consumer loans generally have shorter terms and higher interest rates than other lending but generally involve more
credit risk because of the type and nature of the collateral and, in certain cases, the absence of collateral. In addition,
consumer lending collections are dependent on the borrower's continuing financial stability, and thus are more likely to
be adversely effected by job loss, divorce, illness and personal bankruptcy. In most cases, any repossessed collateral for
a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan balance.
An unallocated component of the allowance for loan losses is maintained to cover uncertainties that could affect
management's estimate of probable losses. The unallocated component of the allowance reflects the margin of
imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses
in the portfolio.
The Bank further segregates the portfolio into original legacy loans and those loans acquired in the MoreBank merger.
The loans acquired in the MoreBank merger were recorded at fair value with no carryover of the related allowance for
loan losses.
A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable
to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include payment status, collateral value and
the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified as impaired loans. Management determines the
significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the
borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest
owed. Impairment is measured on a loan-by-loan basis for commercial real estate loans, commercial and industrial loans
and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest
rate or the fair value of the loan collateral if the loan is collateral-dependent. An allowance for loan losses is established
for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of substantially all of
the Bank’s impaired loans are measured based on the estimated fair value of the loan’s collateral, less costs to sell the
property.
44
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
For commercial real estate loans, estimated fair values of the real estate collateral are determined primarily through third-
party appraisals. When a real estate-secured loan becomes impaired, a decision is made regarding whether an updated
appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most
recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. Appraised
values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair
value. The discounts also include estimated costs to sell the property.
For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable and inventory and
equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports,
accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally
discounted based on the age of the financial information or the quality of the assets.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Bank
does not separately identify individual residential first-lien mortgage loans, home equity loans and consumer loans for
impairment disclosures, unless such loans are a troubled debt restructuring.
Loans whose terms are modified are classified as troubled debt restructurings if the Bank grants borrower concessions
and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt
restructuring generally involve a temporary reduction in interest rate or an extension of a loan’s stated maturity
date. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the
modified terms, are current for six consecutive months after modification. Loans classified as troubled debt
restructurings are designated as impaired.
The allowance calculation methodology includes further segregation of loan segments into risk-rating categories. The
borrower’s overall financial condition, repayment sources, guarantors and value of collateral, if appropriate, are
evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for
commercial and consumer loans.
Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans
classified special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the
potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-
defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately
protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans
classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that
collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified loss
are considered uncollectible and are charged-off to the allowance for loan losses. Loan not classified are rated pass.
Based on management’s comprehensive analysis of the loan portfolio, management believes the allowance for loan
losses is adequate at the reported dates.
Bank-owned life insurance
The Bank is the beneficiary of insurance policies on the lives of certain officers of the Bank. This life insurance
investment is accounted for using the cash surrender value method and is recorded at its net realizable value. Increase in
cash surrender values are recorded as non-interest income.
Other real estate owned
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to
sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically
performed by management and the assets are then recorded at the lower of carrying amount or fair value less cost to sell.
Revenue and expenses from operations and changes in the valuation allowance are included in non-interest expense.
45
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
Premises and equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-
line method over the shorter of the lease term or estimated useful lives of the related assets.
Accrued interest receivable and other assets
Accrued interest receivable and other assets include accrued interest receivable, deferred tax asset, net, restricted
investments in bank stocks, prepaid assets and other assets.
Federal law requires a member institution of the Federal Home Loan Bank (“FHLB”) system to hold restricted stock of
its district Federal Home Loan Bank according to a predetermined formula. Restricted stock in the amount of $1.9
million and $3.7 million is carried at cost at December 31, 2014 and 2013, respectively.
Management’s determination of whether these investments are impaired is based on an assessment of the ultimate
recoverability of their cost, rather than by recognizing temporary declines in value. The determination of whether a
decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of the decline in
net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has
persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments
in relation to the operating performance of the FHLB and (3) the impact of legislative and regulatory changes on
institutions and, accordingly, on the customer base of the FHLB.
The Bank also held $100,000 of stock in Atlantic Community Bankers Bank (“ACBB”) at December 31, 2014 and
2013.
Management believes no impairment charge is necessary related to the FHLB restricted stock or the ACBB restricted
stock as of December 31, 2014 or 2013.
Intangible assets
The acquisition of MoreBank on September 30, 2010 and the acquisition of a branch in 2010 resulted in the Bank
recording core deposit intangibles of $551,000 and $100,000, respectively. The core deposit intangible asset is
amortized to expense on a straight-line basis over the expected period of benefit, which was established initially to be
5 years for the MoreBank acquisition and 10 years for the branch acquisition. The core deposit intangible, net of
accumulated amortization, was approximately $104,000 and $230,000 as of December 31, 2014 and 2013, respectively.
Amortization expense is anticipated to be approximately $65,000 in 2015 and approximately $9,000 in 2016, 2017, 2018
and 2019, respectively.
The recoverability of the carrying value of intangible assets will be evaluated whenever changes in circumstances
indicate recoverability may be in doubt and there may be impairment. Permanent declines in value, if any, will be
charged to expense. There were no impairment charges in the years ended December 31, 2014 and 2013.
Income taxes
The Bank accounts for income taxes in accordance with income tax accounting guidance contained in FASB ASC Topic
740, Income Taxes. This includes guidance related to accounting for uncertainty in income taxes, which sets out a
consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax positions. The
Bank had no material unrecognized tax benefits or accrued interest and penalties as of December 31, 2014 and
2013. The Bank’s policy is to account for interest and penalties as a component of other non-interest expense. The Bank
is subject to income taxes in the U. S. and various state and local jurisdictions. As of December 31, 2014, tax years after
2011 are subject to federal examination and tax years after 2010 to state examination. Tax regulations are subject to
interpretation of the related tax laws and regulations and require significant judgment to apply.
46
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
Federal and state income taxes have been provided on the basis of reported income or loss. The amounts reflected on the
tax returns differ from these provisions due principally to temporary differences in the reporting of certain items for
financial reporting and income tax reporting purposes. The tax effect of these temporary differences is accounted for as
deferred taxes applicable to future periods.
Deferred income tax expense or benefit is determined by recognizing deferred tax liabilities and assets, respectively, for
the estimated future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in
the period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation allowance
provided for the full amount which is not more likely than not to be realized.
Off-balance sheet financial instruments
In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of
commitments to extend credit and letters of credit. Such financial instruments are recorded in the statement of financial
condition when they are funded.
Employee benefit plan
The Bank sponsors a 401(k) plan into which all employees are eligible to contribute the maximum allowed by the
Internal Revenue Code of 1986, as amended. The Bank may make discretionary matching contributions. The Bank made
matching contributions to employees of $77,000 and $71,000, respectively during the years ended December 31, 2014
and 2013.
Stock compensation plans
The stock compensation accounting guidance set forth in FASB ASC Topic 718, Compensation - Stock Compensation,
requires that compensation costs relating to share-based payment transactions be recognized in financial statements. That
cost will be measured based on the grant date fair value of the equity or liability instruments issued. The stock
compensation accounting guidance covers a wide range of share-based compensation arrangements including stock
options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.
The stock compensation accounting guidance requires that compensation costs for all stock awards be calculated and
recognized over the employees’ service period, generally defined as the vesting period. For awards with graded vesting,
compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-
Scholes model is used to estimate the fair value of stock options.
Earnings per share
Basic earnings per share amounts are calculated by dividing income available to common stockholders by the weighted
average common shares outstanding during the period, and exclude any dilutive effects of stock options and warrants.
Diluted earnings per share amounts include the dilutive effects of stock options and warrants whose exercise price is less
than the market price of the Bank’s shares. Diluted earnings per share amounts are calculated by dividing income
available to common stockholders by the weighted average common shares outstanding during the period if options and
warrants were exercised and converted into common stock, using the treasury stock method.
Advertising costs
The Bank charges the costs of advertising to expense as incurred.
47
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies (Continued)
Comprehensive income
Accounting principles generally require that recognized revenues, expenses, gains and losses be included in net income.
Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are
reported as a separate component of the equity section of the consolidated statements of financial condition, such items,
along with net income, are components of comprehensive income. Accumulated other comprehensive income is
comprised of net unrealized holding gains and losses, net of taxes, on available-for-sale securities. Realized gains or
losses are reclassified out of accumulated other comprehensive income when the underlying security is sold, based upon
the specific identification method.
Reclassifications
Certain amounts as of and for the year ended December 31, 2013 have been reclassified to conform to the current year’s
presentation. These reclassifications did not have any impact on stockholders’ equity, net income or cash flows.
Recently issued accounting standards
In January 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-04, Receivables-Troubled Debt
Restructurings by Creditors (Subtopic 310-40). The amendments in this update clarify that an in-substance repossession
or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property
collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate
property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property
to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal
agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed
residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans
collateralized by residential real estate property that are in the process of foreclosure according to local requirements of
the applicable jurisdiction. The amendments in this update are effective for annual periods, and interim periods within
those annual periods, beginning after December 15, 2014. The Bank does not expect the adoption of this ASU to have a
material impact on the consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 660): Summary and
Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—
Contracts with Customers (Subtopic 340-40). The guidance in this update supersedes the revenue recognition
requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry
topics of the Accounting Standards Codification. For public companies, this update will be effective for interim and
annual periods beginning after December 15, 2016. The Bank is currently assessing the impact that this guidance will
have on its consolidated financial statements, but does not expect the guidance to have a material impact on the
consolidated financial statements.
In August 2014, the FASB issued ASU 2014-14, Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-
40), Classification of Certain Government-guaranteed Mortgage Loans upon Foreclosure. The amendments in this
update require that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure
if the following conditions are met: 1) the loan has a government guarantee that is not separable from the loan before
foreclosure; 2) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor
and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and 3) at the time of
foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon
foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and
interest) expected to be recovered from the guarantor. The amendments in this update are effective for public business
entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The
Bank does not expect the adoption of this ASU to have a material impact on the consolidated financial statements.
48
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 – Earnings Per Share
The following schedule presents earnings per share data for the years ended December 31, 2014 and 2013:
Net income applicable to common stock
Weighted average number of common shares outstanding
Basic earnings per share
Net income applicable to common stock
Weighted average number of common shares outstanding
Dilutive effect of potential common shares
Weighted average number of diluted common shares outstanding
Diluted earnings per share
Twelve months ended
December 31,
2014
2013
(in thousands, except per share
data)
$
$
$
$
9,001 $
4,579
1.97 $
9,001 $
4,579
114
4,693
1.92 $
8,801
4,578
1.92
8,801
4,578
63
4,641
1.90
Options and warrants to purchase 606,834 shares of common stock at a weighted average exercise price of $12.41 were
included in the computation of diluted earnings per share for the year ended December 31, 2014. Options to purchase 75,750
shares of common stock at a weighted average exercise price of $22.22 were not included in the computation of diluted
earnings per share because the exercise price equaled or exceeded the estimated fair value of our common stock at December
31, 2014.
Options and warrants to purchase 357,967 shares of common stock at a weighted average exercise price of $11.25 were
included in the computation of diluted earnings per share for the year ended December 31, 2013. Options to purchase
222,900 shares of common stock at a weighted average exercise price of $16.37 were not included in the computation of
diluted earnings per share because the exercise price equaled or exceeded the estimated fair value of our common stock at
December 31, 2013.
Note 3 – Investment Securities
The following summarizes the amortized cost and estimated fair value of securities available-for-sale at December 31, 2014
and 2013 with gross unrealized gains and losses therein:
Amortized
Cost
December 31, 2014
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(in thousands)
Fair Value
Available-for-sale:
U.S. Treasury securities
Mortgage-backed securities-U.S.
Government Sponsored Enterprises (GSEs)
Obligations of state and
political subdivisions
$
$
14,770 $
-
$
(219 ) $
14,551
76,428
1,006
(246 )
77,188
71,665
162,863 $
705
1,711
$
(309 )
(774 ) $
72,061
163,800
49
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Investment Securities (Continued)
Amortized
Cost
December 31, 2013
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(in thousands)
Fair Value
Available-for-sale:
U.S. Treasury securities
Mortgage-backed securities-U.S.
Government Sponsored Enterprises (GSEs)
Obligations of state and
political subdivisions
$
$
38,112 $
-
$
(2,423 ) $
35,689
72,680
1,383
(979 )
73,084
88,697
199,489 $
230
1,613
$
(4,386 )
(7,788 ) $
84,541
193,314
The unrealized losses, categorized by the length of time in a continuous loss position, and the fair value of related securities
available-for-sale as of December 31, 2014 are as follows:
December 31, 2014:
US Treasury securities
Mortgage-backed
securities-U.S.
Government Sponsored
Enterprises (GSEs)
Obligations of state and
political subdivisions
Less than 12 Months
Fair
Value
Unrealized
Losses
More than 12 Months
Fair
Value
Unrealized
Losses
(in thousands)
Total
Fair
Value
Unrealized
Losses
$
-
$
- $
14,551 $
(219)
$
14,551
$
(219)
-
-
-
-
$
$
-
11,822
(246)
11,822
-
- $
22,752
49,125 $
(309)
(774)
$
22,752
49,125
$
(246)
(309)
(774)
The unrealized losses, categorized by the length of time in a continuous loss position, and the fair value of related securities
available-for-sale as of December 31, 2013 are as follows:
Less than 12 Months
Fair
Value
Unrealized
Losses
More than 12 Months
Fair
Value
Unrealized
Losses
(in thousands)
Total
Fair
Value
Unrealized
Losses
December 31, 2013:
Mortgage-backed
securities-U.S.
Government Sponsored
Enterprises (GSEs)
Obligations of state and
political subdivisions
US Treasury securities
$
22,960
$
(979) $
- $
-
$
22,960
$
(979)
57,818
35,689
116,467
$
(4,013)
(2,423)
(7,415) $
$
6,025
-
6,025 $
(373)
-
(373) $
63,843
35,689
122,492
$
(4,386)
(2,423)
(7,788)
50
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Investment Securities (Continued)
At December 31, 2014, there were no securities in the less-than-twelve-months category and 63 securities in the twelve-
months-or-more category for the securities available-for-sale portfolio. Included in the 63 securities in the twelve-months-or-
more category are (a) three U. S. government securities; (b) 51 municipal debt obligations; (c) five mortgage-backed
securities; and (d) four collateralized mortgage obligations.
The Bank does not intend to sell these securities and it is not more likely than not that we will be required to sell these
securities. Unrealized losses primarily relate to interest rate fluctuations and not credit-related criteria. No OTTI charges
were recorded for the years ended December 31, 2014 and 2013.
At December 31, 2013, there were 164 securities in the less-than-twelve-months category and 14 securities in the twelve-
months-or-more category for the securities available-for-sale portfolio. Included in the 164 securities in the less-than-twelve-
months category for securities available-for-sale are (a) nine U.S. government securities; (b) 137 municipal debt obligations;
(c) eight mortgage-backed securities; and (d) 10 collateralized mortgage obligations. In the twelve-months-or-more category,
all securities are municipal debt obligations.
The amortized cost and estimated fair value of securities available-for-sale at December 31, 2014 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:
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total
Amortized
Cost
Fair Value
(in thousands)
$
$
622 $
3,937
78,820
79,484
162,863 $
625
4,006
79,081
80,088
163,800
The following summarizes the amortized cost and estimated fair value of securities held-to-maturity at December 31, 2014
with gross unrealized gains and losses therein:
Amortized
Cost
December 31, 2014
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(in thousands)
Fair Value
Held-to-maturity:
Mortgage-backed securities-U.S.
Government Sponsored Enterprises (GSEs) $
All securities held-to-maturity are due after ten years.
420
$
36
$
- $
456
The following summarizes the amortized cost and estimated fair value of securities held-to-maturity at December 31, 2013
with gross unrealized gains and losses therein:
Amortized
Cost
December 31, 2013
Gross
Unrealized
Gains
Gross
Unrealized
Losses
(in thousands)
Fair Value
Held-to-maturity:
Mortgage-backed securities-U.S.
Government Sponsored Enterprises (GSEs) $
423
$
31
$
- $
454
51
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Investment Securities (Continued)
Proceeds from the sale of securities available-for-sale amounted to $46.3 million for the year ended December 31, 2014,
which included realized gains of approximately $1.0 million and realized losses of approximately $33,600. Proceeds from the
sale of securities available-for-sale amounted to $10.3 million for the twelve months ended December 31, 2013, which
included realized gains of approximately $258,543.
Securities available-for-sale with fair values of approximately $96.1 million and securities held-to-maturity with fair values
of approximately $456,000 were pledged as collateral for NJ Governmental Unit Deposit Protection Act (“GUDPA”)
deposits at December 31, 2014. Securities available-for-sale with fair values of approximately $364,000 were pledged as
collateral for business sweep accounts at December 31, 2014.
Note 4 – Loans Receivable
Loans receivable, net at December 31, 2014 and 2013 were comprised of the following:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total loans
Deferred fees and costs
Allowance for loan losses
December 31,
December 31,
2014
2013
(in thousands)
$
450,250 $
127,469
78,822
45,383
30,711
2,654
735,289
(2,150 )
(10,008 )
372,273
118,274
76,477
40,242
28,204
132
635,602
(1,769 )
(8,493 )
Loans, net
$
$
723,131
625,340
The following table presents nonaccrual loans by segment of the loan portfolio as of December 31, 2014 and 2013:
December 31,
2014
December 31,
2013
(in thousands)
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total
6,190 $
1,185
1,911
166
419
-
9,871 $
2,535
5,127
-
182
394
-
8,238
$
$
52
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Loans Receivable (Continued)
The following table summarizes information in regards to impaired loans by loan portfolio segment segregated by those for
which a related allowance was required and those for which a related allowance was not necessary, as of December 31, 2014
and the year then ended:
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
(in thousands)
Average
Recorded
Investment
Interest
Income
Recognized
- $
-
-
-
-
-
-
417
255
200
-
-
-
872
417
255
200
-
-
-
872 $
4,644 $
3,711
-
685
889
-
9,929
1,195
957
1,953
-
-
-
4,105
5,839
4,668
1,953
685
889
-
14,034 $
64
102
-
22
24
-
212
14
151
-
-
-
-
165
78
253
-
22
24
-
377
With no related allowance
recorded:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
$
With an allowance recorded:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
2,296
3,640
-
688
719
-
7,343
5,321
2,495
1,931
-
-
-
9,747
2,052 $
3,467
-
677
719
-
6,915
4,758
2,479
1,911
-
-
-
9,148
7,617
6,135
1,931
688
719
-
17,090 $
6,810
5,946
1,911
677
719
-
16,063 $
$
53
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Loans Receivable (Continued)
The following table summarizes information in regards to impaired loans by loan portfolio segment segregated by those for
which a related allowance was required and those for which a related allowance was not necessary, as of December 31, 2013
and the year then ended:
Unpaid
Principal
Balance
Recorded
Investment
Related
Allowance
(in thousands)
Average
Recorded
Investment
Interest
Income
Recognized
With no related allowance
recorded:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
$
With an allowance recorded:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total:
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
$
3,270
5,805
-
700
816
-
10,591
-
-
1,986
-
-
-
1,986
3,270
5,805
1,986
700
816
-
12,577 $
2,719 $
5,542
-
703
820
-
9,784
-
-
1,975
-
-
-
1,975
2,719
5,542
1,975
703
820
-
11,759 $
- $
-
-
-
-
-
-
-
-
61
-
-
-
61
-
-
61
-
-
-
61 $
2,565 $
3,900
1,544
214
798
4
9,025
22
-
785
-
-
-
807
2,587
3,900
2,329
214
798
4
9,382 $
-
-
-
23
4
-
27
-
-
64
-
-
-
64
-
-
64
23
4
-
91
54
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Loans Receivable (Continued)
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable 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 December 31, 2014:
30-59
Days Past
Due
60-89
Days Past
Due
Greater
than
90 days
(in thousands)
Total
Past
Due
Total
Loans
Current
Receivable
Loans
Receivable
>90 Days
and
Accruing
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total
$
$
919
3,470
25
-
-
-
4,414
$
$
3,948
783
-
1,565
-
-
6,296
$
$
6,190
1,185
1,911
166
419
-
9,871
$ 11,057
5,438
1,936
1,731
419
-
$ 20,581
$ 439,193
122,031
76,886
43,652
30,292
2,654
$ 714,708
$ 450,250
127,469
78,822
45,383
30,711
2,654
$ 735,289
$
$
-
-
-
-
-
-
-
The following table presents the segments of the loan portfolio summarized by the past due status as of December 31, 2013:
30-59
Days Past
Due
60-89
Days Past
Due
Greater
than
90 days
(in thousands)
Total
Past
Due
Total
Loans
Current
Receivable
Loans
Receivable
>90 Days
and
Accruing
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total
$
$
41
572
4,247
-
165
-
5,025
$
$
-
400
-
-
250
-
650
$
$
2,508
2,143
-
182
394
-
5,227
$
2,549
3,115
4,247
182
809
-
$ 10,902
$ 369,724
115,159
72,230
40,060
27,395
132
$ 624,700
$ 372,273
118,274
76,477
40,242
28,204
132
$ 635,602
$
$
-
-
-
-
-
-
-
The following table presents the segments of the loan portfolio summarized by the aggregate pass rating and the classified
ratings of special mention, substandard and doubtful within the Bank’s internal risk rating system as of December 31, 2014:
Pass
Special
Mention
Substandard
Doubtful
Total
(in thousands)
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total
$
$
437,342 $
122,151
76,911
45,217
30,219
2,654
714,494 $
6,081 $
2,021
-
-
73
-
8,175 $
6,804 $
3,297
1,911
166
419
-
12,597 $
23 $
-
-
-
-
-
23 $
450,250
127,469
78,822
45,383
30,711
2,654
735,289
55
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Loans Receivable (Continued)
The following table presents the segments of the loan portfolio summarized by the aggregate pass rating and the classified
ratings of special mention, substandard and doubtful within the Bank’s internal risk rating system as of December 31, 2013:
Pass
Special
Mention
Substandard
Doubtful
Total
(in thousands)
Commercial real estate
Commercial and industrial
Construction
Residential first-lien mortgage
Home equity
Consumer
Total
$
$
368,022 $
110,927
74,511
40,060
27,385
132
621,037 $
1,055 $
2,220
-
-
425
-
3,700 $
3,169 $
5,127
1,966
182
394
-
10,838 $
27 $
-
-
-
-
-
27 $
372,273
118,274
76,477
40,242
28,204
132
635,602
Allowance for loan losses on loans receivables at and for the year ended December 31, 2014:
Commercial
real estate
Commercial
and industrial
Construction
Residential
first-lien
mortgage
Home equity
Consumer
Unallocated
Total
(in thousands)
Allowance for loan
losses:
Beginning balance
Provisions
Charge-offs
Recoveries
$
$
2,994
738
(116 )
5
$
1,419
41
-
70
$
2,638
81
-
-
$
282
36
-
-
$
282
25
-
-
$
1
40
(29 )
5
$
877
619
-
-
8,493
1,580
(145 )
80
Ending Balance
$
3,621
$
1,530
$
2,719
$
318
$
307
$
17
$
1,496
$
10,008
Ending Balance:
Individually
evaluated for
impairment
Collectively
evaluated
for impairment
$
$
417
$
255
$
200
$
-
$
-
$
-
$
-
$
872
3,204
$
1,275
$
2,519
$
318
$
307
$
17
$
1,496
$
9,136
Recorded investment in loans receivables at December 31, 2014:
Loans:
Ending Balance:
Individually
evaluated for
impairment
Collectively
evaluated
for impairment
$
6,810
$
5,946
$
1,911
$
677
$
719
$
-
$
-
$
16,063
443,440
121,523
76,911
44,706
29,992
2,654
-
719,226
Ending Balance
$
450,250
$
127,469
$
78,822
$
45,383
$
30,711
$
2,654
$
-
$
735,289
56
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Loans Receivable (Continued)
Allowance for loan losses on loans receivable at and for the year ended December 31, 2013:
Commercial
real estate
Commercial
and industrial
Construction
Residential
first-lien
mortgage
Home equity
Consumer
Unallocated
Total
(in thousands)
Allowance for loan
losses:
Beginning balance
Provisions
Charge-offs
Recoveries
$
$
2,557
498
(73 )
12
$
1,244
316
(156 )
15
$
2,163
845
(370 )
-
$
204
78
-
-
$
256
26
-
-
$
10
(9 )
-
-
$
599
278
-
-
7,033
2,032
(599 )
27
Ending Balance
$
2,994
$
1,419
$
2,638
$
282
$
282
$
1
$
877
$
8,493
Ending Balance:
Individually
evaluated for
impairment
Collectively
evaluated
for impairment
$
$
-
$
-
$
61
$
-
$
-
$
-
$
-
$
61
2,994
$
1,419
$
2,577
$
282
$
282
$
1
$
877
$
8,432
Recorded investment in loans receivables at December 31, 2013:
Loans:
Ending Balance:
Individually
evaluated for
impairment
Collectively
evaluated
for impairment
$
2,719
$
5,542
$
1,975
$
703
$
820
$
-
$
-
$
11,759
369,554
112,732
74,502
39,539
27,384
132
-
623,843
Ending Balance
$
372,273
$
118,274
$
76,477
$
40,242
$
28,204
$
132
$
-
$
635,602
At December 31, 2014, thirteen loans totaling $7.9 million were considered troubled debt restructurings and classified as
impaired. Troubled debt restructurings of $3.8 million were performing in accordance with their modified terms at December
31, 2014. The remaining $4.1 million of troubled debt restructurings were on non-accrual status at December 31, 2014.
At December 31, 2013, twelve loans totaling $7.7 million were considered troubled debt restructurings and classified as
impaired. Troubled debt restructurings of $4.8 million were performing in accordance with their modified terms at December
31, 2013. The remaining $2.9 million of troubled debt restructurings were on non-accrual status at December 31, 2013.
The following table summarizes information in regards to troubled debt restructurings for the year ended December 31, 2014
(dollars in thousands):
Troubled debt restructurings:
Commercial and industrial
Number of
Contracts
Pre-Modification
Outstanding
Recorded Investment
Post-Modification
Outstanding
Recorded Investment
1
$
579
$
579
As indicated above, the Bank modified one loan during the year ended December 31, 2014 that was categorized as a troubled
debt restructuring. In modifying this commercial and industrial loan, the Bank extended the maturity date and reduced the
interest rate on the original loan. Troubled debt restructurings are impaired loans and are individually evaluated for
impairment in accordance with the Bank’s policy. There was a $13,125 allowance related to this modified commercial and
industrial loan at December 31, 2014.
57
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Loans Receivable (Continued)
This troubled debt restructuring executed within the year ended December 31, 2014 did not subsequently default during the
year ended December 31, 2014.
The following table summarizes information in regards to troubled debt restructurings for the year ended December 31, 2013
(dollars in thousands):
Troubled debt restructurings:
Commercial real estate
Commercial and industrial
Residential first-lien mortgage
Number of
Contracts
Pre-Modification
Outstanding
Recorded Investment
Post-Modification
Outstanding
Recorded Investment
2
1
1
$
$
$
266
1,425
517
$
$
$
266
2,124
519
As indicated above, the Bank modified four loans during the year ended December 31, 2013 that were categorized as troubled
debt restructurings. In modifying these loans, the Bank capitalized interest, extended the maturity and/or reduced the interest
rate on the original loan. These troubled debt restructurings are impaired loans and therefore, in accordance with the Bank’s
policy, are individually evaluated for impairment. As of December 31, 2013, there is no specific allowance for any of these
modified loans. There were no troubled debt restructurings executed within the year ended December 31, 2013 that
subsequently defaulted during the year ended December 31, 2013.
Loans to Related Party. In 2008, the Bank made two commercial real estate loans to a member of its board of directors. In
2013, the Bank modified these two commercial real estate loans by lowering the interest rate on both loans. The terms of the
loans and the modifications were reviewed and approved by the disinterested members of the Bank’s board of directors. The
modifications were made in the ordinary course of business, on substantially the same terms as those prevailing at the time
for comparable loans with persons not related to the Bank and did not involve more than the normal risk of collectability or
present other unfavorable features. One of the loans was repaid during 2014. The other loan is secured by the building that
houses the Bank’s corporate headquarters and one of its branches that the Bank leases from a company that is 99 percent
owned by this member of our board of directors. See Note 10 - Commitments and Contingencies for additional information
regarding the terms of the lease.
In 2012, the Bank made a commercial real estate loan to a member of its board of directors in the amount of $2.0 million.
The terms of this commercial real estate loan were reviewed and approved by the disinterested members of the Bank’s board
of directors. The loan was made in the ordinary course of business, on substantially the same terms, including interest rate
and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank and did not involve
more than the normal risk of collectability or present other unfavorable features.
The table below presents information regarding the loans to related parties for the years ended December 31, 2014 and 2013.
(in thousands)
2014
2013
Outstanding related party loans at January 1,
New loans
Repayments
Outstanding related party loans at December 31,
$
$
$
4,982
-
(1,162 )
3,820
$
5,179
-
(197 )
4,982
No loans to related parties were nonaccrual, past due, restructured or potential problems at December 31, 2014 and 2013.
Note 5 – Premises and Equipment
The components of premises and equipment at December 31 were as follows (in thousands):
58
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Premises and Equipment (Continued)
Land
Buildings
Leasehold improvements
Furniture, fixtures and equipment
Construction in progress
Accumulated depreciation and amortization
Total
Estimated
useful lives
N/A
40 Yrs.
10 Yrs.
3-7 Yrs.
2014
2013
$
410
1,741
4,993
3,791
73
11,008
(5,192 )
5,816 $
410
1,741
4,568
3,492
38
10,249
(4,477 )
5,772
$
$
Note 6 – Accrued Interest Receivable and Other Assets
The components of accrued interest receivable and other assets at December 31 were as follows (in thousands):
Accrued interest receivable
Deferred tax asset, net
Restricted investments in bank stocks
Prepaid assets and other assets
Total
Note 7 – Deposits
2014
2013
$
$
3,198
5,259
2,023
1,010
11,490
$
$
3,074
7,413
3,811
1,130
15,428
The components of deposits at December 31 were as follows (in thousands):
Demand, non-interest-bearing checking
Demand, interest-bearing and savings
Money market
Time deposits, $100,000 and over
Time deposits, other
Total
2014
2013
$
$
135,157 $
273,380
144,648
172,652
122,020
847,857 $
107,616
244,795
152,058
125,783
118,758
749,010
As of December 31, 2014, one customer’s deposits with the Bank represented 5.9 percent of total deposits. No other
customer accounted for more than 5 percent of total deposits as of December 31, 2014.
At December 31, 2014, the scheduled maturities of certificates of deposit were as follows (in thousands):
2015
2016
2017
2018
2019
Total
Amounts
163,152
54,516
31,778
23,631
21,595
294,672
$
$
59
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 – Borrowings
The Bank’s borrowings consist of FHLB-NY overnight advances. The Bank utilizes federal funds purchased to meet short-
term liquidity needs. All of the Bank’s borrowings are collateralized by securities and/or loans pledged to the FHLB-NY.
The terms of the security agreement with the FHLB-NY include a specific assignment of collateral that requires the
maintenance of qualifying collateral in excess of the FHLB advances when discounted at certain pre-established rates.
The following table presents the Bank’s borrowings at December 31 (in thousands):
2014
2013
FHLB-NY overnight advances
FHLB term advances
Total Borrowings
$
$
24,300
-
24,300
$
$
58,100
2,312
60,412
At December 31, 2014, the Bank has available borrowing capacity with the FHLB-NY, subject to certain collateral
restrictions, of $477.5 million. The Bank is also a member of the Atlantic Community Bankers Bank (“ACBB”). As of
December 31, 2014, the Bank has available borrowing capacity with ACBB of $10.0 million to provide short-term liquidity
generally for a period of not more than fourteen days.
Note 9 – Accrued Interest Payable and Other Liabilities
The components of accrued interest payable and other liabilities at December 31 were as follows (in thousands):
Accrued interest payable
Accrued salary expense
Accrued expenses and other liabilities
Total
Note 10 – Commitments and Contingencies
Operating leases
2014
2013
$
$
1,573 $
501
2,529
4,603 $
1,675
418
1,681
3,774
The Bank has operating leases for eleven of its branch locations, as well as its operations center. Future minimum lease
payments by year under the non-cancellable lease agreements for the Bank’s facilities were as follows (in thousands):
2015
2016
2017
2018
2019
Thereafter
$
$
1,377
1,278
1,070
922
669
1,037
6,353
Rental expense for each of the years ended December 31, 2014 and 2013 was $1.4 million.
The Bank has an operating lease agreement with a member of the Bank’s board of directors for a building containing the
Bank’s corporate headquarters and branch, which is included in the above lease schedule. The lease terms were comparable
to similarly outfitted office space in the Bank’s market. The Bank is also required to pay a monthly fee for certain operating
expenses, including real estate taxes, insurance, utilities, maintenance and repairs, in addition to the base rent. Rental
60
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 – Commitments and Contingencies (Continued)
expense to this related party for the years ended December 31, 2014 and 2013 was approximately $284,000 and $277,000,
respectively.
Commitments to extend credit
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers. These financial instruments include commitments to extend credit and standby letters of
credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the
amount recognized on the balance sheet. The contract, or notional, amounts of these instruments reflect the extent of
involvement the Bank has in particular classes of financial instruments.
The Bank’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for
commitments to extend credit and standby letters of credit written is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-
balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require
payment of a fee by the counterparty. Since many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral
held varies, but primarily includes residential and income-producing real estate.
Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer
to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved
in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Bank requires
collateral supporting these letters of credit as deemed necessary. Management believes that the proceeds obtained through a
liquidation of such collateral should be sufficient to cover the maximum potential amount under the corresponding
guarantees. The current amount of the liability as of December 31, 2014 and 2013 for guarantees under standby letters of
credit issued is not material.
The Bank had the following off-balance sheet financial instruments whose contract amounts represent credit risk at
December 31 (in thousands):
Performance and standby letters of credit
Commitments to fund loans
Unfunded commitments under lines of credit
2014
2013
$
$
8,843
91,228
11,320
111,391
$
$
7,561
76,027
9,255
92,843
Litigation
The Bank, in the normal course of business, may be subject to potential liability under laws and government regulation and
various claims and legal actions that are pending or may be asserted against it. Liabilities are established for legal claims
when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of
resolving legal claims may be substantially higher or lower than the amounts established for those claims. Based on
information currently available, advice of counsel, available insurance coverage and established liabilities, the Bank has
determined that there are no eventual outcomes that will have a material adverse effect on the Bank’s financial position or
results of operations.
61
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Income Taxes
Income tax expense for the years ended December 31 is as follows:
Current tax expense:
Federal
State
Total current
Deferred income tax benefit:
Federal
State
Total deferred
Total income tax expense
2014
2013
(in thousands)
$
$
3,390
230
3,620
(201 )
(251 )
(452 )
3,168
$
$
3,196
255
3,451
(377 )
(99 )
(476 )
2,975
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax
liabilities as of December 31 are as follows:
Deferred tax assets:
Allowance for loan losses
Net operating loss carry-forwards
Unrealized losses on securities
Organizational costs
Premises and equipment
Other
Total deferred tax assets
Deferred tax liabilities:
Deferred loan costs
Unrealized gains on securities
Premises and equipment
Acquisition accounting adjustments
Cash basis conversions
Total deferred tax liabilities
Net deferred tax asset
2014
2013
(in thousands)
3,901
1,212
-
307
-
777
6,197
(390 )
(361 )
(97 )
(90 )
-
(938 )
5,259
$
$
3,201
1,287
2,245
348
48
840
7,969
(348 )
-
-
(207 )
(1 )
(556 )
7,413
$
$
Total income taxes differed from the amount computed by applying the statutory federal income tax rate to pre-tax income as
follows:
Federal income tax expense at statutory rate
Increases (reductions) in taxes resulting from:
State income taxes, net of federal benefit
Bank-owned life insurance death benefit
Tax-exempt income, net
Non-deductible expenses
Other
Total income taxes applicable to pre-tax income
62
2014
2013
(in thousands)
$
4,137
$
4,004
(14 )
-
(882 )
15
(88 )
3,168
$
103
(847 )
(112 )
15
(188 )
2,975
$
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 – Income Taxes (Continued)
At December 31, 2014, the Bank had available federal net operating loss carry-forwards of approximately $3.6 million,
which expire between 2028 and 2030. There are currently no state net operating loss carry-forwards available. The net
operating loss carry-forwards are amounts that were generated by MoreBank, which the Bank acquired on September 30,
2010. These net operating losses are subject to an annual Internal Revenue Code Section 382 limitation of approximately
$222,000.
Based on projections of future taxable income over periods in which the deferred tax assets are deductible, management
believes it is more likely than not that the Bank will realize the benefits of these deductible differences.
Note 12 – Fair Value Measurements and Disclosure
The Bank 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 Bank’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 Bank 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 than 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.
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 December 31, 2014 were as follows:
63
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Fair Value Measurements and Disclosure (Continued)
Description
U.S. Treasury securities
Mortgage-backed securities-U.S.
Government Sponsored Enterprises
(GSE’s)
Obligations of state and
political subdivisions
Securities available-for-sale at fair value
$
(Level 1)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 2)
Significant
Other
Observable
Inputs
(Level 3)
Significant
Unobservable
Inputs
Total Fair
Value
December 31,
2014
(in thousands)
$
14,551 $
-
$
- $
14,551
-
77,188
-
14,551 $
72,061
149,249 $
-
-
- $
77,188
72,061
163,800
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, 2013 were as follows:
Description
U.S. Treasury securities
Mortgage-backed securities-U.S.
Government Sponsored Enterprises
(GSE’s)
Obligations of state and
political subdivisions
Securities available-for-sale at fair value
$
(Level 1)
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 2)
Significant
Other
Observable
Inputs
(Level 3)
Significant
Unobservable
Inputs
Total Fair
Value
December 31,
2013
(in thousands)
$
35,689 $
- $
-
$
35,689
-
73,084
-
35,689 $
84,541
157,625 $
-
-
- $
73,084
84,541
193,314
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, 2014, were as follows:
(Level 1)
Quoted Prices in
Active
Markets for
Identical
Assets
(Level 2)
Significant
Other
Observable
Inputs
(Level 3)
Significant
Unobservable
Inputs
Total Fair
Value
December 31,
2014
(in thousands)
Impaired loans
Other real estate owned
$
$
- $
-
- $
- $
-
- $
8,387 $
193
8,580 $
8,387
193
8,580
64
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Fair Value Measurements and Disclosure (Continued)
For assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy
used at December 31, 2013, were as follows:
(Level 1)
Quoted Prices in
Active
Markets for
Identical
Assets
(Level 2)
Significant
Other
Observable
Inputs
(Level 3)
Significant
Unobservable
Inputs
Total Fair
Value
December 31,
2013
(in thousands)
Impaired loans
Other real estate owned
$
$
- $
-
- $
- $
-
- $
3,778 $
199
3,977 $
3,778
199
3,977
The following table presents quantitative information with regards to Level 3 fair value measurements at December 31, 2014.
Description
Fair Value at
December 31,
2014
(in thousands)
Valuation
Technique
Unobservable
Input
Range
(Weighted
Average)
Impaired loans
$
8,387 Appraisal of collateral1
Other real estate owned
$
193
Agreement of sale
Discount
adjustment2
0.0%-5.0%
(3.4%)
Estimated
selling costs3
10.5%
(10.5%)
1
Fair value is generally determined through independent appraisal of the underlying collateral, primarily using comparable sales.
2 Appraisals may be adjusted by management for qualitative factors, such as economic conditions and estimated liquidation
expense.
3 Selling costs include sales commissions and other costs incidental to the sale.
The following table presents quantitative information with regards to Level 3 fair value measurements at December 31, 2013.
Description
Impaired loans
Other real estate owned
Fair Value at
December 31,
2013
(in thousands)
Valuation
Technique
Unobservable
Input
Range
(Weighted
Average)
$
$
3,778 Appraisal of collateral1
199 Appraisal of collateral1
Discount
adjustment2
Discount
adjustment2
0.0%-83.6%
(4.3%)
0.0%
(0.0%)
1
Fair value is generally determined through independent appraisal of the underlying collateral, primarily using comparable sales.
2 Appraisals may be adjusted by management for qualitative factors, such as economic conditions and estimated liquidation
expense.
65
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Fair Value Measurements and Disclosure (Continued)
The following methods and assumptions were used by the Bank in estimating fair value disclosures:
Cash and due from banks (carried at cost)
The carrying amounts reported in the statement of financial condition for cash and short-term instruments approximate those
assets’ fair values.
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
benchmarkquoted prices. Level 2 debt securities are valued by a third-party pricing service commonly used in the banking
industry. Level 2 fair value measurements consider observable data that may include dealer quotes, market spreads, cash
flows, the U.S. treasury yield curve, live trading levels, trade execution date, market consensus prepayment speeds, credit
information and the security’s terms and conditions, among other things.
Loans receivable (carried at cost)
The fair value of loans receivable are estimated using discounted cash flow analyses, using market rates at the balance sheet
date that reflect the credit and interest rate-risk inherent in the loans, which is characterized as Level 3 in the fair value
hierarchy. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and
prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit
risk, fair values are based on carrying values.
Impaired loans (generally carried at fair value)
Impaired loans carried at fair value are those impaired loans in which the Bank 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 Bank 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.
Other real estate and other assets owned (carried at fair value)
Other real estate owned is adjusted to fair value, less estimated selling costs, upon transfer of loans to other real estate
owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less cost to sell. Fair
value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of
the collateral. The discount adjustment from the appraised value is a significant unobservable input in the determination of
the fair value for other real estate owned. These assets are included as Level 3 fair values.
Federal Home Loan Bank stock and ACBB stock (carried at cost)
The carrying amount of restricted investments in bank stock approximates fair value, and considers the limited marketability
of such securities.
Accrued interest receivable and payable (carried at cost)
The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.
66
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Fair Value Measurements and Disclosure (Continued)
Deposit liabilities (carried at cost)
The fair value disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market
accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair
value for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates
currently being offered in the market on certificates of deposit to a schedule of aggregated expected monthly maturities on
time deposits.
Borrowings (carried at cost)
Fair value of FHLB advances are determined by discounting the anticipated future cash payments by using the rates currently
available to the Bank for debt with similar terms and remaining maturities, which is characterized as Level 3 in the fair value
hierarchy.
Off-Balance sheet financial instruments (disclosed at cost)
Fair value for the Bank’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on
fees currently charged in the market to enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties’ credit standing. The fair values of these off-balance sheet financial instruments are not
considered material as of December 31, 2014 and December 31, 2013.
The carrying amounts and estimated fair value of financial instruments at December 31, 2014, are as follows:
Carrying
Amount
(in thousands)
Estimated
Fair Value
December 31, 2014
Level 1
Level 2
Level 3
Financial assets:
Cash and cash equivalents
$
Securities available-for-sale at fair value
Securities held-to-maturity
Loans receivable, net
Restricted investments in bank stocks
Accrued interest receivable
31,872 $
163,800
420
723,131
2,023
3,198
31,872 $
163,800
456
743,720
2,023
3,198
31,872 $
14,551
-
-
-
-
- $
149,249
456
-
2,023
3,198
Financial liabilities:
Deposits
Borrowings
Accrued interest payable
847,857
23,400
1,573
846,654
23,400
1,573
-
-
-
846,654
-
1,573
-
-
-
743,720
-
-
-
23,400
-
The carrying amounts and estimated fair value of financial instruments at December 31, 2013, are as follows:
67
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 – Fair Value Measurements and Disclosure (Continued)
Carrying
Amount
(in thousands)
Estimated
Fair Value
December 31, 2013
Level 1
Level 2
Level 3
Financial assets:
$
Cash and cash equivalents
Securities available-for-sale at fair value
Securities held-to-maturity
Loans receivable, net
Restricted investments in bank stocks
Accrued interest receivable
27,425 $
193,314
423
625,340
3,811
3,074
27,425 $
193,314
454
643,519
3,811
3,074
27,425 $
35,689
-
-
-
-
- $
157,625
454
-
3,811
3,074
Financial liabilities:
Deposits
Borrowings
Accrued interest payable
Limitations
749,010
60,412
1,675
737,112
60,705
1,675
-
-
-
737,112
-
1,675
-
-
-
643,519
-
-
-
60,705
-
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 of 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. Other
significant assets that are not considered financial assets include premises and equipment. 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 likely 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 13 – Stock-Based Compensation
Organizers of the Bank were issued a total of 97,500 Organizer warrants for their efforts during the organization and start-up
of the Bank. These warrants are immediately exercisable, expire 10 years after the grant date and will enable the warrant
holder to purchase one (1) share of common stock at $10.00 per share for each warrant exercised. All 97,500 Organizer
warrants were outstanding at December 31, 2014 and 2013 and will expire in 2017.
In 2007, the Bank adopted The Bank of Princeton 2007 Stock Option Plan (the “2007 Plan”), which was approved by our
board of directors in August 2007 and by our stockholders in October 2007. The 2007 Plan enables the board of directors to
grant stock options to employees, directors, consultants and other individuals who provide services to the Bank. The shares
subject to or related to options under the 2007 Plan are authorized and unissued shares of the Bank. The maximum number
of shares that may be subject to options under the 2007 Plan is 300,000, all of which may be issued as Incentive Stock
68
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 – Stock-Based Compensation (Continued)
Options and not more than 100,000 of which may be issued as Non-Qualified Stock Options. Vesting periods range from
immediate to four years from the date of grant. The 2007 Plan will terminate ten years from the date of stockholder approval.
In connection with the Bank’s acquisition of MoreBank on September 30, 2010, all outstanding and unexercised options to
acquire shares of MoreBank common stock became fully vested and exercisable and converted into fully vested and
exercisable options to purchase shares of common stock of the Bank in an amount and at an exercise price based on the
merger exchange ratio. These options remain subject to all of the other terms and conditions to which they were subject
immediately prior to the effective time of the merger. At December 31, 2014 and 2013, 46,000 MoreBank Organizer options
remained outstanding. These options were granted to organizers of MoreBank for their efforts during the organization and
start-up of MoreBank. These options are immediately exercisable, expire in December 2016, and enable the option holder to
purchase one (1) share of the Bank’s common stock at $25.00 per share. 1,200 options remained outstanding at December
31, 2014 and 2013 under the MoreBank 2004 Incentive Equity Compensation Plan (the “MoreBank Plan”). These options
are immediately exercisable, expire in December 2017, and enable the option holder to purchase one (1) share of the Bank’s
common stock at $25.00 per share. The MoreBank Plan was adopted by MoreBank to provide stock options and stock
awards to MoreBank’s directors and employees.
In 2012, the Bank adopted The Bank of Princeton 2012 Equity Incentive Plan (the “2012 Plan”), which was approved by our
board of directors in February 2012 and by our stockholders in May 2012. The 2012 Plan enabled the board of directors to
grant stock options or restricted shares of common stock to employees, directors, consultants and other individuals who
provide services to the Bank. The shares subject to or related to options under the 2012 Plan are authorized and unissued
shares of the Bank. In 2013, the Bank’s board of directors and stockholders approved an amendment to the 2012 Plan that
increased the maximum number of shares that may be subject to options under the 2012 Plan from 100,000 to 600,000, all of
which may be issued as Incentive Stock Options or as Non-Qualified Stock Options. Vesting periods range from immediate
to four years from the date of grant. The 2012 Plan will terminate ten years from the date of stockholder approval.
In 2014, the Bank adopted an amendment to each of the 2007 Plan and to the 2012 Plan, which amendments were approved
by our board of directors, to provide that all outstanding options under the 2007 Plan and the 2012 Plan will become fully
vested and exercisable upon a change in control of the Bank and to further specify the consideration that may be exchanged
with respect to outstanding awards upon any such change in control.
The following is a summary of the status of the Bank’s stock option and warrant activity and related information for the year
ended December 31, 2014:
Balance at January 1, 2014
Granted
Exercised
Forfeited
Expired
Weighted Avg.
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Number of
Stock
Options /
Warrants
Weighted
Avg.
Exercise Price
13.16
14.94
11.11
13.40
12.60
572,517 $
110,100 $
(3,636 ) $
(2,763 ) $
(1,984 ) $
Balance at December 31, 2014
674,234 $
13.51
6.1 years
Exercisable at December 31, 2014
571,665 $
13.52
5.7 years
$
$
2,882,477
2,473,825
69
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 – Stock-Based Compensation (Continued)
The following is a summary of the status of the Bank’s stock option and warrant activity and related information for the year
ended December 31, 2013:
Balance at January 1, 2013
Granted
Exercised
Forfeited
Expired
Weighted Avg.
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
Number of
Stock
Options /
Warrants
Weighted
Avg.
Exercise Price
13.21
13.41
11.18
13.75
11.69
476,827 $
100,950 $
(110 ) $
(99 ) $
(5,051 )
Balance at December 31, 2013
572,517 $
13.16
6.8 years
Exercisable at December 31, 2013
373,278 $
13.25
6.3 years
$
$
837,886
767,880
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions:
Expected life
Expected volatility
Forfeiture rate
Dividend yield
Risk-free interest rate
Fair value
For the year ended December 31,
2014
2013
5.34 years
43.66%
1.59%
0.00%
1.75 %
$ 6.15
5.00 years
60.23%
3.63%
0.00%
1.27 %
$ 6.91
Stock option expenses included in salaries and employee benefits expense in the consolidated statements of income were
$437,000 and $295,000 for the years ended December 31, 2014 and 2013, respectively. Stock option expense recorded
within other expenses was $285,000 and $176,000 for the years ended December 31, 2014 and 2013, respectively. At
December 31, 2014, there was approximately $438,000 of unrecognized expense related to outstanding stock options, which
will be recognized over a period of approximately 1.24 years.
Note 14 – Regulatory Matters
Consent Order
On January 29, 2014, we entered into a Stipulation and Consent to the Issuance of a Consent Order with the FDIC that was
countersigned by the FDIC on January 30, 2014 (the “Stipulation”), pursuant to which the Bank agreed to the issuance of a
Consent Order by the FDIC (the “Consent Order”). We consented to the issuance of the Consent Order without admitting
any charges of unsafe or unsound banking practices or violations of law, in order to resolve regulatory uncertainty over the
adequacy of our compliance with laws relating to the Bank Secrecy Act (“BSA”) and anti-money laundering (“AML”). The
FDIC signed an Order Terminating Consent Order on February 3, 2015.
The Consent Order arose from a routine safety and soundness examination of the Bank by the FDIC, which was conducted as
of June 30, 2013. The Consent Order required us to strengthen our BSA/AML program and our internal audit function, and
to address other related matters. Among other things, it required our board of directors to designate a committee to oversee
the compliance with the Consent Order. We were also required to take certain actions to enhance our staff, including a BSA
officer, and board and management oversight.
70
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 – Regulatory Matters (Continued)
BSA/AML requires financial institutions to assist United States government agencies in detecting and preventing money
laundering and other types of suspicious activities. Specifically, BSA/AML requires financial institutions to keep records of
cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and
to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. It has been revised
several times and has taken on increased importance in this era of heightened national security.
We also agreed to an Acknowledgement and Consent of FDIC Order with the Commissioner of Banking and Insurance for
the State of New Jersey (the “Commissioner”), effective as of January 30, 2014, which made the Consent Order binding
between us and the Commissioner. This Acknowledgement and Consent of FDIC Order was terminated concurrent with the
FDIC’s Order Terminating Consent Order.
Regulatory Capital
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet
the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by the federal
banking agencies that, if undertaken, could have a direct material effect on the Bank’s operations and/or financial condition.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk-weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts
and ratios (set forth below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1
capital to average assets. Management believes, as of December 31, 2014, that the Bank meets all capital adequacy
requirements to which it is subject.
The Bank’s actual capital amounts and ratios at December 31, 2014 and 2013 are presented below:
Actual
For capital adequacy
purposes
To be well capitalized under
prompt corrective action
provisions
Ratio
Amount
Ratio
Amount
Ratio
Amount
December 31, 2014:
Total capital (to risk-weighted assets)
$87,610
Tier 1 capital (to risk-weighted assets) $77,821
$77,821
Tier 1 capital (to average assets)
11.2%
9.9%
8.2%
$ 62,632
$ 31,316
$ 37,994
December 31, 2013:
Total capital (to risk-weighted assets)
$76,298
Tier 1 capital (to risk-weighted assets) $67,932
$67,932
Tier 1 capital (to average assets)
11.4%
10.2%
7.8%
$ 53,533
$ 26,766
$ 34,637
8.0%
4.0%
4.0%
$ 78,289
$ 46,974
$ 47,493
8.0%
4.0%
4.0%
$ 66,916
$ 40,150
$ 43,297
10.0%
6.0%
5.0%
10.0%
6.0%
5.0%
The Bank is subject to certain restrictions on the amount of dividends that it may declare due to regulatory considerations.
71
The Bank of Princeton
THE BANK OF PRINCETON
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 – Quarterly Financial Data (unaudited)
Year Ended December 31, 2014
$
$
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In thousands, except per share data)
9,694 $
1,760
7,934
252
7,682
552
5,458
2,776
766
2,010 $
10,042 $
1,755
8,287
371
7,916
633
5,784
2,765
762
2,003 $
10,241 $
1,828
8,413
360
8,053
708
5,512
3,249
896
2,353 $
10,590
1,814
8,776
597
8,179
853
5,653
3,379
744
2,635
0.44 $
0.43 $
0.44 $
0.39 $
0.51 $
0.46 $
0.58
0.56
Year Ended December 31, 2013
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(In thousands, except for share and per share data)
8,890 $
1,743
7,147
84
7,063
389
4,684
2,768
788
1,980 $
9,041 $
1,765
7,276
513
6,763
693
4,631
2,825
755
2,070 $
9,470 $
1,809
7,661
577
7,084
324
4,560
2,848
785
2,063 $
9,712
1,798
7,914
858
7,056
1,269
4,990
3,335
647
2,688
0.43 $
0.43 $
0.45 $
0.45 $
0.45 $
0.44 $
0.59
0.58
Interest and dividend income
Interest expense
$
Net Interest Income after Provision for Loan Losses
Income before Income Tax Expense
Net Interest Income
Provision for loan losses
Non-interest income
Non-interest expense
Income tax expense
Net Income
Earnings per common share
Basic
Diluted
Interest and dividend income
Interest expense
Net Interest Income
Provision for loan losses
Net Interest Income after Provision for Loan Losses
Non-interest income
Non-interest expenses
Income before Income Tax Expense
Income tax expense
Net Income
Earnings per common share
Basic
Diluted
$
$
$
72
The Bank of Princeton
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
An evaluation was performed under the supervision, and with the participation of the Bank’s management,
including the President and Chief Financial Officer, of the effectiveness of the design and operation of the Bank’s
disclosure controls and procedures (as defined in Rule l3a-l5(e) promulgated under the Exchange Act) as of
December 31, 2014. Based on such evaluation, the Bank’s President and Chief Financial Officer have concluded
that the Bank’s disclosure controls and procedures are effective, as of December 31, 2014, to ensure that the
information required to be disclosed by the Bank in the reports that the Bank files or submits under the Exchange
Act is recorded, processed, summarized, and reported within the time periods specified in FDIC rules and forms.
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with accounting principles generally accepted in the United States,
which is commonly referred to as GAAP. The effectiveness of any system of internal control over financial
reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating
and evaluating the Bank’s internal control over financial reporting. Because of these inherent limitations, internal
control over financial reporting cannot provide absolute assurance regarding the reliability of financial reporting and
the preparation of financial statements in accordance with GAAP and may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that our internal control
over financial reporting may become inadequate because of changes in conditions or other factors, or that the degree
of compliance with the policies or procedures may deteriorate.
Management, with the participation of the Bank’s President and Chief Financial Officer, evaluated the
effectiveness of the Bank’s internal control over financial reporting as of December 31, 2014 using the criteria in
“Internal Control—Integrated Framework (1992)” issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on such evaluation, management assessed that the Bank’s internal control over
financial reporting was effective as of December 31, 2014.
Changes in Internal Control Over Financial Reporting
There was no change in the Bank’s internal control over financial reporting identified during the quarter
ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect, the Bank’s
internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The Bank responds to this Item by incorporating by reference the material responsive to this Item in the
Bank’s definitive proxy statement to be filed with the Federal Deposit Insurance Corporation in connection with its
2015 Annual Meeting of Stockholders to be held April 29, 2015.
73
The Bank of Princeton
Item 11. Executive Compensation
The Bank responds to this Item by incorporating by reference the material responsive to this Item in the
Bank’s definitive proxy statement to be filed with the Federal Deposit Insurance Corporation in connection with its
2015 Annual Meeting of Stockholders to be held April 29, 2015.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The Bank responds to this Item by incorporating by reference the material responsive to this Item in the
Bank’s definitive proxy statement to be filed with the Federal Deposit Insurance Corporation in connection with its
2015 Annual Meeting of Stockholders to be held April 29, 2015.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Bank responds to this Item by incorporating by reference the material responsive to this Item in the
Bank’s definitive proxy statement to be filed with the Federal Deposit Insurance Corporation in connection with its
2015 Annual Meeting of Stockholders to be held April 29, 2015.
Item 14. Principal Accounting Fees and Services
The Bank responds to this Item by incorporating by reference the material responsive to this Item in the
Bank’s definitive proxy statement to be filed with the Federal Deposit Insurance Corporation in connection with its
2015 Annual Meeting of Stockholders to be held April 29, 2015.
Item 15. Exhibits, Financial Statement Schedules
PART IV
(a) The following portions of the Bank’s consolidated financial statements are set forth in Item 8 of this
Annual Report:
i.
ii.
iii.
iv.
Consolidated Statements of Financial Condition as of December 31, 2014 and 2013
Consolidated Statements of Income for the years ended December 31, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014 and
2013
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,
2014 and 2013
v.
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013
vi.
Notes to Consolidated Financial Statements
(b) Financial Statement Schedules
All financial statement schedules are omitted as the information, if applicable, is presented in the
consolidated financial statements or notes thereto.
74
The Bank of Princeton
(c) Exhibits
Exhibit
No.
2.1
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
21.1
31.1
31.2
32.1
Description
(A) Agreement and Plan of Merger dated as of May 5, 2010 by and between The Bank of Princeton and
MoreBank.
(A) Certificate of Incorporation, as amended.
(A) Amended and Restated Bylaws
(A) Specimen form of stock certificate.
The Bank will furnish to the FDIC upon request copies of the instruments defining the rights of the Federal
Home Loan Bank of New York with respect to the Bank’s long-term debt.
(B) The Bank of Princeton Amended and Restated 2007 Stock Option Plan*
(B) The Bank of Princeton Amended and Restated 2012 Equity Incentive Plan*
(A) Form of Incentive Stock Option Agreement*
Form of Incentive Stock Option Agreement*
(A) Form of Nonqualified Stock Option Agreement*
Form of Nonqualified Stock Option Agreement*
(A) Warrant Agreement for Organizers*
(A) Form of Warrant Certificate*
(A) MoreBank 2004 Incentive Equity Compensation Plan*
(A) Form of Incentive Stock Option Agreement*
(A) Form of Nonqualified Stock Option*
(A) Form of Option for the Purchase of Shares of the Par Value of $1.00 Per Share of MoreBank*
(C) Stipulation and Consent to the Issuance of a Consent Order
(C) Consent Order
Subsidiaries of the Registrant
Rule 13a-14(a) Certification of the Principal Executive Officer
Rule 13a-14(a) Certification of the Principal Financial Officer
Section 1350 Certifications
* Management contract or compensatory plan, contract or arrangement.
(A) Incorporated by reference to the exhibit to registrant’s Form 10, General Form For Registration Of Securities,
filed with the Federal Deposit Insurance Corporation on May 2, 2011.
(B) Incorporated by reference to Exhibits 10.1 or 10.2, as applicable, of registrant’s Current Report on Form 8-K,
filed with the Federal Deposit Insurance Corporation on October 20, 2014.
(C) Incorporated by reference to the exhibit to registrant’s Current Report on Form 8-K, filed with the Federal
Deposit Insurance Corporation on February 5, 2014.
75
The Bank of Princeton
Pursuant to the requirements of Section 13 or 15(d) 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 as of March 19, 2015.
SIGNATURES
The Bank of Princeton
By:
/s/Edward Dietzler
Edward Dietzler
President
(Principal Executive Officer)
The Bank of Princeton
By:
/s/Michael J. Sanwald
Michael J. Sanwald
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
76
The Bank of Princeton
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below on March 19, 2015 by the
following persons on behalf of the Registrant and in the capacities indicated.
/s/Edward Dietzler
Edward Dietzler
President
(Principal Executive Officer)
/s/Andrew M. Chon
Andrew M. Chon
Director, Chairman
/s/Stephen Distler
Stephen Distler
Director, Vice Chairman
/s/Judith A. Giacin
Judith A. Giacin
Director
/s/Richard Gillespie
Richard Gillespie
Director
/s/Michael J. Sanwald
Michael J. Sanwald
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/Stephen Shueh
Stephen Shueh
Director
/s/Robert N. Ridolfi, Esq
Robert N. Ridolfi, Esq
Director
/s/Ross Wishnick
Ross Wishnick
Director, Vice Chairman
77
The Bank of Princeton
EXHIBIT INDEX
Exhibit
No.
2.1
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
21.1
31.1
31.2
32.1
Description
(A) Agreement and Plan of Merger dated as of May 5, 2010 by and between The Bank of Princeton and
MoreBank.
(A) Certificate of Incorporation, as amended.
(A) Amended and Restated Bylaws
(A) Specimen form of stock certificate.
The Bank will furnish to the FDIC upon request copies of the instruments defining the rights of the Federal
Home Loan Bank of New York with respect to the Bank’s long-term debt.
(B) The Bank of Princeton Amended and Restated 2007 Stock Option Plan*
(B) The Bank of Princeton Amended and Restated 2012 Equity Incentive Plan*
(A) Form of Incentive Stock Option Agreement*
Form of Incentive Stock Option Agreement*
(A) Form of Nonqualified Stock Option Agreement*
Form of Nonqualified Stock Option Agreement*
(A) Warrant Agreement for Organizers*
(A) Form of Warrant Certificate*
(A) MoreBank 2004 Incentive Equity Compensation Plan*
(A) Form of Incentive Stock Option Agreement*
(A) Form of Nonqualified Stock Option*
(A) Form of Option for the Purchase of Shares of the Par Value of $1.00 Per Share of MoreBank*
(C) Stipulation and Consent to the Issuance of a Consent Order
(C) Consent Order
Subsidiaries of the Registrant
Rule 13a-14(a) Certification of the Principal Executive Officer
Rule 13a-14(a) Certification of the Principal Financial Officer
Section 1350 Certifications
* Management contract or compensatory plan, contract or arrangement.
(A) Incorporated by reference to the exhibit to registrant’s Form 10, General Form For Registration Of Securities,
filed with the Federal Deposit Insurance Corporation on May 2, 2011.
(B) Incorporated by reference to Exhibits 10.1 or 10.2, as applicable, of registrant’s Current Report on Form 8-K,
filed with the Federal Deposit Insurance Corporation on October 20, 2014.
(C) Incorporated by reference to the exhibit to registrant’s Current Report on Form 8-K, filed with the Federal
Deposit Insurance Corporation on February 5, 2014.
78
The Bank of Princeton
Form of Incentive Stock Option Agreement
Exhibit 10.4
INCENTIVE STOCK OPTION AGREEMENT
UNDER
THE BANK OF PRINCETON 2012 EQUITY INCENTIVE PLAN
BANK OF PRINCETON (the “Bank”) and ___________________________________ (the “Optionee”).
THIS INCENTIVE STOCK OPTION AGREEMENT (this “Agreement”) is made between THE
for the benefit of the key employees, directors and advisors of the Bank and its Affiliates; and
WHEREAS, the Bank maintains The Bank of Princeton 2012 Equity Incentive Plan (the “Plan”)
the terms of the Plan; and
WHEREAS, the Plan permits the award of Incentive Stock Options to purchase Shares, subject to
further align the Optionee’s personal financial interests with those of the Bank’s stockholders.
WHEREAS, the Bank desires to grant the Optionee Incentive Stock Options under the Plan to
intending to be legally bound hereby, the parties agree as follows:
NOW, THEREFORE, in consideration of these premises and the agreements set forth herein and
Award of Option. This Agreement evidences the grant to the Optionee of an option (the
“Option”) to purchase _________________ (______) Shares (the “Option Shares”). The Option is subject to the
terms set forth herein, and in all respects is subject to the terms and provisions of the Plan applicable to Incentive
Stock Options, which terms and provisions are incorporated herein by this reference. Except as otherwise specified
herein or unless the context herein requires otherwise, the terms defined in the Plan will have the same meanings
herein.
Revenue Code, the Option is intended to be an incentive stock option as described by Section 422 of the Code.
Nature of the Option. Subject to the limitation contained in Section 422(d) of the Internal
Date of Grant; Term of Option. The Option was granted on ___________, ____ (the “Effective
Date”) and may not be exercised later than the date that is ten (10) years after that date, subject to earlier termination
in accordance with the Plan.
Option Exercise Price. The per share exercise price of the Option is
____________________________ ($__.__) (the “Exercise Price”), which is the Fair Market Value per Share on the
Effective Date.
provisions of the Plan and this Agreement, as follows:
Exercise of Option. The Option will become exercisable only in accordance with the terms and
continuous service to the Bank through the applicable vesting date as follows:
Right to Exercise. Option Shares will become exercisable if the Optionee remains in
___% of the Options will vest on the Effective Date
___% of the Options will vest __________________________
___% of the Options will vest __________________________
___% of the Options will vest __________________________
___% of the Options will vest __________________________
Upon a termination of the Optionee’s service with the Bank, the Option will be exercisable only to the extent
specified in Section 6 of the Plan. Solely for purposes of this Option, service with the Bank will be deemed to
include service with an Affiliate of the Bank for so long as that entity remains an Affiliate of the Bank.
79
The Bank of Princeton
Notwithstanding the foregoing, this Option (to the extent then outstanding) will become fully vested and
immediately exercisable upon a Change in Control.
Method of Exercise. The Optionee may exercise the Option by providing written notice
to the Bank stating the election to exercise the Option. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified mail to the Secretary of the Bank or such other person as may be designated by
the Bank, and shall be accompanied by payment of the Exercise Price and an amount equal to any required tax
withholding. Payment of the Exercise Price and any required tax withholding will be made in cash or such other
form as may be accepted by the Board in accordance with the Plan.
may be required or appropriate under applicable law, the Plan or otherwise.
Share Legends. Any certificate evidencing an Option Share will contain such legends as
that any exercise may apply only with respect to a whole number of Option Shares.
Partial Exercise. The Option may be exercised in whole or in part; provided, however,
will be void, if the issuance of the Option Shares upon such exercise would constitute a violation of any applicable
federal or state securities laws or other laws or regulations.
Restrictions on Exercise. The Option may not be exercised, and any purported exercise
Non-Transferability of Option. The Option may not be sold, pledged, assigned, hypothecated,
gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent or distribution. During the Optionee’s lifetime, the Option is exercisable only by the
Optionee. Subject to the foregoing and the terms of the Plan, the terms of the Option will be binding upon the
executors, administrators and heirs of the Optionee.
Tax Consequences. The Optionee has reviewed with the Optionee’s own tax advisors the federal,
state, local and foreign tax consequences of the Option. The Optionee is relying solely on such advisors and not on
any statements or representations of the Bank or any of its agents or affiliates. The Optionee understands that he or
she (and not the Bank) will be responsible for his or her own tax liabilities arising in connection with this award or
the transactions contemplated by this Agreement. The Bank does not warrant that the Option is an incentive stock
option as described by Section 422 of the Code or otherwise subject to any other particular tax treatment.
No Continuation of Service. Neither the Plan nor this Option will confer upon the Optionee any
right to continue in the service of the Bank or any of its Affiliates, or limit in any respect the right of the Bank or its
Affiliates to discharge the Optionee at any time, with or without Cause and with or without notice.
The Plan. The Optionee has received a copy of the Plan, has read the Plan and is familiar with its
terms, and hereby accepts the Option subject to the terms and provisions of the Plan, as amended from time to time.
Pursuant to the Plan, the Board is authorized to interpret the Plan and to adopt rules and regulations not inconsistent
with the Plan as it deems appropriate. The Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board with respect to questions arising under the Plan or this Agreement.
Early Disposition of Stock. Subject to the fulfillment by the Optionee of any conditions limiting
the disposition of the Option Shares, the Optionee agrees that if the Optionee disposes of any Option Shares before
the later of (i) the first anniversary of the date on which the Option Shares are transferred to the Optionee or (ii) the
second anniversary of the Effective Date, then the Optionee will notify the Bank in writing within 30 days after the
date of such disposition.
Entire Agreement. This Agreement, together with the Plan, represents the entire agreement
between the parties and supersedes any and all prior or contemporaneous discussions, understandings or any
agreements of any nature, written or otherwise, relating to the subject matter hereof.
New Jersey, without regard to the application of the principles of conflicts of laws.
Governing Law. This Agreement will be construed in accordance with the laws of the State of
80
The Bank of Princeton
Execution. This Agreement may be executed, including execution by facsimile signature, in one
or more counterparts, each of which will be deemed an original, and all of which together shall be deemed to be one
and the same instrument.
This space intentionally left blank; signature page follows.
81
The Bank of Princeton
_________, 20__.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the ___ day of
THE BANK OF PRINCETON
By:
Name:
Title:
OPTIONEE:
Signature
Print Name
Address:
82
The Bank of Princeton
Form of Nonqualified Stock Option Agreement
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER
THE BANK OF PRINCETON 2012 EQUITY INCENTIVE PLAN
Exhibit 10.6
THE BANK OF PRINCETON (the “Bank”) and ___________________________________ (the “Optionee”).
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is made between
for the benefit of the key employees, directors and advisors of the Bank and its Affiliates; and
WHEREAS, the Bank maintains The Bank of Princeton 2012 Equity Incentive Plan (the “Plan”)
subject to the terms of the Plan; and
WHEREAS, the Plan permits the award of Non-Qualified Stock Options to purchase Shares,
to further align the Optionee’s personal financial interests with those of the Bank’s stockholders.
WHEREAS, the Bank desires to grant the Optionee Non-Qualified Stock Options under the Plan
intending to be legally bound hereby, the parties agree as follows:
NOW, THEREFORE, in consideration of these premises and the agreements set forth herein and
Award of Option. This Agreement evidences the grant to the Optionee of an option (the
“Option”) to purchase _________________________ (______) Shares (the “Option Shares”). The Option is subject
to the terms set forth herein, and in all respects is subject to the terms and provisions of the Plan applicable to Non-
Qualified Stock Options, which terms and provisions are incorporated herein by this reference. Except as otherwise
specified herein or unless the context herein requires otherwise, the terms defined in the Plan will have the same
meanings herein.
Nature of the Option. The Option is intended to be a nonstatutory stock option and is not
intended to be an incentive stock option as described by Section 422 of the Code, or to otherwise qualify for any
special tax benefits to the Optionee.
Date of Grant; Term of Option. The Option was granted on ___________, _____ (the
“Effective Date”) and may not be exercised later than the date that is ten (10) years after that date, subject to earlier
termination in accordance with the Plan.
($__.__) (the “Exercise Price”), which is the Fair Market Value per Share on the Effective Date.
Option Exercise Price. The per share exercise price of the Option is _____________________
provisions of the Plan and this Agreement, as follows:
Exercise of Option. The Option will become exercisable only in accordance with the terms and
continuous service to the Bank through the applicable vesting date as follows:
Right to Exercise. Option Shares will become exercisable if the Optionee remains in
____ of the Options will vest on the Effective Date
____ of the Options will vest __________________________
____ of the Options will vest __________________________
Upon a termination of the Optionee’s service with the Bank, the Option will be exercisable only to the extent
specified in Section 6 of the Plan. Solely for purposes of this Option, service with the Bank will be deemed to
include service with an Affiliate of the Bank for so long as that entity remains an Affiliate of the Bank.
Notwithstanding the foregoing, this Option (to the extent then outstanding) will become fully vested and
immediately exercisable upon a Change in Control.
83
The Bank of Princeton
Method of Exercise. The Optionee may exercise the Option by providing written notice
to the Bank stating the election to exercise the Option. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified mail to the Secretary of the Bank or such other person as may be designated by
the Bank, and shall be accompanied by payment of the Exercise Price and an amount equal to any required tax
withholding. Payment of the Exercise Price and any required tax withholding will be made in cash or such other
form as may be accepted by the Board in accordance with the Plan.
may be required or appropriate under applicable law, the Plan or otherwise.
Share Legends. Any certificate evidencing an Option Share will contain such legends as
that any exercise may apply only with respect to a whole number of Option Shares.
Partial Exercise. The Option may be exercised in whole or in part; provided, however,
will be void, if the issuance of the Option Shares upon such exercise would constitute a violation of any applicable
federal or state securities laws or other laws or regulations.
Restrictions on Exercise. The Option may not be exercised, and any purported exercise
Non-Transferability of Option. The Option may not be sold, pledged, assigned, hypothecated,
gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by
will or by the laws of descent or distribution. During the Optionee’s lifetime, the Option is exercisable only by the
Optionee. Subject to the foregoing and the terms of the Plan, the terms of the Option will be binding upon the
executors, administrators and heirs of the Optionee.
Tax Consequences. The Optionee has reviewed with the Optionee’s own tax advisors the federal,
state, local and foreign tax consequences of the Option. The Optionee is relying solely on such advisors and not on
any statements or representations of the Bank or any of its agents or affiliates. The Optionee understands that he or
she (and not the Bank) will be responsible for his or her own tax liabilities arising in connection with this award or
the transactions contemplated by this Agreement.
No Continuation of Service. Neither the Plan nor this Option will confer upon the Optionee any
right to continue in the service of the Bank or any of its Affiliates, or limit in any respect the right of the Bank or its
Affiliates to discharge the Optionee at any time, with or without Cause and with or without notice.
The Plan. The Optionee has received a copy of the Plan, has read the Plan and is familiar with its
terms, and hereby accepts the Option subject to the terms and provisions of the Plan, as amended from time to time.
Pursuant to the Plan, the Board is authorized to interpret the Plan and to adopt rules and regulations not inconsistent
with the Plan as it deems appropriate. The Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board with respect to questions arising under the Plan or this Agreement.
Entire Agreement. This Agreement, together with the Plan, represents the entire agreement
between the parties and supersedes any and all prior or contemporaneous discussions, understandings or any
agreements of any nature, written or otherwise, relating to the subject matter hereof.
New Jersey, without regard to the application of the principles of conflicts of laws.
Governing Law. This Agreement will be construed in accordance with the laws of the State of
Execution. This Agreement may be executed, including execution by facsimile signature, in one
or more counterparts, each of which will be deemed an original, and all of which together shall be deemed to be one
and the same instrument.
This space intentionally left blank; signature page follows.
84
The Bank of Princeton
20__.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the ___ day of _________,
THE BANK OF PRINCETON
By:
Name:
Title:
OPTIONEE:
Signature
Print Name
Address:
85
The Bank of Princeton
SUBSIDIARIES OF REGISTRANT
Exhibit 21.1
Name of Subsidiary
Bayard Lane, LLC
112 Fifth Avenue, LLC
Bayard Properties, LLC
TBOP REIT, Inc.
TBOP Delaware Investment Company
Jurisdiction of
Incorporation
or Formation
NJ
NJ
NJ
NJ
DE
86
The Bank of Princeton
I, Edward Dietzler, certify that:
RULE 13A-14(A)/15D-14(A) CERTIFICATIONS OF THE
CHIEF EXECUTIVE OFFICER
1. I have reviewed this annual report on Form 10-K of The Bank of Princeton:
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of circumstances under which such statements
were made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting
Date:
March 19, 2015
/s/Edward Dietzler
Edward Dietzler
President
(Principal Executive Officer)
87
The Bank of Princeton
RULE 13A-14(A)/15D-14(A) CERTIFICATIONS OF THE
CHIEF FINANCIAL OFFICER
Exhibit 31.2
I, Michael J. Sanwald, certify that:
1. I have reviewed this annual report on Form 10-K of The Bank of Princeton:
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of circumstances under which such statements were made, not
misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report.
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting
Date: March 19, 2015
/s/Michael J. Sanwald
Michael J. Sanwald
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
88
The Bank of Princeton
SECTION 1350 CERTIFICATIONS
Exhibit 32.1
In connection with the Annual Report of The Bank of Princeton (the “Bank”) on Form 10-K for the period ending
December 31, 2014 as filed with the Federal Deposit and Insurance Corporation on the date hereof (the “Report”), the
undersigned certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Bank.
/s/Edward Dietzler
Edward Dietzler
President
(Principal Executive Officer)
/s/Michael J. Sanwald
Michael J. Sanwald
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
March 19, 2015
89
The Bank of Princeton
NOTES:
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90
The Bank of Princeton A special community deserves a special bank.
91
The Bank of Princeton Who We Are
Board of Directors
Advisory Board, Princeton
Andrew M. Chon, Chairman
Stephen Distler, Vice Chairman
Ross E. Wishnick, Vice Chairman
Edward J. Dietzler, President
Judith Giacin
Richard Gillespie
Robert N. Ridolfi, Esq.
Stephen K. Shueh
Incorporators
Gregg E. Chaplin
Andrew M. Chon
Peter M. Crowley
Stephen Distler
Richard Gillespie
Bumsung K. Han
John A. Horvath
Kevin R. Kenyon
W. Andrew Krusen, Jr.
Janet M. Lasley
Emmett J. Lescroart
Dennis M. Machulsky
Casey K. Min
J. Scott Needham
Henry S. Opatut
Robert N. Ridolfi, Esq.
James M. Riley
Jeffery H. Sands
Eric L. Steinfeldt
Ross E. Wishnick
J. Scott Needham, Chairman
George L. Bustin
Barbara Cuneo
Peter J. Dawson
Robert Dunn
Paul Gerard
Michael Goodman, Esq.
Yongkuen Joh
Martin Kahn
Emmett J. Lescroart
Lance Liverman
Jerry MacLean
Nelson Obus
Joseph Ridolfi
Chetan Shah
Scott Sipprelle
Advisory Board, New Brunswick
Thea Berkhout
Sam Boraie
Michael Cangemi
James Decker
Glynn Dwyer
Jonathan Glick
Ninfa Mueller
Ros Neal
Beverly A. Poelstra
Mark Sherman
Pam Stefanek
H. Edward Wilkin, III
$955
MM
92
The Bank of Princeton Relationship Management
Management & Support
Commercial Lenders
Executive Management
Stephanie M. Williams, Chambers
Michele Lewis-Fleming, Chambers
Kris Muse, Nassau
Steven J. Landau, Montgomery/
Lambertville
William McDowell, Pennington
Paul M. Bencivengo, Hamilton
William D. Allan, Monroe
William McCoy, New Brunswick
Jennifer Yoo, Cheltenham
Hiwon Kim, Cheltenham
Troy Hwang, North Wales
Market Managers
Rose Russo, Bayard
Darshana Jadav, Chambers
Paul Sabol, Nassau
Roseanne Maresma, Montgomery
Rhoda Sundhar, Pennington
Suzanne Lippincott, Hamilton
Connie Inverso, Monroe
Amy Lavery, Lambertville
Miriam I. Colón, New Brunswick
Esther Youngsoon Sim, Cheltenham
Hae Ran Hwangbo, North Wales
Sokha Eng, Arch Street
Edward J. Dietzler
Carol R. Coles
Douglas V. Conover
Paul Y. Hyon
Daniel J. O’Donnell
Michael J. Sanwald
Marketing
Barbara A. Cromwell
Human Resources
Anna Maria Miller
Operations & Compliance
Stacy Miano
Karen D. Pfeifer
Kelly Tarity
Loan Administration
Mary Beth Gorecki, Consumer Credit
Dawn Hathaway, Loan Compliance
Christopher Tonkovich, Commercial Credit
Finance
Edward P. Hassenkamp
93
The Bank of Princeton
Listening.
Pictured above (left to right)
Edward J. Dietzler, President of The Bank of Princeton; Paul Y. Hyon, Regional President of
MoreBank; Daniel J. O’Donnell, EVP General Counsel & Chief Risk Officer; Carol R. Coles,
EVP Chief Credit Officer; Michael J. Sanwald, EVP Chief Financial Officer; and
Douglas V. Conover, EVP Chief Lending Officer.
The Bank of Princeton, with nine branch locations, serves Mercer, Hunterdon, Middlesex
and Somerset Counties. MoreBank, a division of The Bank of Princeton has three
locations nearby in Pennsylvania. The merger of MoreBank with The Bank of Princeton
occurred in 2010.
Gaining
Perspective
94
The Bank of Princeton A Year of One Great Deal after Another
The Bank of Princeton & MoreBank
A Deal Worth Singing About!
1.10% Certificate of Deposit for 1 Year
The Bank of Princeton
Wise Checking
Featuring NO Monthly Service Charges
MoreBank
Soar into 2015...
1.00% Money Market Account through February 2015
The Bank of Princeton & MoreBank
See what all the buzz is about!
1.00% Certificate of Deposit for 1 Year
The Bank of Princeton & MoreBank
e-Statement Promotion
Switch from paper statements to e-statements
and receive
$5.00 deposited to your checking account
95
The Bank of Princeton Putting our website to work for you!
The Bank of Princeton and MoreBank offer many valuable resources on their websites to
assist with managing finances. Discover over 20 calculators used to facilitate with
budgets, loan estimating and help formulate a plan to become a millionaire! Find a
number of practical forms, including a switch kit, for download and print. Review fraud
prevention information as well as explore your local weather.
Upcoming Events
Directors, Management and Staff are proud to be active and partnering with many
organizations to make a difference in the communities we serve. Our staff can be found
walking, running and volunteering to raise money and awareness. Join us at some of our
upcoming events in 2015. Visit... www.thebankofprinceton.com for additional information
including links to purchase tickets or options for supporting these worthy charities and
local events.
Spotlight on Business
The Bank of Princeton and MoreBank continue to partner and maintain a focus
on the business community. Each quarter, a business customer is selected and featured at
the branch location specific to their market.
All twelve Spotlights on Business are highlighted for one quarter and then
archived on our website.
Have you downloaded the App?
Our personal Banking Apps, developed for both smart phones and the iPad, make life more convenient.
Uncover links to the Apps on our website, in iTunes or Google Play for Android.
thebankofprinceton.com/personal/mobile-banking
Coming in 2015...
A Business Online Banking
Mobile App!
Soon you can take care of
your business banking from
any smartphone or tablet!
Upcoming Events
Spotlight on Business
What are these funny looking squares? They are
QR codes. QR code (Quick Response Code) is the
trademark for a type of matrix barcode (or
two-dimensional barcode). You can download free
QR code readers to your smartphone. Then just
scan the code, and you will be taken directly to the
source of information.
96
The Bank of Princeton
Year-End Total Assets
$955 Million
2014
$877 Million
2013
$769 Million
2012
$665 Million
2011
$488 Million
2010
$265 Million
2009
$194 Million
2008
$66 Million
2007
97
The Bank of Princeton Boy Scout Troop 29
Bridge Academy, The
Allies, Inc.
Alzheimer's Association
American Cancer Society
Dillon Youth Basketball League
Joint Effort - Princeton
Dress for Success
Kalmia Club, The
Eden Autism Services Foundation
Korean American Association
American Heart Association
Edison Chamber of Commerce
of Greater Philadelphia
American Legion, The
Elijah's Promise
American Repertory Ballet
Family Guidance Center
Korean American Association
of Southern New Jersey
Animal Alliance of New Jersey
Feria de Negocios Hispanos
Korean American Institute of Princeton
Anchor House
Arc of Hunterdon County, The
Arts Council of Princeton
Food Cupboard of the Inter-Faith
Korean American Soccer Association
Housing Alliance, The
Forsgate Foundation, The
of Greater Philadelphia
Korean American Sports Association
Asian Pacific American Bar Association
Friendly Sons & Daughters of St. Patrick
of Greater Philadelphia
of Pennsylvania
of Mercer County
Big Brothers Big Sisters of Mercer County
Friends of Ely Park
Korean Community Center
of Greater Princeton
George's Pet Adoption Day, The
Lambertville Chamber of Commerce
Capital Health Foundation
of Commerce
Greater New Hope Chamber
Lamb Foundation, The
Lambertville Food Pantry
Capital Region Minority Chamber
Greater Philadelphia Asian Social
Lambertville / New Hope Winter Festival
of Commerce
Services Center
Lambertville Historical Society
Catholic Charities, Diocese of Metuchen
Greener New Jersey Productions
Lambertville-West Amwell Youth
Catholic Charities, Diocese of Trenton
Habitat for Humanity, Raritan Valley
Baseball & Softball Association
Center for Educational Advancement
Hamilton Area YMCA
Learning Center for Exceptional
Center for Family, Community &
Hamilton Education Foundation
Children, The
Social Justice, Inc., The
Center for Literacy
Help Portrait - Princeton Chapter
Leukemia & Lymphoma Society
HiTOPS, Inc.
LifeTies, Inc.
Central Bucks Chamber of Commerce
HomeFront
Children's Home Society of New Jersey
HomeSharing, Inc.
March of Dimes Foundation
Mary Jacobs Library Foundation
Crisis Ministry of Mercer County, The
Hopewell Elementary School Science Fair
Meals on Wheels of Trenton / Ewing
Christine's Hope for Kids Foundation
Hopewell Harvest Fair
Mercer County Bar Association
Community Options
Communiversity
Corner House
Hopewell Valley Arts Council
Mercer County Community College
Hopewell Valley Education Foundation
Foundation
Hopewell Valley Soccer Association
Mercer County Turkey Trot
Crossroads of the American Revolution
Hopewell Valley Veterans Association
Mercer Street Friends Food Bank
D&R Greenway Land Trust
Hopewell Valley YMCA
Middlesex County Regional Chamber
Dance Stop Studio
Hunterdon County Chamber
of Commerce
Daytop New Jersey at Crawford House
of Commerce
MidJersey Chamber of Commerce
Delaware Township School Partners
Hyacinth AIDS Foundation
MidSummer Marketing Event
in Education
Jack & Jill of America, Inc.
Mil Al Mission
“Commitment is what transforms
a promise into reality.”
~ Abraham Lincoln
Jewish Family & Children Services
Minding Our Business
Jewish Family Services
of Middlesex County
Montgomery Elementary Schools PTA
Montgomery Baseball League
John Warms Montgomery High School
Montgomery Basketball Association
Alumni Association
Montgomery Business Association
Montgomery / Rocky Hill Rotary Club
Philabundance
Ryan's Quest
Montgomery Rodeo
Philadelphia Chinatown Development
Science Mentors 1 to 1
Montgomery Township Education
Corporation
Foundation
Philadelphia Korean Senior
Montgomery Township Environmental
Golf Association
Commission
PlanSmart NJ
Send Hunger Packing Princeton
SERV Behavioral Health Systems
Shad Fest Lambertville
South Hunterdon Regional
Montgomery Township Food Pantry
Princeton Academy of the Sacred Heart
High School Baseball
Montgomery Township Fireworks
Princeton Area Alumni Association
Special Strides
Committee
Princeton Education Foundation
St. Francis Medical Center Foundation
Montgomery Township Volunteer
Princeton Historical Society
Steamboat Floating Classroom
Fire Company No. 1 & No. 2
Princeton High School Baseball
Susan G. Komen
Montgomery Women's Club
Morven Museum & Garden
Nassau Hockey League
Booster Club
Princeton in Africa
PrincetonKIDS
Thomas Edison State College Foundation
Trenton Area Soup Kitchen, The
Trenton Catholic Academy
National Association for Korean Schools,
Princeton Pro Musica
Trinity Church
The Mid-Atlantic Chapter
New Brunswick Cultural Center
Hub City Music Festival
Princeton Public Library
Trinity Counseling Service
Princeton Recreation Department
United Way of Hunterdon County
Princeton Regional Chamber
Unity Square / New Brunswick 4-H
New Brunswick Fire Department
of Commerce
Princeton Senior Resource Center
Trunk or Treat
VolunteerConnect
New Brunswick Little League
New Hope Film Festival
New Hope Historical Society
Princeton Symphony Orchestra
Waldorf School of Princeton
Princeton Tennis Program
Watchung Hills Ponytail Softball
New Hope-Solebury Girls Soccer
Princeton University Summer Chamber
League, Inc.
New Hope-Solebury Spirit Run
Concerts
West Amwell Township
Princeton Youth Baseball Association
Womanspace
Wounded Warriors Project
Yeshivat Keter Torah
YMCA Camp Mason
YWCA of Trenton
New Jersey Association
of Community Providers
New Jersey Foundation for Aging
New Jersey Oyster Bowl
Recreation Foundation
of Hopewell Valley, Inc.
Riverside Symphonia
New Jersey State Elks Association
Ronald McDonald House of
NJ Bankers Association
New Brunswick
North Brunswick Township High School
Rotary Club of Princeton
Notre Dame High School
Open Space Pace
Parkinson Alliance, The
Passage Theatre Company
Paul Robeson House, The
Pennington Business &
Professional Association
Pennington Day, Inc.
Pennington Montessori
Pennington Volunteer Fire Company
People & Stories / Gente y Cuentos
C o m p a s s i o n & Dedication
Extending sincere gratitude
to our community partners.
Together... making a difference.
C
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H
183 Bayard Lane
Princeton, NJ 08540
e
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dquart e r
s
21 Chambers Street
Princeton, NJ 08542
194 Nassau Street
Princeton, NJ 08542
1185 Route 206 North
Princeton, NJ 08540
2 Route 31 South
Pennington, NJ 08534
339 Route 33
Hamilton, NJ 08619
1 Rossmoor Drive, Ste 120
Monroe Twp, NJ 08831
10 Bridge Street
Lambertville, NJ 08530
1 Spring Street, Ste 102
New Brunswick, NJ 08901
403 Wall Street
Princeton, NJ 08540
470 W. Cheltenham Avenue
Philadelphia, PA 19126
1222 Welsh Road
North Wales, PA 19454
921 Arch Street
Philadelphia, PA 19107
r
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Op e r
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www.thebankofprinceton.com
609.921.1700
www.morebankusa.com
215.224.6400