Bank of Princeton
Annual Report 2022

Plain-text annual report

2022 ANNUAL REPORT Our growing community is expanding into a greater region. 109 Table of Contents Letter to the Shareholders.................................................i -ii 2022 Form 10-K .............................................................................1 Who We Are.............................................................................. 105 Our growing community is expanding into a greater region. A Successful 2022 We have expanded our communities in New Jersey and Pennsylvania, regionally. The Bank of Princeton is approaching its 16th year of operation, and continues its success by focusing on growth – personal and business – with a priority on customer satisfaction. The Bank’s strong capital position provides the opportunity for future organic growth, as well as the ability to take advantage of acquisition opportunities such as local and regional communities. Our mission stands strong, as we continue to grow with a foothold on community service. Dear Fellow Shareholders, The Bank of Princeton dealt with many challenges during the year, including the impact of the economy, which had some residual effects from the pandemic of 2019. In addition, rising inflation and a volatile interest rate market which impacted our net interest margin. Despite these challenges, the Bank reached its strategic and financial goals with exceptional financial performance and sustained credit quality. The Bank completed a successful year with earnings of $26.5 million, or $4.11 per diluted common share, representing a 24.5% increase over 2021. Total assets stood at $1.6 billion at year end. Loans grew $35.2 million during 2022. These results, as well as increasing the quarterly cash dividend to $0.25 per share (from $0.18 per share in 2021), completing a second stock buy-back program, and controlled prudent loan growth, aided the Bank in increasing shareholder value. The Bank celebrated its 15th year of operation and continues its success by staying the course with its original core mission. That is, targeting the commercial real estate and small business communities for their lending needs and staying significantly involved in the community. The Bank’s strong capital position provides the opportunity for future organic growth, as well as the ability to take advantage of acquisition opportunities. Notable Highlights for 2022 • Our net interest margin was $4.41% for 2022, an increase of 39 basis points over 2021. • The Bank increased its quarterly dividend 39% to $0.25 per share. The Bank announced an increase to $0.30 per share for the 1st quarter of 2023. • The Bank announced in March its intent to form Princeton Bancorp, Inc., a bank holding company, which would allow for increased flexibility to pursue strategic opportunities to drive long-term growth. This was completed in January 2023. Richard J. Gillespie Chairman of the Board Edward J. Dietzler President Chief Executive Officer i ii Dear Fellow Shareholders, 2022 ANNUAL REPORT “The Board is proud both of the management team and staff that delivered our best year ever.” Richard J. Gillespie “I am extremely pleased with the Bank’s financial performance in 2022. Our team at The Bank of Princeton continues to deliver strong performance and the highest level of customer service, while at the same time making significant improvements in our products and services.” Edward J. Dietzler • In October, the Bank announced that it had entered into a definitive agreement to acquire Elkins Park, PA based Noah Bank, expanding the Bank’s footprint to northern New Jersey & New York City. • Initiated and completed a second 5% stock repurchase program during 2022, with the intent to maximize shareholder value by enhancing future periods’ earnings-per-share and return-on-equity without dilution. • The Bank launched NotifiAlerts and CardCentral, two online banking and mobile banking app services that provide real-time account activity alerts and the ability to monitor all bank debit/ credit cards from one location. The Bank believes that to stay competitive in the community banking market it must continue to make significant investments in digital technologies that allow our customers to remotely access the many Bank products and services, as well as adding protection against cyber fraud and other threats. In addition, while our existing clients can benefit from the convenience of this technology, it also allows the Bank to be competitive in attracting new consumer and business customers within our footprint and surrounding market areas. The Board and Management stand committed to providing exceptional customer service paralleled with strong partnerships in the communities we serve. We are proud of our employees who have successfully responded to the challenges of 2022 to deliver our most profitable year ever. i ii 2022 Financial Reports 105 The Bank of Princeton The Bank of Princeton The following table presents a summary of our allowance for loan losses and nonaccrual loans by total loans and a summary of net charge-offs by loan segments: Allowance for loan losses to total loans outstanding: Allowance for loan losses Total loans outstanding Nonaccrual loans Allowance for loan losses to nonaccrual loans Nonaccrual loans to total loans outstanding Net charge-offs during the period to average loans outstanding Commercial real estate Net charge-offs Average amount outstanding Commercial and industrial Net charge-offs Average amount outstanding Construction Net charge-offs Average amount outstanding Residential first-lien Net charge-offs Average amount outstanding Home equity/consumer Net charge-offs Average amount outstanding PPP Net charge-offs Average amount outstanding Total Loans Net charge-offs Average amount outstanding As of and for Year Ended December 31, 2022 2021 (Dollars in thousands) 1.20% 16,461 1,372,824 266 6188.3% 0.02% 0.05% 459 850,192 0.00% - 29,562 0.02% 100 416,508 0.00% - 46,379 0.00% - 7,575 0.00% - 25,285 0.04% 559 1,375,501 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1.24% 16,620 1,340,448 1,175 1414.5% 0.09% 0.26% 2,075 785,379 2.43% 957 39,329 0.00% - 335,416 0.00% - 55,230 0.00% - 9,133 0.00% - 157,140 0.22% 3,032 1,381,626 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ The allowance for loan losses decreased $159 thousand, or 1.0%, to $16.5 million at December 31, 2022. Changes between loan segments were mainly a result of charge-offs during the year ended December 31, 2022. The allowance for loan losses decreased as a result of the decrease in historical loss rate from December 31, 2021 to at December 31, 2022. The decrease was partially offset by an increase in qualitative factors from 2021 to 2022. 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. Reductions or additions to the allowance charged to operations are the result of applying our allowance methodology to the existing loan portfolio. Average Balance Sheets. The following table sets forth average balance sheets, yields and costs, and certain other information for the years indicated. The average yields and costs of funds shown are derived by dividing income or expense by the daily average balance of assets or liabilities, respectively, for the periods presented. Net loan fees of $5.2 million and $9.2 million were recorded for twelve months ended December 31, 20`22 and 2021, respectively. Nonaccrual loans are included in the average balance of loans receivable, net for all periods presented. No tax-equivalent adjustments have been made. How the Critical Audit Matter was addressed in the Audit Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included tests of the following: (cid:220) Management’s determination of general reserves, including determination of historical loss experience and qualitative adjustments to historical loss experience. The accuracy of management’s calculation of the allowance for loan losses, including relevant internal controls. (cid:220) We have served as the Bank's auditor since 2021. /s/ Wolf & Company, P.C. Boston, Massachusetts March 24, 2023 Note 14 – Fair Value Measurements and Disclosure (Continued) Other real estate owned (generally 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. Loans Receivable, net The fair value of loans receivable, net is based on discounted cash flow methodologies for which the determination of fair value may require significant management judgement. Deposits The fair value of deposits is based on discounted cash flow methodologies for which the determination of fair value may require significant management judgement. Borrowings Borrowings held by the Bank that are overnight, the carrying value is deemed to be its approximate fair value. Restricted investment in bank stock and accrued interest receivable and accrued interest payable Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business. The fair value has not been estimated for assets and liabilities that are not considered financial instruments. The carrying amounts and estimated fair value of financial instruments are as follows: Level 2 Level 3 Financial Assets: Cash and cash equivalents Securities AFS Securities HTM Loans receivable, net Restricted bank stock Accrued interest receivable December 31, 2022 Carrying Amount Estimated Fair Value $ 53,351 5 83,402 88 2012 1,353,907 1 1,742 4 4,756 $ 53,351 5 83,402 88 2002 1,347,137 1 1,742 4 4,756 Level 1 (In thousands) 53,351 $ 5 -- -- -- -- -- Note 14 – Fair Value Measurements and Disclosure (Continued) $ - - 81,341 8 20022 -- 1,742 4,756 4 Financial Liabilities The carrying amounts and estimated fair value of financial instruments are as follows: 1,347,730 10,000 1 1,027 Deposits Borrowings Accrued interest payable 1,225,087 10,000 1 1,027 -- -- -- 1,225,087 10,000 1 1,027 Limitations $ - - 2,061 2 -- 1,347,137 1 -- -- -- -- -- 10.13 (Q) 2020 Management Incentive Plan* 10.14 (R) Dividend Reinvestment and Stock Purchase Plan 10.15 (S) Supplemental Executive Retirement Plan dated July 30, 2021 for the benefit of Edward J. Dietzler and 21.1 31.1 31.2 32.1 Daniel J. O’Donnell 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. Management contract or compensatory plan, contract or arrangement. (A) Incorporated by reference to Exhibit 3.1 to registrant’s Current Report on Form 8-K, filed with the SEC on September 2, 2022 (B) Incorporated by reference to Exhibit 3.1(ii) to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (C) Incorporated by reference to Exhibit 4.1 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022 (D) Incorporated by reference to Exhibit 4.1 to registrant’s Current Report on Form 8-K12B, filed with the SEC on January 10, 2023. (E) Incorporated by reference to Exhibit 10.1 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (F) Incorporated by reference to Exhibit 10.2 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (G) Incorporated by reference to Exhibit 10.3 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (H) Incorporated by reference to Exhibit 10.4 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (I) Incorporated by reference to Exhibit 10.5 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (J) Incorporated by reference to Exhibit 10.6 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (K) Incorporated by reference to Exhibit 10.7 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (L) Incorporated by reference to Exhibit 10.8 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (M) Incorporated by reference to Exhibit 10.9 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. (N) Incorporated by reference to Exhibit 10.10 to registrant’s Registration Statement No. 333-263313 of Form S-4EF filed with the SEC on March 4, 2022. The Bank of Princeton 104 Who We Are Board of Directors 2022 Financial Reports Richard J. Gillespie Chairman Stephen A. Distler Vice Chairman Edward J. Dietzler President Chief Executive Officer Ross E. Wishnick Vice Chairman Judith A. Giacin Robert N. Ridolfi, Esq. Stephen K. Shueh Martin Tuchman 105 Who We Are Executive Management Edward J. Dietzler President Chief Executive Officer Daniel J. O’Donnell, Esq. Executive Vice President Chief Operating Officer & General Counsel George S. Rapp Executive Vice President Chief Financial Officer Christopher M. Tonkovich Executive Vice President Chief Credit Officer Stephanie M. Adkins Executive Vice President Chief Lending Officer Matthew T. Clark Executive Vice President Chief Information Officer Established in 2007, The Bank of Princeton opened its first branch for business on the 23rd of April. Since then, the Bank has grown to include twenty-four branch locations and a comprehensive Operations Center that serve the Mercer, Burlington, Camden, Gloucester, Hunterdon, Middlesex, Monmouth, Ocean, and Somerset counties in New Jersey along with four branches in the Montgomery County and Philadelphia markets in Pennsylvania. 106 107 Our Team Compliance & Operations Karen D. Pfeifer, SVP Angela Bancroft, VP Jamie Wilson, VP Michelle Gorda, AVP Justin Naidoo, AVP Sandhya Paul, AVP Facilities Ryan M. Cavicchio, VP Finance Jeffrey T. Hanuscin, SVP Marie P. Mueller, VP Rosemary Tumino, AVP Human Resources Anna Maria Potter-Miller, SVP Information Technology Michael C. Stocklin, SVP Kyndle E. Alig, VP John Critelli, VP Kevin Pierce, VP Loan Administration Mary Beth Gorecki, SVP Denise Youn, SVP Lukasz Gargas, VP Michelle Goldstein, VP Peggyann Lane, VP Clifford Livingston, VP Marc Lordi, VP Amela Muslic, VP Stanley Plytynski, VP Steven Beck, AVP Theresa Harris-Norfleet, AVP Roseann Kennedy, AVP Natalya Khandros, AVP Eileen McBride, AVP David Mulryne, AVP Olivia Pyon, AVP Wanda Szymanski, AVP Rebecca Vanselous, AVP Marketing Stefanie Gryger, AVP Retail Administration Karin van Garderen, SVP Paul Ojeda, VP Rose Russo, VP Amy Zuccarello, AVP Security Keith R. Bitzel, VP Commercial Lenders Paul Bencivengo, SVP William McCoy, SVP William McDowell, SVP Kris Muse, SVP Duncan Farquhar, VP Michele Lewis-Fleming, VP Branch Management Princeton Region Henrry Polanco, VP, RRM Rian Andrews, AVP, Bayard Lane Wendy J. Evans, AVP, Monroe Khendra Slawinski, AVP, Montgomery Darshana Jadav, AVP, Nassau Street Keisha Patrick-Davey, AVP, New Brunswick Miriam Colón, AVP, Piscataway Rhoda Sundhar, AVP, Princeton Junction Central Region Nedgine Douge, VP, RRM* Paul Sabol, AVP, Bordentown Barbara Brehaut, AVP, Hamilton Jonathan Collins, AVP, Lambertville Yvette Windsor, AVP, Lawrenceville Nathalie Cassion, AVP, Pennington Lourdes Pagan, AVP, Quakerbridge Road Southern Region Kelly Zane, VP, RRM* Donna Craddock, AVP, Browns Mills Shannon Bennett, AVP, Chesterfield Jeralyn H. Lang, AVP, Cream Ridge Christina Lerro, AVP, Deptford Jhonatan Castro, AVP, Lakewood Carole McGuirl, AVP, Sicklerville Pennsylvania Region Sera Yu, AVP, RRM* Rebecca Zheng, AVP, Arch Street Kyung Nam Kim, AVP, Cheltenham Chantal Smith, AVP, Chestnut Street Monica Kyung Ae Song, AVP, North Wales * Regional Retail Manager Matthew T. Clark Executive Vice President Chief Information Officer 106 107 108 Our growing community is expanding into a greater region. 200 Club of Mercer County Adopt A Classroom Alfa Gallery, The Alpha Care American Cancer Society American Foundation for Suicide Prevention Anchor House Animal Alliance Arts Council of Princeton Asian American Chamber of Commerce of Greater Philadelphia Bayard Rustin Center for Social Justice Bordentown Rotary Club Boys & Girls Clubs of Mercer County Bridge Academy of New Jersey, The Calvary Chapel Gloucester County Campus Philly Capital Health Foundation Capital Singers of Trenton CASA of New Jersey Catholic Charities Diocese of Trenton Central Jersey Housing Resource Center Cheltenham Township Chesterfield Baptist Church Chesterfield MVP LLC Chesterfield Township Children’s Home Society of New Jersey Civic League of Greater New Brunswick Clarifi Consolidated Fire Association Corner House Foundation Crosswicks Library Company CYO Bromley Center Delaware River Steamboat Floating Classroom, Inc. Downtown Bordentown Association Dress for Success Central New Jersey Eastern Montgomery County Chamber of Commerce Eden Autism Services Foundation Elijah’s Promise Erial Little League Father Center, The Feeding Middlesex County Fellowship CrossPoint Church First Ukrainian Evangelical Baptist Church Friends of Abbott Marshlands Friends of Hopewell Valley Open Space Friends of Rittenhouse Square Gilda’s Club South Jersey Greater Lambertville Chamber of Commerce Greater Philadelphia Asian Social Services Center Greater Philadelphia Coalition Against Hunger Grounds for Sculpture Habitat for Humanity of Burlington County and Greater Philadelphia Habitat for Humanity of South Central New Jersey, Inc. Habitat for Humanity Philadelphia Habitat for Humanity, Raritan Valley Chapter Hamilton Area YMCA Hamilton Educational Foundation HiTOPS, Inc. HomeFront Hopewell Harvest Fair Hopewell Valley Arts Council Hopewell Valley Gridiron Club Hopewell Valley Veterans Association Hopewell Valley YMCA Housing Initiatives of Princeton Indo American Fair Interfaith Caregivers of Greater Mercer County Isles, Inc. Jewish Family & Children’s Service of Greater Mercer County Joint Effort - Princeton Safe Streets Weekend Kalmia Club, The “Those who are happiest are those who do the most for others.” ~Booker T. Washington Korean American Association of Greater Philadelphia Korean American Chamber of Commerce for Philadelphia Korean Cultural Foundation Lambertville Historical Society Lawrence Township Education Foundation Lawrenceville Main Street Let There Be Health LifeTies, Inc. Mainstage Center for the Arts Meadow View Junior Academy Meals on Wheels in Greater New Brunswick Medina Community Clinic Mental Health Association of Monmouth County, The Mercer County Community College Foundation Mercer County Turkey Trot Mercer Street Friends Metropolitan Community Churches Middlesex County Regional Chamber of Commerce Mil Al Mission Mission Fire Company Moms Helping Moms Montgomery / Rocky Hill Rotary Club 109 Montgomery Baseball League Montgomery High School - Cougar Football Club Montgomery Township Fireworks Committee Morven Museum & Garden Mount Carmel Guild of Trenton National Junior Tennis & Learning of Trenton New Egypt Recreational Baseball New Hope Celebrates New Jersey State Theatre North Hanover Township Northern Burlington Junior Greyhounds Athletic Association Om Parikh Memorial Fund Penn Asian Senior Services Pennington Business & Professional Association Pennington Day, Inc. Pennington Public Library Philabundance Philadelphia Chinatown Development Corporation Piscataway Township Planned Lifetime Assistance Network of NJ Plumstead Township Princeton Area Alumni Association Princeton Battlefield Society, The Princeton Community Housing Princeton Tennis Program Princeton University Summer Chamber Concerts Project Freedom Puerto Rican Action Board Rebuilding Together Philadelphia Robert Wood Johnson University Hospital Hamilton Foundation SAVE, A Friend to Homeless Animals Send Hunger Packing Princeton Senior Crimestoppers Society of Young Korean Americans Sourland Conservancy South Jersey Dream Center Special Olympics NJ Steinert School Fund Styletainment Sustainable Princeton Thomas Edison State University Foundation Town Clock Community Development Corporation Township of Deptford Township of Gloucester Township of Pemberton Trenton Area Soup Kitchen, The Trenton Catholic Preparatory Academy Trenton Educational Dance Institute Trenton Music Makers United Way of Hunterdon County USS New Jersey Commissioning Committee Washington Township Parks & Recreation Softball Wildcats 16U West Windsor - Plainsboro Education Foundation Women Aware Woori Center YMCA Camp Mason YMCA of Metuchen, Edison, Woodbridge & South Amboy ThankYou! 2022 ANNUAL REPORT thebankofprinceton.com 609.921.1700 Corporate Headquarters 183 Bayard Lane, Princeton, NJ 08540 Operations Center 403 Wall Street, Princeton, NJ 08540 Convenient Locations Throughout New Jersey and Pennsylvania. New Jersey Bayard Lane 183 Bayard Lane Princeton, NJ 08540 609.847.7300 Bordentown 335 Farnsworth Avenue Bordentown, NJ 08505 609.291.8200 Browns Mills 101 Pemberton Browns Mills Road Browns Mills, NJ 08015 609.893.5540 Chesterfield 305 Bordentown– Chesterfield Road Chesterfield, NJ 08515 609.324.1256 Cream Ridge 403 Route 539 Cream Ridge, NJ 08514 609.757.1120 Deptford 1895 Hurffville Road Sewell, NJ 08080 856.227.9440 Hamilton 339 Route 33 Hamilton, NJ 08619 609.584.0011 Kingston 4422 Route 27 Kingston, NJ 08528 609.454.0333 Princeton Jct. 11 Cranbury Road Princeton Junction, NJ 08550 609.759.8100 Quakerbridge Rd. 3745 Quakerbridge Road Hamilton, NJ 08619 609.981.8900 Sicklerville 483 Cross Keys Road Sicklerville, NJ 08081 856.728.0343 Pennsylvania Arch St. 921 Arch Street Philadelphia, PA 19107 215.923.6200 Cheltenham 470 W. Cheltenham Avenue Philadelphia, PA 19126 215.224.6400 Chestnut St. 1839 Chestnut Street Philadelphia, PA 19103 215.996.7380 North Wales 1222 Welsh Road North Wales, PA 19454 215.631.9911 Lakewood 12 America Avenue, 7B Lakewood, NJ 08701 732.835.7320 Lambertville 10 Bridge Street Lambertville, NJ 08530 609.397.0333 Lawrenceville 2999 Princeton Pike Lawrenceville, NJ 08648 609.882.0500 Monroe 1 Rossmoor Drive, Ste 120 Monroe Twp, NJ 08831 609.655.7790 Montgomery 1185 Route 206 North Princeton, NJ 08540 609.497.0500 Nassau St. 194 Nassau Street Princeton, NJ 08542 609.921.3311 New Brunswick 1 Spring Street, Ste 102 New Brunswick, NJ 08901 732.993.0066 Pennington 2 Route 31 South Pennington, NJ 08534 609.730.8500 Piscataway 1642 Stelton Road, Ste 410 Piscataway, NJ 08854 732.743.9500 2022 ANNUAL REPORT 

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