PRINCETON, N.J., Oct. 21, 2021 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ: BPRN) today reported its unaudited results of operations and financial condition for the quarter ended September 30, 2021.  The Bank reported net income of $5.9 million, or $0.88 per diluted common share, for the third quarter of 2021, compared to net income of $5.5 million, or $0.80 per diluted common share, for the second quarter of 2021, and net income of $3.5 million, or $0.52 per diluted common share, for the third quarter of 2020. The increase in net income, when compared to the three months ended June 30, 2021, was primarily due to a $376 thousand increase in net-interest income, a $300 thousand increase in non-interest income, and a $133 thousand reduction in non-interest expense, partially offset by a $200 thousand increase in the provision for loan losses and a $206 thousand increase in income tax expense.  The increase in net income, when comparing it to the three months ended September 30, 2020, was primarily due to an increase in net-interest income of $3.3 million and a $42 thousand increase in non-interest income, partially offset by a $955 thousand increase in non-interest expense and a $765 thousand increase in income tax expenses. 

For the nine month period ended September 30, 2021, the Bank recorded net income of $16.3 million, or $2.38 per diluted common share, compared to $9.7 million, or $1.41 per diluted common share, for the same period in 2020, primarily due to an $11.3 million increase in net-interest income and a $250 thousand reduction in the Bank's provision for loan losses, partially offset by an increase in income taxes of $2.3 million, a $2.3 million increase in non-interest expense, and a $437 thousand decrease in non-interest income.

Highlights for the quarter-ended September 30, 2021 are as follows:

• The Bank continued its stock buyback program during the third quarter by purchasing an additional 73,259 shares of common stock at a weighted average price of $29.63.
• Net interest income for the third quarter of 2021 increased $3.3 million or 26.1% over the same period in 2020.
• The Bank decreased its cost of funds on deposits by 37 basis points in the third quarter of 2021 from the same period in 2020.
• The Bank's efficiency ratio decreased to 48.2% for the third quarter of 2021 compared to 52.9-% for the third quarter of 2020.
• The ratio of nonperforming loans to total loans continues to be low at 0.16% as of September 30, 2021 compared to 0.12% at December 31, 2020 and compared to 0.18% at September 30, 2020.

President/CEO Edward Dietzler stated that, "The Bank this year has produced continuous increases in earnings with a 7.3% improvement over the second quarter 2021 and 67.1% when compared to the third quarter in 2020."

Balance Sheet Review

Total assets were $1.67 billion at September 30, 2021, an increase of $66.4 million, or 4.1% when compared to $1.60 billion at the end of 2020. The primary reason for the increase in total assets was an increase in cash and cash equivalents of approximately $66.8 million, and a $17.2 million increase in available-for-sale securities, partially offset by a decrease of $21.2 million in net loans, primarily consisting of a decrease of $29.6 million in commercial real estate loans and a $19.3 million decrease in residential loans and home equity/consumer loans and, partially offset by an increase of $90.2 million in construction loans during the nine month period covered. In addition, Payroll Protection Program ("PPP") loans declined $49.2 million at September 30, 2021 due to loan payoffs and the federal government's termination of the program.

Total deposits at September 30, 2021 increased by $63.6 million, or 4.7%, when compared to December 31, 2020, primarily due to loan proceeds maintained in non-interest demand accounts from customers who received PPP loans, and stimulus payments to individuals under the American Rescue Plan Act, as well as growth from new branches added during the third quarter of 2020.  When comparing deposit products between the two periods, non-interest checking increased $59.4 million, savings increased $44.3 million and money markets increased $55.8 million. These increases were partially offset by a decrease in interest-bearing demand accounts of $39.2 million, primarily consisting of municipal deposits, and a decrease of $56.6 million in certificates of deposit. In addition, the Bank had no outstanding borrowings at September 30, 2021 and December 31, 2020.  

Total stockholders' equity at September 30, 2021 increased $6.4 million or 3.1% when compared to the end of 2020. This increase was primarily due to earnings recorded during the nine months of 2021 minus the $6.6 million of common stock repurchased and the cash dividend paid during the period, and minus the $638 thousand decrease in the fair-value of the available-for-sale investment portfolio related to an increase in the treasury interest rate curve.  In addition, the Bank commenced its stock buyback program during the third quarter and repurchased 227,191 shares of common stock at a total cost of $6.6 million and a weighted average cost of $29.13 per share.  The ratio of equity to total assets at September 30, 2021 and at December 31, 2020, was $12.9% and 13.0%, respectively.  

Asset Quality

At September 30, 2021, non-performing assets were $2.5 million, an increase of $835 thousand, or 49.8%, when compared to the amount at December 31, 2020.  This increase at September 30, 2021 from December 31, 2020 was primarily due to the addition of three loans totaling $1.5 million being classified as non-performing, partially offset by $815 thousand in principal charge-offs, and the remaining $251 thousand from principal payments. Troubled debt restructurings ("TDR") totaled $7.3 million at September 30, 2021 and $8.6 million at December 31, 2020. Three TDR loans totaling $6.2 million are performing to their agreed upon terms and the remaining two loans have remained in non-accrual status as of September 30, 2021.  

As part of the Bank's commitment to provide assistance during the COVID-19 pandemic, the Bank agreed to defer either the principal portion or both principal and interest payments for its customers who requested the deferral and were not delinquent prior to the government shut down.  The Bank has seen a favorable trend as a vast majority of customers have returned to their regular payment schedule. As of September 30, 2021, the Bank had remaining 1 loan that was modified totaling $9.0 million, and at December 31, 2020, the Bank had remaining 14 loans (consisting of nine borrowers) that were modified totaling $45.0 million, down from the 240 loans totaling $263.5 million originally approved for such deferment reported as of June 30, 2020. Under current accounting guidance, these loans are not required to be classified as TDRs.

Review of Quarterly Financial Results

Net-interest income was $16.1 million for the third quarter of 2021, compared to $15.7 million for the second quarter of 2021 and to $12.8 million for the third quarter of 2020.  The increase from the previous quarter was a result of an increase in interest income of $234 thousand and a $142 thousand, or 8.4%, decrease in interest paid on liabilities, partially resulting from an 7 basis points reduction in the rate on interest bearing deposits.  Interest income for the third quarter of 2021 included an increase of approximately $1.4 million in accelerated accretion attributable to deferred fees received from the first phase of PPP loans, due to the U.S. government forgiving the debt and paying off the loans. The net interest margin for the third quarter of 2021 was 4.08%, increasing 2 basis points when compared to the second quarter of 2021. This increase was primarily associated with a reduction of 5 basis points in total interest cost of funds, reduced by an increase in the average outstanding balance of earning assets of $13.4 million, and a 3 basis points reduction in the yield on the earning assets.  When comparing the three month periods ended September 30, 2021 and 2020, net interest income increased $3.3 million, which was primarily due an increase in interest income of $2.2 million caused by a $93.0 million increase in interest earning assets aided by a reduction in interest expense of $1.2 million.  The reduction in interest expense was attributable to a decline of 45 basis points in the rate paid on its interest-bearing liabilities. For the nine month period ended September 30, 2021, net interest income was $46.6 million, an increase of $11.3 million, or 32.1%, over the same period in 2020.  This increase was due a $6.0 million increase in interest earned on earning assets and a $5.3 million decline in interest expense. For the nine month period ended September 30, 2021, the average outstanding balance of earning assets increased by $129.7 million and average outstanding interest-bearing liabilities increased $55.0 million.  The total rate on interest-bearing liabilities, which includes non-interest-bearing deposits, for the three month periods ended September 30, 2021 and 2020 was 0.43% and 0.80%, respectively.  For the nine month periods ended September 30, 2021 and 2020 the total rate on interest-bearing liabilities was 0.50% and 1.09%, respectively.

The provision for credit losses was $1.2 million for the three month period ended September 30, 2021.  The comparable amounts were $1.0 million and $1.9 million for the three months ended June 30, 2021 and September 30, 2020, respectively. The primary reasons for the provision for credit losses for the third and second quarters of 2021 were charge-offs in the amounts of $821 thousand and $1.0 million, respectively.  The primary reason for the provision in the third quarter of 2020 was due to an increase in the Bank's general reserves.  The general reserve increase was attributable to the economic impact from the COVID-19 pandemic and an increase in the historical loss factors resulting from increased levels of prior period charge-offs.  As of September 30, 2021, the Bank did not apply any qualitative factors to the loans originated from PPP, based on the U.S government's guarantee and the Coronavirus Aid, Relief and Economic Securities Act requirement to classify these loans at 0% in determining risk-based capital ratio.  The coverage rate of allowance for credit losses to period end loans was 1.22% (excluding PPP loans, the coverage ratio was 1.34%) at September 30, 2021, compared to 1.18% (excluding PPP loans, the coverage ratio was 1.35%) at December 31, 2020, which reflects managements assessment of the credit quality in the loan portfolio.

At September 30, 2021, the Bank's concentration in the loan portfolio associated with the segments management believes could be affected by the pandemic: restaurants and hotels totaled $31.3 million and $46.9 million, respectively.  

Total non-interest income for the third quarter of 2021 increased $42 thousand, or 3.3%, to $1.3 million when compared to the same period in 2020. This increase was primarily due to a $29 thousand increase on service fees collected and a $173 thousand increase in loan fees earned. Total non-interest income when comparing third quarter of 2021 to second quarter of 2021 increased $300 thousand, primarily due to $398 thousand increase in loans fees and $17 thousand increase in deposit fees earned.  For the nine month period ended September 30, 2021, non-interest income decreased $437 thousand, or 12.0%, from the same nine month period in 2020, primarily due to a $554 thousand gain on the sale of investment securities available-for sale recorded in the 2020 period.

Total non-interest expense for the third quarter of 2021 increased $955 thousand, or 12.6%, when compared to the same period in 2020.  This increase was primarily due to an increase in additional operating cost associated with the Bank's branch expansion strategy.  When comparing the quarter ended September 30, 2021 to the immediately prior quarter, non-interest expense decreased $133 thousand, or 1.5%, primarily due to decreases in salaries and benefits expense, professional fees, occupancy and equipment expenses, federal deposit insurance expense, and other operating expenses, partially offset by an increase in OREO expenses.  For the nine month period ended September 30, 2021, non-interest expense was $25.5 million, compared to $23.2 million for the same period in 2020. This increase was primarily due to an increase in additional operating costs associated with the Bank's branch expansion strategy.

For the three month period ended September 30, 2021, the Bank recorded an income tax expense of $1.8 million, resulting in an effective tax rate of 22.8%, compared to an income tax expense of $1.5 million resulting in an effective tax rate of 21.9% for the three month period ended June 30, 2021, and compared to an income tax expense of $988 thousand resulting in an effective tax rate of 21.8% for the three month period ended September 30, 2020. During the third quarter of 2020, the New Jersey Governor signed a law extending and retroactively increasing New Jersey's corporation business tax surtax by 1.0% to 2.5%. The effective tax rate for the third and second quarters 2021 were impacted by the level of tax-free income against the level of taxable earnings. For the nine month periods ended September 30, 2021 and 2020, the income tax expense was $4.7 million (effective tax rate of 22.3%) and $2.4 million (effective tax rate of 19.9%), respectively.

COVID-19

The full impact of the coronavirus continues to evolve as of the date of this press release. As such, it is uncertain as to the full magnitude that the pandemic will have on the Bank's financial condition, liquidity, and future results of operations.  

The Bank continues to work closely with its loan customers to educate and guide them on their options for financial assistance, including possible payment relief through deferral and waived fees.  The Bank continues to endeavor to provide a fast and flexible response to the quickly changing circumstances.

About The Bank of Princeton

The Bank of Princeton is a community bank founded in 2007.  The Bank is a New Jersey state-chartered commercial bank with 19 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Hamilton, Lakewood, Lambertville, Lawrenceville, Monroe, New Brunswick, Pennington, Piscataway, Princeton Junction, Quakerbridge and Sicklerville.  There are also four branches in the Philadelphia, Pennsylvania area. The Bank of Princeton is a member of the Federal Deposit Insurance Corporation ("FDIC").

Forward-Looking Statements

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including this press release), which are made in good faith by the Bank pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended.

These forward-looking statements involve risks and uncertainties, such as statements of the Bank's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Bank's control). The following factors, among others, could cause the Bank's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the extent of the adverse impact of the current global coronavirus outbreak on our customers, prospects and business, as well as the impact of any future pandemics or other natural disasters; civil unrest, rioting, acts or threats of terrorism, or actions taken by the local, state and Federal governments in response to such events, which could impact business and economic conditions in our market area,  the strength of the United States economy in general and the strength of the local economies in which the Bank conducts operations; the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; market volatility; the value of the Bank's products and services as perceived by actual and prospective customers, including the features, pricing and quality compared to competitors' products and services; the willingness of customers to substitute competitors' products and services for the Bank's products and services; credit risk associated with the Bank's lending activities; risks relating to the real estate market and the Bank's real estate collateral; the impact of changes in applicable laws and regulations and requirements arising out of our supervision by banking regulators; other regulatory requirements applicable to the Bank; technological changes; acquisitions; changes in consumer spending and saving habits; those risks set forth in the Bank's Annual Report on Form 10-K for the year ended December 31, 2020 under the heading "Risk Factors," and the success of the Bank at managing the risks involved in the foregoing.

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

Contact George Rapp
609.454.0718
[email protected]