The Bank of Princeton Announces Second Quarter 2021 Results

PRINCETON, N.J., July 22, 2021 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ: BPRN) today reported its unaudited results of operations and financial condition for the quarter ended June 30, 2021.  The Bank reported net income of $5.5 million, or $0.80 per diluted common share, for the second quarter of 2021, compared to net income of $4.9 million, or $0.70 per diluted common share, for the first quarter of 2021, and net income of $3.1 million, or $0.45 per diluted common share, for the second quarter of 2020. The increase in net income, when compared to the three months ended March 31, 2021, was primarily due to a $980 thousand increase in net-interest income, a $125 thousand reduction in the provision for loan losses, and a $155 thousand increase in non-interest income, partially offset by a $423 thousand increase in non-interest expense and a $165 thousand increase in income tax expense. The increase in net income, when comparing it to the three months ended June 30, 2020, was primarily due to an increase in net-interest income of $3.7 million and a $148 thousand increase in non-interest income, partially offset by a $628 thousand increase in non-interest expenses and an $850 thousand increase in income tax expenses.  For the six month period ended June 30, 2021, the Bank recorded net income of $10.4 million, or $1.50 per diluted common share, compared to $6.2 million, or $0.89 per diluted common share for the same period in 2020, primarily due to an $8.0 million increase in net-interest income, partially offset by an increase in income taxes of $1.5 million, a $1.3 million increase in non-interest expenses, a $480 thousand decrease in non-interest income, and a $475 thousand increase in the Bank's provision for loan losses.

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

• The Bank commenced its "Stock Buyback Program" during the second quarter by purchasing 153,932 shares of common stock at a weighted average price of $28.96.
• Total loans increased $33.7 million since December 31, 2020, to $1.4 billion or by 2.46%.
• Net interest income for the second quarter of 2021 increased $3.7 million or 31.1% over the same period in 2020.
• The Bank decreased its cost of funds on deposits by 66 basis points in the second quarter of 2021 from the same period in 2020.
• The Bank's efficiency ratio decreased to 50.9% for the second quarter of 2021 compared to 61.1% for the second quarter of 2020.
• The ratio of nonperforming loans to total loans continues to be low at 0.23% as of June 30, 2021 compared to 0.12% at December 31, 2020 and compared to 0.18% at June 30, 2020.

President/CEO Edward Dietzler stated that, "The Bank during the current quarter provided very strong earnings performance with a 78.2% increase in diluted earnings per share as well as a 63 basis point increase in our net interest margin, when comparing to the same period in 2020."

Chairman Richard Gillespie added, "The Bank's exceptional earnings performance continues for yet another quarter.  The $0.10 per share improvement over the first quarter positions the Bank for an overall strong 2021.  Our Board is proud of the manner management and the whole team have navigated through the pandemic period."

Balance Sheet Review

Total assets were $1.64 billion at June 30, 2021, an increase of $32.6 million or 2.0% when compared to $1.60 billion at the end of 2020. The primary reason for the increase in total assets was an increase in net loans of approximately $30.4 million, primarily consisting of approximately $83.6 million in construction loans, partially offset by a decrease of $25.0 million in commercial real estate loans and a $13.0 million decrease in residential loans during the six month period covered. In addition, Payroll Protection ("PPP") loans declined $2.3 million at June 30, 2021.

Total deposits at June 30, 2021 increased by $31.1 million, or 2.3%, 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 $57.3 million, savings increased $28.7 million and money markets increased $29.8 million. These increases were partially offset by a decrease in interest-bearing demand accounts of $38.0 million, primarily consisting of municipal deposits, and a decrease of $46.7 million in certificates of deposit. In addition, the Bank had no outstanding borrowings at June 30, 2021 and December 31, 2020.  

Total stockholders' equity at June 30, 2021 increased $4.0 million or 1.9% when compared to the end of 2020. This increase was primarily due to earnings recorded during the six months of 2021 minus the cash dividend paid during the period, and minus the $318 thousand decrease in the fair-value of the available-for-sale investment portfolio related to an increase in the treasury curve.  In addition, the Bank commenced its Stock Buyback Program and repurchased 153,932 shares of common stock at a total cost of $4.5 million and a weighted average cost of $28.96 per share.  The ratio of equity to total assets at June 30, 2021 and December 31, 2020, was 13.0%.  

Asset Quality

At June 30, 2021, non-performing assets were $3.7 million, an increase of $2.0 million, or 121.5%, when compared to the amount at December 31, 2020.  This increase at June 30, 2021 from December 31, 2020 was primarily due to the addition of four loans totaling $2.4 million being classified as non-performing, partially offset by $360 thousand in principal charge-offs and the remaining $472 thousand from principal payments. Troubled debt restructurings ("TDR") totaled $7.6 million at June 30, 2021 and $8.7 million at December 31, 2020. Three TDR loans totaling $6.2 million are performing to their agreed upon terms and the remaining three loans have been placed in non-accrual status as of June 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 June 30, 2021, the Bank had remaining 6 loans (consisting of three borrowers) that were modified totaling $9.9 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 TDR's.

Review of Quarterly Financial Results

Net-interest income was $15.7 million for the second quarter of 2021, compared to $14.8 million for the first quarter of 2021 and $12.0 million for the second quarter of 2020.  The increase from the previous quarter was a result of an increase in interest income of $636 thousand and a $344 thousand, or 16.9%, decrease in interest paid on liabilities, partially resulting from a 12 basis points reduction in the rate on interest bearing deposits.  Interest income for the second three months of 2021 included an increase of approximately $900 thousand in accelerated accretion attributed 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 second quarter of 2021 was 4.06%, increasing 8 basis points when compared to the first quarter of 2021. This increase was primarily associated with a reduction of 12 basis points in total interest cost of funds, and an increase in the average outstanding balance of earning assets of $50.1 million, slightly offset by a 3 bps reduction in the yield on the earning assets.  When comparing the three month periods ended June 30, 2021 and 2020, net interest income increased $3.7 million, which was primarily due an increase in interest income of $2.1 million caused by a $143.9 million increase in interest earning assets aided by a reduction in interest expense of $1.6 million.  The reduction in interest expense was attributed to a decline of 65 basis points in the rate paid on its interest-bearing liabilities. For the six month period ended June 30, 2021, net interest income was $30.5 million, an increase of $8.0 million, or 35.5%, over the same period in 2020.  This increase was due a $3.9 million increase in interest earned on earning assets and a $4.1 million decline in interest expense. For the six month period ended June 30, 2021, the average outstanding balance of earning assets increased by $148.2 million and average outstanding interest-bearing liabilities increased $59.3 million.  The total rate on interest-bearing liabilities, which includes non-interest-bearing deposits, for the three month periods ended June 30, 2021 and 2020 was 0.48% and 1.02%, respectively.  For the six month periods ended June 30, 2021 and 2020 the total rate on interest-bearing liabilities was 0.54% and 1.25%, respectively.

The provision for credit losses was $1.0 million for the three month period ended June 30, 2021.  The comparable amounts were $1.0 million and $1.1 million for the three months ended March 31, 2021 and June 30, 2020, respectively. The primary reasons for the provision for credit losses for the first and second quarters of 2021 were charge-offs in the amounts of $1.1 million and $1.0 million, respectively.  The primary reason for the provision in the second quarter of 2020 was an increase in the Bank's qualitative factors and historical loss factor.  The general reserves were also impacted by an increase in the qualitative factors dollar contribution to the reserve due to growth within the Bank's loan portfolio mainly in the construction and development loans due to a higher risk factor attributed these loans and partially offset by reductions in the outstanding balances of commercial real estate loans and residential loans and a reduction in the historical loss factor resulting from decline in level of prior period charge-offs.  As of June 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 1.14% (excluding PPP loans, the coverage ratio was 1.31%) at June 30, 2021, compared to 1.17% (excluding PPP loans, the coverage ratio was 1.34%) at December 31, 2020, which reflects management's assessment of the credit quality in the loan portfolio.

At June 30, 2021, the Bank's concentration in the loan portfolio associated with the segment's management believes could be affected by the pandemic: restaurants, hotels, and retail, totaled $13.6 million, $48.8 million and $49.9 million, respectively.  

Total non-interest income for the second quarter of 2021 increased $148 thousand to $1.0 million, or by 17.0%, when compared to the same period in 2020. This increase was primarily due to a $128 thousand increase on service fees collected and a $21 thousand increase in loan fees collected. Total non-interest income when comparing second quarter of 2021 to first quarter of 2021 increased $155 thousand, primarily due to $112 thousand increase in loans fees and $34 thousand increase in deposit fees collected.  For the six month period ended June 30, 2021, non-interest income decreased $480 thousand, or 20.3%, from the same six month period in 2020, primarily due to a $506 thousand gain on the sale of investment securities available-for sale recorded in the 2020 period.

Total non-interest expense for the second quarter of 2021 increased $628 thousand, or 7.8%, 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 June 30, 2021 to the immediately prior quarter, non-interest expense increased $423 thousand, or 5.1%, primarily due to increases in salaries and benefits expense, federal deposit insurance expense, and other operating expenses.  For the six month period ended June 30, 2021, non-interest expense was $16.9 million, compared to $15.6 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 June 30, 2021, the Bank recorded an income tax expense of $1.5 million, resulting in an effective tax rate of 21.9%, compared to an income tax expense of $1.4 million resulting in an effective tax rate of 22.2% for the three month period ended March 31, 2021, and compared to an income tax expense of $697 resulting in an effective tax rate of 18.2% for the three month period ended June 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 first and second quarters 2021 were impacted by the level of tax-free income against the level of taxable earnings. For the six month periods ended June 30, 2021 and 2020, the income tax expense were $2.9 million (effective tax rate of 22.0%) and $1.4 million (effective tax rate of 18.8%), 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 20 branches in New Jersey, including four 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]

SOURCE The Bank of Princeton

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