The Bank of Princeton Announces First Quarter 2020 Results

PRINCETON, N.J., April 23, 2020 /PRNewswire/ -- The Bank of Princeton (the "Bank") (NASDAQ – BPRN) today reported unaudited results of operations and financial condition for the quarter ended March 31, 2020.  The Bank reported net income of $3.0 million, or $0.44 per diluted common share, for the first quarter of 2020, compared to net income of $3.4 million, or $0.49 per diluted common share, for the fourth quarter of 2019, and net income of $229 thousand, or $0.03 per diluted common share, for the first quarter of 2019. The decrease in net income, when comparing this most recent quarter to the three months ended December 31, 2019, was primarily due to a $708 thousand increase in non-interest expense and a $525 thousand increase in the Bank's provision for loan losses, partially offset by a $697 thousand increase in non-interest income.  The increase in net income, when comparing it to the three months ended March 31, 2019, was primarily due to an increase of $706 thousand in the Bank's non-interest income and a decrease in the Bank's provision for loan losses of $3.6 million, partially offset by a $1.2 million increase in operating expenses attributed to the Bank's strategy of branch expansion.

Highlights for the quarter-ended March 31, 2020 are as follows:

• Net interest income for the three month period ended March 31, 2020 increased $591 thousand, or 6.0%, over the same period in 2019.
• The Bank decreased its cost of funds by 11 basis points during the three month period ended March 31, 2020, when compared to the same period in 2019.
• Non-interest income for the three month period ended March 31, 2020 increased $706 thousand, or 89.9%, over the same period in 2019.
• The ratio of non-performing assets to total assets was 0.18% at March 31, 2020.

"During the first quarter, less expensive core deposits continued to grow, which has a positive impact on our cost of funds," stated Edward Dietzler, President/CEO.

Balance Sheet Review

Total assets were $1.43 billion at March 31, 2020, a decrease of $30.3 million or 2.0% when compared to $1.45 billion at the end of 2019. The primary reason for the decrease in total assets was a result of the Bank's strategic initiative to reduce its cost of funds by reducing interest rates offered on higher costing deposit products.

Total deposits at March 31, 2020 decreased by $37.5 million, or 3.0%, when compared to December 31, 2019, primarily due to the impact of reducing rates on some of its higher costing deposit products.  When comparing deposit products between the two periods, money markets decreased by $35.1 million, interest-bearing checking decreased by $12.1 million and time deposits decreased by $6.3 million, partially offset by increases in non-interest checking of $8.8 million and savings of $7.2 million. In addition, at March 31, 2020 and at December 31, 2019, the Bank did not have an outstanding balance in borrowings.  

Total stockholders' equity at March 31, 2020 increased $3.1 million or 1.6% when compared to the end of 2019. This increase was primarily due to earnings recorded during the three months of 2020, and an increase of $550 thousand in the fair-value of the available-for-sale investment portfolio.   The ratio of equity to total assets at March 31, 2020 was 14.0% compared to 13.5% at December 31, 2019.

Asset Quality

At March 31, 2020, non-performing assets were $2.6 million, an increase of $154 thousand, or 6.3%, when compared to $2.4 million at December 31, 2019.  This increase at March 31, 2020 from December 31, 2019 was primarily due the addition of a single-family residential loan.  Total troubled debt restructurings ("TDR") totaled $9.3 million at March 31, 2020 and December 31, 2019. All TDR's are performing to their agreed upon terms.

Review of Quarterly Financial Results

Net interest income was $10.5 million for the first quarter of 2020, compared to $10.4 million for the fourth quarter of 2019 and $9.9 million for the first quarter of 2019.  The increase from the previous quarter was a result of a decrease in interest paid on liabilities of $246 thousand, or 5.1%, partially offset by a decrease in interest income of $156 thousand.  The net interest margin for the first quarter 2020 was 3.13%, increasing 3 basis points when compared to the fourth quarter of 2019. This increase was primarily associated with a reduction of 9 basis points in total cost of funds offset by a 5 basis points reduction in the yield on earning assets. When comparing the three month periods ended March 31, 2020 and 2019, net interest income increased $591 thousand, which was primarily due to a higher volume of average earnings assets of approximately $145.7 million.  Interest and dividend income increased by $762 thousand, offset by an increase in interest expense of $171 thousand. The total rate on interest-bearing liabilities, which includes non-interest-bearing deposits, for the three month periods ended March 31, 2020 and 2019 was 1.46% and 1.60%, respectively. 

The provision for credit losses was $650 thousand for the three months ended March 31, 2020.  The comparable amounts were $125 thousand and $4.2 million for the three months ended December 31, 2019 and March 31, 2019, respectively. The primary reason for the provision in the first quarter of 2020 was due to an $886 thousand charge-off recorded against a borrower of a commercial real estate loan.  The rate of allowance for credit losses to period end loans was 1.03% at March 31, 2020, compared to 1.06% at December 31, 2019 and 1.07% at March 31, 2019, which reflects management's assessment of the credit quality in the loan portfolio.

Total non-interest income for the first quarter of 2020 increased $706 thousand to $1.5 million, or 89.9%, when compared to the same period in 2019. This increase was primarily due to a $505 thousand gain record on the sale of investment securities held as available-for-sale, and an increase in service charges on deposits and loan fees collected.  Total non-interest income, comparing the three month periods ended March 31, 2020 and December 31, 2019, reflected an increase of $697 thousand, or 87.8%, primarily due to the aforementioned gain recorded on the sale investment securities held as available-for-sale, and a higher level of fees generated on loans recorded between the two periods.    

Total non-interest expense for the first quarter of 2020 increased $1.2 million, or 19.6%, when compared to the same period in 2019.  This increase was primarily due to an increase in additional operating cost associated with the Bank's branch expansion strategy.  When comparing March 31, 2020 to the immediately prior quarter, non-interest expense increased $708 thousand, or 10.3%, primarily due to growth-related increases in salaries and employee benefits' expense, data processing expense, professional fees, and FDIC insurance premiums, partially offset by a reduction in advertising expenses, occupancy and equipment expense and other expense.

For the three month period ended March 31, 2020, the Bank recorded an income tax expense of $726 thousand, resulting in an effective tax rate of 19.3%, compared to an income tax expense of $817 thousand resulting in an effective tax rate of 19.4% for the three month period ended December 31, 2019, and compared to an income tax benefit of $74 thousand for the three month period ended March 31, 2019. The effective tax rate for the three months ended March 31, 2020 and December 31, 2019 were both positively impacted by the exercise of stock options from the Bank's equity incentive plans. The tax benefit for March 31, 2019 was impacted by the level of tax-free income against the level of taxable earnings.

COVID-19

The full impact of the coronavirus continues to evolve as of the date of this report. 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 is working closely with its loan customers to educate and guide them on their options for financial assistance, including the Paycheck Protection Program ("PPP") and payment relief through deferral and waived fees.  The Bank will continue to provide a fast and flexible response to the quickly changing circumstances and is confident it will navigate successfully through these trying times. 

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 18 branches in New Jersey, including four in Princeton and others in Bordentown, Browns Mills, Chesterfield, Cream Ridge, Deptford, Hamilton, Lambertville, Lawrenceville, Monroe, New Brunswick, Pennington, Princeton Junction, Quakerbridge and Sicklerville.  There are also three 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 impact of the recent global coronavirus outbreak, 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, 2019 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
grapp@thebankofprinceton.com