Princeton Bancorp Inc.
08/07/2026 | Press release | Distributed by Public on 08/07/2026 12:06
Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with the unaudited consolidated interim financial statements contained in Part I, Item 1 of this report, and with our audited consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" presented in our Form 10-K as of and for the year ended December 31, 2025.
Cautionary Statement Regarding Forward-Looking Statements
The Company may from time to time make written or oral "forward-looking statements," including statements contained in the Company's filings with the Securities and Exchange Commission, in its reports to stockholders and in other communications by the Company (including this press release), which are made in good faith by the Company 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 Company's plans, objectives, expectations, estimates and intentions that are subject to change based on various important factors (some of which are beyond the Company's control). The most significant factors that could cause future results to differ materially from those anticipated by our forward-looking statements include the global impact of foreign military conflicts, the potential impact of any future Federal budget stalemates in Congress, higher tariffs imposed by the Trump administration, higher inflation levels, and general economic and recessionary concerns, all of which could impact economic growth and could cause an increase in loan delinquencies, a reduction in financial transactions and business activities including decreased deposits and reduced loan originations, difficulties in managing liquidity in a rapidly changing and unpredictable market, and supply chain disruptions. Other factors that could cause actual results to differ materially from those indicated by forward-looking statements include, but are not limited to, the following factors: 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 Company and Bank conduct 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; 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 Company and the Bank; the timing and nature of the regulatory response to any applications filed by the Company and the Bank; developments in technology, such as artificial intelligence, and our ability to incorporate innovative technologies in our business and provide products and services that satisfy our customers' expectations for convenience and security; other acquisitions; changes in consumer spending and saving habits; those risks under the heading "Risk Factors" set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2025; and the success of the Company at managing the risks involved in the foregoing.
The Company cautions that the foregoing list of important factors is not exclusive. The Company 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 Company, except as required by applicable law or regulation.
Throughout this document, references to "we," "us," or "our" refer to the Company and the Bank.
Executive Overview
The Company is the holding company for The Bank of Princeton (the "Bank"), a community bank founded in 2007. The Bank is a New Jersey state-chartered commercial bank with 29 branches in New Jersey, including three in Princeton and others in Bordentown, Browns Mills, Burlington, Chesterfield, Cherry Hill, Cranbury, Cream Ridge, Deptford, Fort Lee, Hamilton, Kingston, Lakewood, Lambertville, Lawrenceville, Medford, Monroe, Moorestown, New Brunswick, Palisades Park, Pennington, Piscataway, Princeton Junction, Quakerbridge, Sicklerville, Voorhees, and Woodbury. There are also five branches in the Philadelphia, Pennsylvania area and two in the New York City metropolitan area. The Bank is a member of the Federal Deposit Insurance Corporation ("FDIC").
The Company's common stock trades on the "Nasdaq Global Select Market" under ticker symbol, "BPRN."
Critical Accounting Policies and Estimates
The Company has chosen accounting policies that it believes are appropriate to accurately and fairly report its operating results and financial position, and the Company applies those accounting policies in a consistent manner. The Significant Accounting Policies are
summarized in Note 1 to the consolidated financial statements included in the 2025 Annual Report on Form 10-K. There have been no changes to the Critical Accounting Estimates since the Company filed its Annual Report on Form 10-K for the year ended December 31, 2025.
New Accounting Pronouncements
Refer to Note 1 to the consolidated financial statements included in the 2025 Annual Report on Form 10-K and Note 1- Summary of Significant Accounting Policies in this document.
Economy
Economic conditions during the second quarter of 2026 remained mixed, characterized by moderating growth, resilient labor markets, and inflation trending downward but still modestly above the target of the Federal Reserve. Consumer spending continued to support economic activity but showed signs of softening amid elevated interest rates and reduced excess savings, while business investment remained constrained by tighter financial conditions. The Federal Reserve maintained a restrictive monetary policy stance during the quarter, contributing to higher borrowing costs, modest tightening in credit availability, and continued pressure on interest-sensitive sectors, including commercial real estate. Looking ahead, economic conditions remain uncertain, with risks dependent on the trajectory of inflation, labor market conditions, and the timing of potential monetary policy adjustments.
Comparison of Financial Condition at June 30, 2026 and December 31, 2025
General
Total assets were $2.25 billion at June 30, 2026, a decrease of $34.1 million, or 1.49% when compared to $2.29 billion at the end of 2025. The primary reasons for the decrease in total assets were related to decreases in cash and cash equivalents of $69.5 million and in loans of $44.9 million, partially offset by an increase in investment securities of $78.9 million.
Cash and cash equivalents
Cash and cash equivalents decreased $69.5 million, or 51.2%, to $66.2 million at June 30, 2026 compared to December 31, 2025.
Investment securities
Total available-for-sale investment securities increased $78.9 million, or 43.2%, to $261.5 million at June 30, 2026 compared to December 31, 2025. This increase was related to the purchase of $109.4 million in mortgage-backed securities of U.S. government sponsored enterprises, partially offset by payoffs of mortgage-backed securities of U.S. government sponsored enterprises and U.S government agency securities during the six months ended June 30, 2026.
Loans
Loans, net of deferred loan fees and costs, decreased $44.9 million, or 2.47%, to $1.77 billion at June 30, 2026 compared to December 31, 2025. The decrease in the Company's net loans consisted of decreases of $69.7 million in commercial real estate loans and $15.3 million in construction loans, partially offset by increases of $25.4 million in home equity and consumer loans and $15.1 million in residential mortgages.
The Company's CRE loan portfolio, which includes multi-family, land, owner-occupied and non-owner-occupied CRE loans, was $1.27 billion or 71.8% of total loans of $1.77 billion at June 30, 2026. There were 705 loans in the Company's CRE portfolio with an average and median loan size of $1.8 million and $0.6 million, respectively. Loan to Value ("LTV") estimates are less than 70% for $1.16 billion or 92.1% of the CRE portfolio and less than 80% for $1.26 billion or 99.6% of the CRE portfolio.
The following table presents the commercial real estate portfolio by property type along with the weighted average loan to value for the periods presented (dollars in thousands):
|
June 30, 2026 |
December 31, 2025 |
|||||||||||||||||||||||
|
Balance |
% of |
Weighted |
Balance |
% of |
Weighted |
|||||||||||||||||||
|
Commercial Real Estate |
||||||||||||||||||||||||
|
Multi Family |
487,205 |
38.2 |
% |
52.4 |
% |
505,267 |
37.6 |
% |
52.5 |
% |
||||||||||||||
|
Owner Occupied |
362,382 |
28.5 |
% |
34.9 |
% |
394,281 |
29.3 |
% |
34.9 |
% |
||||||||||||||
|
Land |
23,368 |
1.8 |
% |
88.8 |
% |
27,514 |
2.1 |
% |
70.7 |
% |
||||||||||||||
|
Non Owner Occupied |
||||||||||||||||||||||||
|
Retail |
106,015 |
8.3 |
% |
40.6 |
% |
108,367 |
8.1 |
% |
41.0 |
% |
||||||||||||||
|
Office Building |
84,682 |
6.7 |
% |
41.6 |
% |
93,027 |
6.9 |
% |
42.4 |
% |
||||||||||||||
|
Industrial/Warehousing |
74,041 |
5.8 |
% |
43.7 |
% |
80,244 |
6.0 |
% |
44.5 |
% |
||||||||||||||
|
Mixed Use |
50,833 |
4.0 |
% |
41.9 |
% |
44,198 |
3.3 |
% |
41.4 |
% |
||||||||||||||
|
Restaurants |
16,647 |
1.3 |
% |
35.4 |
% |
20,284 |
1.5 |
% |
38.0 |
% |
||||||||||||||
|
Healthcare |
9,598 |
0.8 |
% |
49.7 |
% |
9,829 |
0.7 |
% |
50.9 |
% |
||||||||||||||
|
Other |
59,044 |
4.6 |
% |
41.6 |
% |
60,520 |
4.5 |
% |
43.0 |
% |
||||||||||||||
|
Total non owner occupied |
400,860 |
31.5 |
% |
416,469 |
31.0 |
% |
||||||||||||||||||
|
Total Commercial Real Estate |
1,273,815 |
100.0 |
% |
1,343,531 |
100.0 |
% |
||||||||||||||||||
The following table presents the geographic markets of the commercial real estate portfolio for the periods presented (dollars in thousands):
|
June 30, 2026 |
December 31, 2025 |
|||||||||||||||
|
Balance |
% of |
Balance |
% of |
|||||||||||||
|
Geographical Market |
||||||||||||||||
|
New York |
605,188 |
47.5 |
% |
629,314 |
46.8 |
% |
||||||||||
|
New Jersey |
493,483 |
38.7 |
% |
504,206 |
37.5 |
% |
||||||||||
|
Pennsylvania |
157,787 |
12.4 |
% |
186,268 |
13.9 |
% |
||||||||||
|
Other |
17,357 |
1.4 |
% |
23,743 |
1.8 |
% |
||||||||||
|
1,273,815 |
100.00 |
% |
1,343,531 |
100.00 |
% |
|||||||||||
For the three and six months ended June 30, 2026, charge-offs were $4 thousand and $18 thousand and recoveries were $248 thousand and $261 thousand, respectively. The coverage ratio of the allowance for credit losses to period end loans was 1.13% at June 30, 2026 and 1.12% at December 31, 2025.
At June 30, 2026, non-performing assets remained steady at $16.3 million, compared to $16.6 million at December 31, 2025. Non-performing assets as a percentage of total loans, net of deferred fees and costs, remained steady at 0.92% at June 30, 2026 compared to 0.91% at December 31, 2025.
Deposits
Total deposits on June 30, 2026, decreased $40.5 million, or 2.05%, when compared to December 31, 2025. The decrease in the Company's deposits consisted primarily of decreases in certificates of deposit of $97.0 million, interest-bearing checking deposits of $20.9 million, and savings deposits of $3.0 million, partially offset by increases in money market deposits of $57.1 million, and non-interest checking deposits of $23.2 million. On balance sheet liquidity remains strong at June 30, 2026.
At June 30, 2026, the Company had approximately $666.0 million in uninsured deposits, consisting of $80.3 million in non-interest-bearing demand deposits, $230.1 million in interest-bearing demand deposits, $227.7 million in money market accounts, $25.8 million in savings deposits and $102.1 million in certificates of deposits.
Borrowings
The Company had no outstanding borrowings at June 30, 2026 and December 31, 2025.
Stockholders' equity
Total stockholders' equity at June 30, 2026 increased $9.2 million, or 3.40%, when compared to December 31, 2025. The increase was primarily due to an increase in retained earnings of $8.7 million (which consisted of $13.3 million in net income, partially offset by $4.6 million of cash dividends recorded during the period), and an increase in paid-in capital of $989 thousand. The ratio of equity to total assets at June 30, 2026 and December 31, 2025 was 12.4% and 11.9%, respectively.
Liquidity
Our liquidity, represented by cash and cash equivalents, 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.
As a member of the FHLB we are eligible to borrow funds in an aggregate amount of up to 50% of the Company's total assets, subject to its collateral requirements. The Company maintained a $100.0 million letter of credit with the FHLB supporting municipal deposits as of June 30, 2026. Based on available eligible securities and qualified real estate loan collateral, the Company had the ability to borrow an additional $523.5 million as of June 30, 2026.
As of June 30, 2026, the Bank was eligible to use the Federal Reserve discount window for borrowings, based on assets pledged as collateral as of the applicable date. As of June 30, 2026, the Company had no outstanding advances from the discount window.
The Company is also a shareholder of Atlantic Community Bancshares, Inc., the parent company of Atlantic Community Bankers Bank ("ACBB"). As of June 30, 2026, the Company had available borrowing capacity with ACBB of $10.0 million to provide short-term liquidity generally for a period of not more than fourteen days. No amounts were outstanding under our line of credit with ACBB at June 30, 2026.
We believe that our current sources of funds provide adequate liquidity for our current cash flow needs.
Capital Resources
Regulatory Capital Requirements. Because the Company qualifies as a "small bank holding company" under the Federal Reserve's Small Bank Holding Company Policy Statement, it is exempt from the Federal Reserve's risk-based capital and leverage rules. With respect to the Bank, Federally insured, state-chartered non-member banks such as the Bank are required to maintain minimum levels of regulatory capital. Current FDIC capital standards require these institutions to satisfy a common equity Tier 1 capital requirement and a Tier 1 capital requirement, a leverage capital requirement and a risk-based capital requirement.
In addition, in order to make capital distributions and pay discretionary bonuses to executive officers without restriction, an institution must also maintain additional common equity in excess of the minimum requirements. This excess is referred to as a capital conservation buffer. At June 30, 2026, the required capital conservation buffer is 2.50%.
Under the risk-based capital requirements, "total" capital (a combination of core and "supplementary" capital) must equal at least 8.0% of "risk-weighted" assets. The FDIC also is authorized to impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. Management believes, as of June 30, 2026, that the Bank meets all capital adequacy requirements to which it is subject and is "well capitalized" under applicable regulations.
The Bank's actual capital amounts and ratios and the regulatory requirements at June 30, 2026 and December 31, 2025 are presented below:
|
Actual |
For capital conservation |
To be well capitalized |
||||||||||||||||||||||
|
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
|||||||||||||||||||
|
(Dollars in thousands) |
||||||||||||||||||||||||
|
June 30, 2026: |
||||||||||||||||||||||||
|
Total capital (to risk-weighted assets) |
$ |
281,209 |
14.67 |
% |
$ |
201,332 |
10.50 |
% |
$ |
191,745 |
10.00 |
% |
||||||||||||
|
Tier 1 capital (to risk-weighted assets) |
$ |
260,752 |
13.60 |
% |
$ |
162,983 |
8.50 |
% |
$ |
153,396 |
8.00 |
% |
||||||||||||
|
Common equity tier 1 capital (to |
$ |
260,752 |
13.60 |
% |
$ |
134,221 |
7.00 |
% |
$ |
124,634 |
6.50 |
% |
||||||||||||
|
Tier 1 leverage capital (to average |
$ |
260,752 |
11.69 |
% |
$ |
144,938 |
6.50 |
% |
$ |
111,491 |
5.00 |
% |
||||||||||||
|
December 31, 2025: |
||||||||||||||||||||||||
|
Total capital (to risk-weighted assets) |
$ |
271,337 |
13.99 |
% |
$ |
203,588 |
10.50 |
% |
$ |
193,894 |
10.00 |
% |
||||||||||||
|
Tier 1 capital (to risk-weighted assets) |
$ |
251,012 |
12.95 |
% |
$ |
164,810 |
8.50 |
% |
$ |
155,115 |
8.00 |
% |
||||||||||||
|
Common equity tier 1 capital (to |
$ |
251,012 |
12.95 |
% |
$ |
135,726 |
7.00 |
% |
$ |
126,031 |
6.50 |
% |
||||||||||||
|
Tier 1 leverage capital (to average |
$ |
251,012 |
11.13 |
% |
$ |
146,646 |
6.50 |
% |
$ |
112,805 |
5.00 |
% |
||||||||||||
Comparison of Operating Results for the three months ended June 30, 2026 and 2025
General
The Company reported net income of $7.1 million, or $1.04 per diluted common share, for the three months ended June 30, 2026, compared to $688 thousand, or $0.10 per diluted common share for the same period in 2025. The increase in net income for the second quarter of 2026 when compared to the second quarter of 2025 was primarily due to a decrease in the provision for credit losses of $7.3 million, an increase in net interest income of $1.2 million, and an increase in non-interest income of $185 thousand, partially offset by increases of $2.2 million in income tax expenses and $137 thousand in non-interest expense.
Interest income
Interest income decreased $1.1 million for the three months ended June 30, 2026, compared to the same period in 2025. Interest income on loans decreased $939 thousand due to a decrease of $50.4 million in the average balance of loans, and a decrease of 3 basis points on the yield on loans. Interest on taxable available-for-sale securities decreased $466 thousand due to a $39.5 million decrease in the average balance of taxable available-for-sale securities. Other interest and dividend income increased $320 thousand due to an increase of $43.5 million in average balances, partially offset by a decrease of 77 basis points in the yield.
Interest expense
Interest expense decreased $2.3 million to $11.6 million for the three months ended June 30, 2026, compared to the same period in 2025. Interest expense decreased primarily due to a decrease of $68.8 million in the average balance of interest-bearing deposits and a decrease of 43 basis points in the rate paid on interest-bearing deposits over the same prior year period.
Provision for credit losses
The Company recorded a reversal of credit losses of $353 thousand during the three months ended June 30, 2026, which consisted of a $314 thousand decrease recorded to the allowance of credit losses on loans, and a decrease to the provision for credit losses of $39 thousand related to unfunded commitments, which are recorded in other liabilities on the Company's statements of financial condition. This reversal represented a decrease in the provision for credit losses of $7.3 million from the three-months ended June 30, 2025. There were charge-offs of $4 thousand recorded, and recoveries were $248 thousand, for the three months ended June 30, 2026.
Non-interest income
Total non-interest income was $2.4 million for the three months ended June 30, 2026, an increase of $185 thousand or 8.2% when compared to the same prior year period. The increase over the prior year's second quarter was primarily due to an increase in loan fees of $205 thousand, and in fees and service charges of $46 thousand, partially offset by a decrease in other non-interest income of $88 thousand.
Non-interest expense
Total non-interest expense was $13.6 million for the three months ended June 30, 2026, an increase of $137 thousand or 1.0% when compared to the same prior year period. This increase was primarily related to increases in professional fees of $253 thousand, occupancy and equipment expense of $105 thousand, and salaries and employee benefits expense of $60 thousand, partially offset by decreases in federal deposit insurance expense of $115 thousand, office expense of $102 thousand, and other non-interest expense of $53 thousand.
Provision for income taxes
For the three months ended June 30, 2026, the Company recorded an income tax expense of $2.1 million, resulting in an effective tax rate of 22.9%, compared to an income tax benefit of ($92) thousand resulting in an effective tax rate of (15.4%) for the three months ended June 30, 2025.
Average Balances, Net Interest Income, and Yields Earned and Rates Paid
The following table shows for the three-month period indicated the total dollar amount of interest earned from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average loan receivables balances include non-accrual loans. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.
|
Three Months Ended June 30, |
||||||||||||||||||||||||||||||||
|
2026 |
2025 |
Change 2026 vs 2025 |
||||||||||||||||||||||||||||||
|
Average |
Income/ |
Yield |
Average |
Income/ |
Yield |
Average |
Yield |
|||||||||||||||||||||||||
|
(Dollars in thousands) |
||||||||||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||||||||||
|
Loans receivable |
$ |
1,795,516 |
$ |
28,681 |
6.41 |
% |
$ |
1,845,920 |
$ |
29,620 |
6.44 |
% |
$ |
(50,404 |
) |
(0.03 |
)% |
|||||||||||||||
|
Securities |
||||||||||||||||||||||||||||||||
|
Taxable available-for-sale |
155,641 |
1,833 |
4.71 |
% |
195,152 |
2,298 |
4.71 |
% |
(39,511 |
) |
(0.00 |
)% |
||||||||||||||||||||
|
Tax exempt available-for-sale |
38,806 |
264 |
2.72 |
% |
39,025 |
279 |
2.86 |
% |
(219 |
) |
(0.14 |
)% |
||||||||||||||||||||
|
Held-to-maturity |
150 |
2 |
5.33 |
% |
158 |
2 |
5.06 |
% |
(8 |
) |
0.27 |
% |
||||||||||||||||||||
|
Federal funds sold |
8,817 |
81 |
3.66 |
% |
34,201 |
377 |
4.42 |
% |
(25,384 |
) |
(0.76 |
)% |
||||||||||||||||||||
|
Other interest earning-assets |
83,676 |
795 |
3.82 |
% |
14,790 |
180 |
4.88 |
% |
68,886 |
(1.06 |
)% |
|||||||||||||||||||||
|
Total interest-earning assets |
2,082,606 |
$ |
31,656 |
6.10 |
% |
2,129,246 |
$ |
32,756 |
6.17 |
% |
(46,640 |
) |
(0.07 |
)% |
||||||||||||||||||
|
Other non-earnings assets |
167,339 |
165,803 |
1,536 |
|||||||||||||||||||||||||||||
|
Total assets |
$ |
2,249,945 |
$ |
2,295,049 |
$ |
(45,104 |
) |
|||||||||||||||||||||||||
|
Interest-bearing liabilities |
||||||||||||||||||||||||||||||||
|
Demand |
$ |
323,266 |
$ |
1,641 |
2.04 |
% |
$ |
314,336 |
$ |
1,567 |
2.00 |
% |
$ |
8,930 |
0.04 |
% |
||||||||||||||||
|
Savings |
165,712 |
853 |
2.07 |
% |
170,644 |
975 |
2.29 |
% |
(4,932 |
) |
(0.22 |
)% |
||||||||||||||||||||
|
Money markets |
495,284 |
3,602 |
2.92 |
% |
464,917 |
3,636 |
3.14 |
% |
30,367 |
(0.22 |
)% |
|||||||||||||||||||||
|
Certificates of deposit |
644,658 |
5,520 |
3.43 |
% |
747,773 |
7,755 |
4.16 |
% |
(103,115 |
) |
(0.73 |
)% |
||||||||||||||||||||
|
Total deposit |
1,628,920 |
11,616 |
2.86 |
% |
1,697,670 |
13,933 |
3.29 |
% |
(68,750 |
) |
(0.43 |
)% |
||||||||||||||||||||
|
Borrowings |
- |
- |
N/A |
1,259 |
13 |
4.14 |
% |
(1,259 |
) |
N/A |
||||||||||||||||||||||
|
Total interest-bearing liabilities |
1,628,920 |
$ |
11,616 |
2.86 |
% |
1,698,929 |
$ |
13,946 |
3.29 |
% |
(70,009 |
) |
(0.43 |
)% |
||||||||||||||||||
|
Non-interest-bearing deposits |
306,096 |
288,608 |
17,488 |
|||||||||||||||||||||||||||||
|
Other liabilities |
39,252 |
42,634 |
(3,382 |
) |
||||||||||||||||||||||||||||
|
Total liabilities |
1,974,268 |
2,030,171 |
(55,903 |
) |
||||||||||||||||||||||||||||
|
Stockholders' equity |
275,677 |
264,878 |
10,799 |
|||||||||||||||||||||||||||||
|
Total liabilities and stockholder's equity |
$ |
2,249,945 |
$ |
2,295,049 |
$ |
(45,104 |
) |
|||||||||||||||||||||||||
|
Net interest-earnings assets |
$ |
453,686 |
$ |
430,317 |
$ |
23,369 |
||||||||||||||||||||||||||
|
Net interest income; interest rate spread |
$ |
20,040 |
3.24 |
% |
$ |
18,810 |
2.88 |
% |
$ |
1,230 |
0.36 |
% |
||||||||||||||||||||
|
Net interest margin |
3.86 |
% |
3.54 |
% |
0.32 |
% |
||||||||||||||||||||||||||
Rate/Volume Analysis
The following table reflects the changes in our interest income and interest expense segregated into amounts attributable to changes in volume and in yields on interest-earning assets and interest-bearing liabilities during the periods indicated.
|
Three Months Ended June 30, |
||||||||||||
|
Rate |
Volume |
Net |
||||||||||
|
(In thousands) |
||||||||||||
|
Interest and dividend income: |
||||||||||||
|
Loans receivable, including fees |
$ |
(137 |
) |
$ |
(802 |
) |
$ |
(939 |
) |
|||
|
Securities available-for-sale |
||||||||||||
|
Taxable |
- |
(466 |
) |
(466 |
) |
|||||||
|
Tax-exempt |
(13 |
) |
(2 |
) |
(15 |
) |
||||||
|
Securities held-to-maturity |
- |
- |
- |
|||||||||
|
Federal funds sold |
(55 |
) |
(240 |
) |
(295 |
) |
||||||
|
Other interest and dividend income |
(30 |
) |
645 |
615 |
||||||||
|
Total interest and dividend income |
$ |
(235 |
) |
$ |
(865 |
) |
$ |
(1,100 |
) |
|||
|
Interest expense |
||||||||||||
|
Demand |
$ |
29 |
$ |
45 |
$ |
74 |
||||||
|
Savings |
(94 |
) |
(28 |
) |
(122 |
) |
||||||
|
Money markets |
(414 |
) |
380 |
(34 |
) |
|||||||
|
Certificates of deposit |
(1,249 |
) |
(999 |
) |
(2,248 |
) |
||||||
|
Borrowings |
- |
- |
- |
|||||||||
|
Total interest expense |
$ |
(1,728 |
) |
$ |
(602 |
) |
$ |
(2,330 |
) |
|||
|
Change in net interest income |
$ |
1,493 |
$ |
(263 |
) |
$ |
1,230 |
|||||
Comparison of Operating Results for the six months ended June 30, 2026 and 2025
General
The Company reported net income of $13.3 million, or $1.95 per diluted common share, for the six months ended June 30, 2026, compared to a net income of $6.1 million, or $0.88 per diluted common share, for the six months ended June 30, 2025. The increase in net income was primarily due to a decrease of $7.7 million in the provision for credit losses, an increase in net interest income of $1.3 million, an increase in non-interest income of $446 thousand, and a decrease in non-interest expense of $240 thousand, partially offset by an increase in income tax expense of $2.5 million, when compared to the prior year period.
Interest income
Interest income decreased $3.3 million for the six months ended June 30, 2026, compared to the same period in 2025. Interest income on loans decreased $2.5 million due to a decrease of $50.8 million in the average balance of loans, and a decrease of 9 basis points on the yield on loans. Interest on taxable available-for-sale securities decreased $1.6 million due to a 28 basis point decrease in yield and a $55.3 million decrease in the average balance of taxable available-for-sale securities. Other interest and dividend income increased $761 thousand due to an increase of $52.6 million in average balances, partially offset by a decrease of 76 basis points in the yield.
Interest expense
Interest expense decreased $4.7 million to $23.8 million for the six months ended June 30, 2026, compared to the same period in 2025. Interest expense decreased primarily due to a decrease of $69.1 million in the average balance of interest-bearing deposits and a decrease of 43 basis points in the rate paid on interest-bearing deposits, over the same prior year period.
Provision for credit losses
The Company recorded a reversal of credit losses of $509 thousand during the six months ended June 30, 2026, and recorded a $7.2 million provision for credit losses for the six-month period ended June 30, 2025. The decrease for the six-month period ended June 30, 2026, compared with the same prior year period, is primarily associated with a charge-off recorded during the prior period, in the amount of $9.9 million, which included a $2.4 million specific reserve that had previously been reserved in the allowance for credit losses. There were charge-offs of $18 thousand recorded, and recoveries were $261 thousand, for the six months ended June 30, 2026.
Non-interest income
Total non-interest income was $4.9 million for the six months ended June 30, 2026, an increase of $446 thousand or 10.0% when compared to the same prior year period. The increase over the prior year period was primarily due to increases in other non-interest income of $215 thousand, an increase in fees and service charges of $115 thousand, an increase in income from bank-owned life insurance of $58 thousand, and an increase in loan fees of $58 thousand.
Non-interest expense
Total non-interest expense was $27.1 million for the six months ended June 30, 2026 , a decrease of $240 thousand or 0.9% when compared to the same prior year period. This decrease was primarily related to a decrease in federal deposit insurance expense of $348 thousand, a decrease in other non-interest expense of $123 thousand, and a decrease in salaries and employees benefits of $87 thousand, partially offset by an increase in professional fees of $252 thousand.
Provision for income taxes
For the six months ended June 30, 2026, the Company recorded an income tax expense of $3.9 million, resulting in an effective tax rate of 22.8%, compared to an income tax expense of $1.4 million resulting in an effective tax rate of 18.9% for the six months ended June 30, 2025.
Average Balances, Net Interest Income, and Yields Earned and Rates Paid
The following table shows for the six-month period indicated the total dollar amount of interest earned from average interest earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities and the resulting costs, expressed both in dollars and rates. Average loan receivables balances include non-accrual loans. Average yields have been annualized. Tax-exempt incomes and yields have not been adjusted to a tax-equivalent basis.
|
Six Months Ended June 30, |
||||||||||||||||||||||||||||||||
|
2026 |
2025 |
Change 2026 vs 2025 |
||||||||||||||||||||||||||||||
|
Average |
Income/ |
Yield |
Average |
Income/ |
Yield |
Average |
Yield |
|||||||||||||||||||||||||
|
(Dollars in thousands) |
||||||||||||||||||||||||||||||||
|
Interest-earning assets: |
||||||||||||||||||||||||||||||||
|
Loans receivable |
$ |
1,797,846 |
$ |
56,747 |
6.37 |
% |
$ |
1,848,664 |
$ |
59,244 |
6.46 |
% |
$ |
(50,818 |
) |
(0.09 |
)% |
|||||||||||||||
|
Securities |
||||||||||||||||||||||||||||||||
|
Taxable available-for-sale |
144,254 |
3,351 |
4.65 |
% |
199,548 |
4,914 |
4.93 |
% |
(55,294 |
) |
(0.28 |
)% |
||||||||||||||||||||
|
Tax exempt available-for-sale |
39,427 |
538 |
2.73 |
% |
39,499 |
563 |
2.85 |
% |
(72 |
) |
(0.12 |
)% |
||||||||||||||||||||
|
Held-to-maturity |
151 |
4 |
5.33 |
% |
159 |
4 |
5.03 |
% |
(8 |
) |
0.30 |
% |
||||||||||||||||||||
|
Federal funds sold |
38,451 |
709 |
3.72 |
% |
43,705 |
959 |
4.42 |
% |
(5,254 |
) |
(0.70 |
)% |
||||||||||||||||||||
|
Other interest earning-assets |
73,246 |
1,378 |
3.80 |
% |
15,406 |
367 |
4.80 |
% |
57,840 |
(1.00 |
)% |
|||||||||||||||||||||
|
Total interest-earning assets |
2,093,375 |
$ |
62,727 |
6.04 |
% |
2,146,981 |
$ |
66,051 |
6.20 |
% |
(53,606 |
) |
(0.16 |
)% |
||||||||||||||||||
|
Other non-earnings assets |
165,963 |
168,359 |
(2,396 |
) |
||||||||||||||||||||||||||||
|
Total assets |
$ |
2,259,338 |
$ |
2,315,340 |
$ |
(56,002 |
) |
|||||||||||||||||||||||||
|
Interest-bearing liabilities |
||||||||||||||||||||||||||||||||
|
Demand |
$ |
326,550 |
$ |
3,294 |
2.03 |
% |
$ |
319,777 |
$ |
3,124 |
1.97 |
% |
$ |
6,773 |
0.06 |
% |
||||||||||||||||
|
Savings |
167,257 |
1,739 |
2.10 |
% |
171,022 |
1,923 |
2.27 |
% |
(3,765 |
) |
(0.17 |
)% |
||||||||||||||||||||
|
Money markets |
482,882 |
7,000 |
2.92 |
% |
470,596 |
7,274 |
3.12 |
% |
12,286 |
(0.20 |
)% |
|||||||||||||||||||||
|
Certificates of deposit |
672,367 |
11,796 |
3.54 |
% |
756,808 |
16,150 |
4.30 |
% |
(84,441 |
) |
(0.76 |
)% |
||||||||||||||||||||
|
Total deposit |
1,649,056 |
23,829 |
2.91 |
% |
1,718,203 |
28,471 |
3.34 |
% |
(69,147 |
) |
(0.43 |
)% |
||||||||||||||||||||
|
Borrowings |
- |
- |
N/A |
639 |
13 |
4.10 |
% |
(639 |
) |
N/A |
||||||||||||||||||||||
|
Total interest-bearing |
1,649,056 |
$ |
23,829 |
2.91 |
% |
1,718,842 |
$ |
28,484 |
3.34 |
% |
(69,786 |
) |
(0.43 |
)% |
||||||||||||||||||
|
Non-interest-bearing deposits |
297,587 |
288,060 |
9,527 |
|||||||||||||||||||||||||||||
|
Other liabilities |
38,688 |
43,979 |
(5,291 |
) |
||||||||||||||||||||||||||||
|
Total liabilities |
1,985,331 |
2,050,881 |
(65,550 |
) |
||||||||||||||||||||||||||||
|
Stockholders' equity |
274,007 |
264,459 |
9,548 |
|||||||||||||||||||||||||||||
|
Total liabilities and stockholder's equity |
$ |
2,259,338 |
$ |
2,315,340 |
$ |
(56,002 |
) |
|||||||||||||||||||||||||
|
Net interest-earnings assets |
$ |
444,319 |
$ |
428,138 |
$ |
16,180 |
||||||||||||||||||||||||||
|
Net interest income; interest rate spread |
$ |
38,898 |
3.13 |
% |
$ |
37,567 |
2.86 |
% |
$ |
1,331 |
0.27 |
% |
||||||||||||||||||||
|
Net interest margin |
3.75 |
% |
3.53 |
% |
0.22 |
% |
||||||||||||||||||||||||||
Rate/Volume Analysis
The following table reflects the changes in our interest income and interest expense segregated into amounts attributable to changes in volume and in yields on interest-earning assets and interest-bearing liabilities during the periods indicated.
|
Six Months Ended June 30, |
||||||||||||
|
Rate |
Volume |
Net |
||||||||||
|
(In thousands) |
||||||||||||
|
Interest and dividend income: |
||||||||||||
|
Loans receivable, including fees |
$ |
(840 |
) |
$ |
(1,657 |
) |
$ |
(2,497 |
) |
|||
|
Securities available-for-sale |
||||||||||||
|
Taxable |
(269 |
) |
(1,294 |
) |
(1,563 |
) |
||||||
|
Tax-exempt |
(24 |
) |
(1 |
) |
(25 |
) |
||||||
|
Securities held-to-maturity |
- |
- |
- |
|||||||||
|
Federal funds sold |
(142 |
) |
(108 |
) |
(250 |
) |
||||||
|
Other interest and dividend income |
(60 |
) |
1,071 |
1,011 |
||||||||
|
Total interest and dividend income |
$ |
(1,335 |
) |
$ |
(1,989 |
) |
$ |
(3,324 |
) |
|||
|
Interest expense: |
||||||||||||
|
Demand |
$ |
103 |
$ |
67 |
$ |
170 |
||||||
|
Savings |
(143 |
) |
(41 |
) |
(184 |
) |
||||||
|
Money market |
(468 |
) |
194 |
(274 |
) |
|||||||
|
Certificates of deposit |
(2,672 |
) |
(1,695 |
) |
(4,367 |
) |
||||||
|
Borrowings |
- |
- |
- |
|||||||||
|
Total interest expense |
$ |
(3,180 |
) |
$ |
(1,475 |
) |
$ |
(4,655 |
) |
|||
|
Change in net interest income |
$ |
1,845 |
$ |
(514 |
) |
$ |
1,331 |
|||||
How We Manage Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk which is inherent in our lending, investment and deposit gathering activities. To that end, management actively monitors and manages interest rate risk exposure. In addition to market risk, our primary risk is credit risk on our loan portfolio and our investment security portfolio. We attempt to manage credit risk through our loan underwriting and oversight policies.
The principal objective of our interest rate risk management function is to evaluate the interest rate risk embedded in certain balance sheet accounts, determine the level of risk appropriate given our business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with approved guidelines. We seek to manage our exposure to risks from changes in interest rates while at the same time trying to improve our net interest spread. We monitor interest rate risk as such risk relates to our operating strategies. We have established an Asset/Liability Committee which is comprised of both Management and members of the Board of Directors. The Asset/Liability Committee meets on a regular basis and is responsible for reviewing our asset/liability policies and interest rate risk position. Both the extent and direction of shifts in interest rates are uncertainties that could have a negative impact on future earnings.
Gap Analysis. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive" and by monitoring the Company's interest rate sensitivity "gap." An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate-sensitive liabilities. A gap is considered negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would tend to affect adversely net interest income while a positive gap would tend to result in an increase in net interest income. Conversely, during a period of falling interest rates, a negative gap would tend to result in an increase in net interest income while a positive gap would tend to affect adversely net interest income.
The table below sets forth the amounts of our interest-earning assets and interest-bearing liabilities outstanding at June 30, 2026, which we expect, based upon certain assumptions, to reprice or mature in each of the future time periods shown (the "GAP Table"). Except as stated below, the amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at June 30, 2026, based on contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and anticipated prepayments of adjustable-rate loans and fixed-rate loans, and as a result of contractual rate adjustments on adjustable-rate loans.
|
3 Months or |
More than 3 |
More than 1 |
More than 3 |
More than 5 |
Non-Rate |
Total |
||||||||||||||||||||||
|
(In thousands) |
||||||||||||||||||||||||||||
|
Interest-earning assets: (1) |
||||||||||||||||||||||||||||
|
Investment securities |
$ |
26,210 |
$ |
50,114 |
$ |
62,117 |
$ |
35,398 |
$ |
95,354 |
$ |
(7,553 |
) |
$ |
261,640 |
|||||||||||||
|
Loans receivable |
362,646 |
289,196 |
632,958 |
357,716 |
151,728 |
(22,744 |
) |
1,771,500 |
||||||||||||||||||||
|
Other interest-earnings assets (2) |
51,806 |
- |
- |
- |
- |
- |
51,806 |
|||||||||||||||||||||
|
Total interest-earning assets |
$ |
440,662 |
$ |
339,310 |
$ |
695,075 |
$ |
393,114 |
$ |
247,082 |
$ |
(30,297 |
) |
$ |
2,084,946 |
|||||||||||||
|
Interest-bearing liabilities: |
||||||||||||||||||||||||||||
|
Checking and savings accounts |
$ |
477,384 |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
$ |
477,384 |
||||||||||||||
|
Money market accounts |
521,309 |
- |
- |
- |
- |
- |
521,309 |
|||||||||||||||||||||
|
Certificate accounts |
315,014 |
288,268 |
21,783 |
2,690 |
- |
- |
627,755 |
|||||||||||||||||||||
|
Borrowings |
- |
- |
- |
- |
- |
- |
- |
|||||||||||||||||||||
|
Total interest-bearing liabilities |
$ |
1,313,707 |
$ |
288,268 |
$ |
21,783 |
$ |
2,690 |
$ |
- |
$ |
- |
$ |
1,626,448 |
||||||||||||||
|
Interest-earning assets less |
$ |
(870,837 |
) |
$ |
51,042 |
$ |
673,292 |
$ |
390,424 |
$ |
247,082 |
$ |
(30,297 |
) |
$ |
460,706 |
||||||||||||
|
Cumulative interest-rate |
$ |
(870,837 |
) |
$ |
(819,795 |
) |
$ |
(146,503 |
) |
$ |
243,921 |
$ |
491,003 |
|||||||||||||||
|
Cumulative interest-rate gap as a |
||||||||||||||||||||||||||||
|
June 30, 2026 |
(38.69 |
)% |
(36.42 |
)% |
(6.51 |
)% |
10.84 |
% |
21.81 |
% |
||||||||||||||||||
|
Cumulative interest-earning assets |
33.71 |
% |
48.83 |
% |
90.98 |
% |
115.00 |
% |
130.19 |
% |
||||||||||||||||||
(1)
Interest-earnings assets are included in the period in which the balances are expected to be redeployed and/or repriced as a result of anticipated prepayments, scheduled rate adjustments and contractual maturities.
(2)
Includes interest-bearing bank balances, FHLB Stock and Federal Funds Sold
(3)
Interest-rate sensitivity gap represents the difference between total interest-earning assets and total interest-bearing liabilities.
Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate loans, have features which restrict changes in interest rates both on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their adjustable-rate loans may decrease in the event of an interest rate increase.
Net Portfolio Value Analysis. Our interest rate sensitivity is also monitored by management through the use of a model which generates estimates of the changes in our net portfolio value ("NPV") over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities, and off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The following table sets forth our NPV as of June 30, 2026, and reflects the changes to NPV as a result of immediate and sustained changes in interest rates as indicated.
|
Change in Interest Rates |
Net Portfolio Value |
NPV as % of Portfolio |
||||||||||||||||||
|
In Basis Points (Rate Shock) |
Amounts |
$ Change |
% Change |
EVE/EVA1 |
Change |
|||||||||||||||
|
(Dollars in thousands) |
||||||||||||||||||||
|
300 |
$ |
354,619 |
$ |
(33,778 |
) |
(8.70 |
)% |
16.59 |
% |
(0.51 |
) |
|||||||||
|
200 |
$ |
372,284 |
$ |
(16,113 |
) |
(4.15 |
)% |
17.06 |
% |
(0.04 |
) |
|||||||||
|
100 |
$ |
383,842 |
$ |
(4,555 |
) |
(1.17 |
)% |
17.24 |
% |
0.14 |
||||||||||
|
Static |
$ |
388,397 |
$ |
- |
17.10 |
% |
||||||||||||||
|
(100) |
$ |
394,153 |
$ |
5,756 |
1.48 |
% |
17.00 |
% |
(0.10 |
) |
||||||||||
|
(200) |
$ |
394,038 |
$ |
5,641 |
1.45 |
% |
16.65 |
% |
(0.45 |
) |
||||||||||
|
(300) |
$ |
397,720 |
$ |
9,323 |
2.40 |
% |
16.41 |
% |
(0.69 |
) |
||||||||||
1.
Economic Value of Equity (EVE) divided by Economic Value of Assets (EVA)
As is the case with the Gap Table above, certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV require the making of certain assumptions which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the models presented assume that the composition of our interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the NPV model provides an indication of interest rate risk exposure at a particular point in time, such model is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.
Princeton Bancorp Inc. published this content on August 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 07, 2026 at 18:07 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]