Princeton Bancorp, Inc. (BPRN)

Item 2. 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

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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.

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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):

The following table presents the geographic markets of the commercial real estate portfolio for the periods presented (dollars in thousands):

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 l

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in sections as follows:

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Overview and Strategy

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Comparison of Financial Condition at December 31, 2025 and December 31, 2024

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Comparison of Operating Results for the Years Ended December 31, 2025 and 2024

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Rate/Volume Analysis

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Liquidity, Commitments and Capital Resources

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Off-Balance Sheet Arrangements

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Impact of Inflation

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Exposure to Changes in Interest Rates

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Critical Accounting Policies and Estimates

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Recently Issued Accounting Standards

Overview and Strategy

We remain focused on establishing and retaining customer relationships by offering a broad range of traditional financial services and products, competitively priced and delivered in a responsive manner to small businesses, to professionals and individuals in our market area. As a community bank, we seek to provide superior customer service that is highly personalized, efficient and responsive to local needs. To better serve our customers, we endeavor to provide advanced delivery systems with ATMs, current operating software, timely reporting, online bill pay and other similar up-to-date products and services. We seek to deliver these products and services with the care and professionalism expected of a community bank and with a special dedication to personalized customer service.

Our primary business objectives are:

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to provide local businesses, professionals and individuals with banking services responsive to and determined by their needs and local market conditions;

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to attract deposits and loans through competitive pricing, responsiveness and service; and

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to provide a reasonable return to stockholders on capital invested.

We also intend to continue pursuing a strategy that includes acquisitions. An acquisition strategy involves significant risks, including the following: finding suitable candidates for acquisition; attracting funding to support additional growth within acceptable risk tolerances; maintaining asset quality; retaining the target’s customers and key personnel; obtaining necessary regulatory approvals; conducting adequate due diligence and managing known and unknown risks and uncertainties; integrating acquired businesses; and maintaining adequate regulatory capital. The market for acquisition targets is highly competitive, which may adversely affect our ability to find acquisition candidates that fit our strategy and standards.

We strive to serve the financial needs of our customers while providing an appropriate return to our stockholders, consistent with safe and sound banking practices. We expect that a financial strategy that utilizes variable rates and matching assets and liabilities will enable us to increase our net interest margin, while managing interest rate risk. We also seek to generate fee income from various sources, subject to our desire to maintain competitive pricing within our market area.

Our recognition of, and commitment to, the needs of the local community, combined with highly personalized and responsive customer service, differentiates us from our competition. We continue to capitalize upon the personal contacts and relationships of our organizers, directors, stockholders and officers to establish and grow our customer base.

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Comparison of Financial Condition at December 31, 2025 and December 31, 2024

General.

Total assets were $2.29 billion at December 31, 2025, a decrease of $55.1 million, or 2.35% when compared to $2.34 billion at the end of 2024. The primary reason for the decrease in total assets was related to a decrease in investment securities of $64.6 million, partially offset by an increase in cash and cash equivalents of $18.3 million.

Cash and cash equivalents

Cash and cash equivalents increased $18.3 million, or 15.6%, to $135.7 million at December 31, 2025 compared to December 31, 2024.

Investment securities

Total available-for-sale investment securities decreased $64.6 million, or 26.1%, to $182.6 million at December 31, 2025 compared to December 31, 2024. The decrease was primarily due to principal repayments of $77.7 million and $3.5 million of maturities or calls of available-for-sale securities during 2025, partially offset by purchases of available for sale securities in the amount of $11.6 million and a decrease of $5.1 million attributed to the unrealized losses associated with the available-for-sale portfolio.

Loans

Loans, net of deferred loan fees and costs, decreased $2.5 million, or 0.1%, to $1.82 billion at December 31, 2025 compared to December 31, 2024. The decrease in net loans consisted of decreases of $47.7 million in construction loans, $41.6 million in commercial real estate loans, and $16.3 million in commercial and industrial loans, partially offset by increases of $95.8 million in residential mortgages, and $7.2 million in home equity and consumer loans. Commercial loan balances decreased due to increased selectivity in new loan originations and a continued focus on credit quality.

The Company’s CRE loan portfolio, which includes multi-family, land, owner-occupied and non-owner-occupied CRE loans, was $1.34 billion or 73.9% of total loans of $1.82 billion at December 31, 2025. There were 740 loans in the Company’s CRE portfolio with an average and median loan size of $1.8 million and $0.6 million, respectively. LTV estimates are less than 70% for $1.23 billion or 91.7% of the CRE portfolio and less than 80% for $1.33 billion or 99.3% 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):

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The following table presents the geographic markets of the commercial real estate portfolio for the periods presented (dollars in thousands):

At December 31, 2025, non-performing assets totaled $16.6 million, a decrease of $10.6 million when compared to the amount at December 31, 2024. The decrease was due primarily the result of $10.0 million in charge-offs recorded during 2025, of which $9.9 million was recorded during the second quarter of 2025.

Deposits

Total deposits on December 31, 2025, decreased $56.4 million, or 2.78%, when compared to December 31, 2024. The decrease in the Company’s deposits consisted primarily of decreases in certificates of deposit of $45.0 million, money market deposits of $26.3 million, non-interest-bearing demand deposits of $15.0 million, and savings deposits of $3.1 million, partially offset by an increase in interest-bearing demand deposits of $33.0 million.

Borrowings

The Company had no outstanding borrowings at December 31, 2025 or December 31, 2024.

Stockholders’ equity

Total stockholders’ equity at December 31, 2025, increased $8.7 million or 3.31% when compared to December 31, 2024. The increase was primarily due to an increase in retained earnings of $9.8 million (which consisted of $18.6 million in net income, partially offset by $8.6 million of dividends recorded during the period), an increase in paid-in capital of $3.0 million primarily due to the exercise of stock options, and a decrease in accumulated other comprehensive loss of $3.7 million due to reductions in market interest rates and in investment securities, partially offset by a $7.9 million increase in treasury stock due to our stock repurchase program. The ratio of equity to total assets at December 31, 2025, and at December 31, 2024, was 11.9% and 11.2%, respectively.

We manage our balance sheet based on a number of interrelated criteria, such as changes in interest rates, fluctuations in certain asset and liability categories whose changes are not totally controlled by us, changes in deposit account balances driven by depositors’ needs, prepayments and issuer call options exercised on securities available for sale, early payoffs on loans, investment opportunities presented by market conditions, lending originations, capital provided by earnings, and active management of our overall liquidity positions. The management of these dynamic and interrelated elements of our balance sheet results in fluctuations in balance sheet items throughout the year.

Comparison of Operating Results for the Years Ended December 31, 2025, and December 31, 2024

General.

For the year ended December 31, 2025, the Company recorded net income of $18.6 million, or $2.71 per diluted common share, compared to $10.2 million, or $1.55 per diluted common share, for 2024. This increase was primarily the result of the purchase accounting adjustments recorded in 2024 reducing net income, which were related to the Cornerstone "CFC" acquisition, and included merger related expenses of $7.8 million.

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Net interest income.

Net interest income for the twelve-month period ended December 31, 2025, was $75.8 million, an increase of $9.3 million, or 14.0%, from 2024. The increase from the previous year was the result of an increase in interest income of $7.6 million, or 6.2%, and a decrease in interest expense of $1.7 million, or 3.0%.

Total interest and dividend income.

Total interest and dividend income increased $7.6 million, or 6.2%, to $130.6 million for the year ended December 31, 2025, compared to $122.9 million for the prior year. The improvement in interest income resulted from an increase in average interest-earning assets of $148.2 million, partially offset by a decrease in the yield on earning assets of 8 basis points to 6.17% for the twelve-month period ended December 31, 2025.

Interest income

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