Princeton Bancorp(BPRN) - 2024 Q4 - Annual Report

Loan Portfolio - As of December 31, 2024, the total loan portfolio amounted to $1.83 billion, with commercial real estate and multi-family loans constituting$1.39 billion, or 76.1% of total loans[26] - The commercial real estate portfolio increased by $242.2 million, or 21.1$1.14 billion, or 73.8% of total loans[26] - Commercial and industrial loans reached $93.0 million, representing 5.1$42.0 million, or 82.2%, since December 31, 2023[32] - Construction loans totaled $257.2 million, or 14.1$53.0 million, or 17.1%, since December 31, 2023[35] - Residential first-lien mortgage loans amounted to $68.0 million, or 3.7$30.0 million, or 78.8%, since December 31, 2023[38] - Loans receivable, net increased from $1.55 billion at December 31, 2023, to$1.82 billion at December 31, 2024, an increase of $270.5 million, or 17.5$255.5 million to the loan portfolio[40] - As of December 31, 2024, the company's total loan portfolio includes approximately $1.39 billion in commercial real estate loans, representing 76.1$257.2 million in construction loans, accounting for 14.1% of the total loan portfolio as of December 31, 2024[147] - The lending limit to one borrower under regulatory guidelines is $40.6 million, with an internal limit set at approximately$30.5 million[129] Non-Performing Assets and Credit Losses - Total non-performing assets increased to $27.1 million as of December 31, 2024, up$20.4 million from December 31, 2023[59] - The allowance for credit losses on loans was $23.7 million as of December 31, 2024, compared to$18.5 million as of December 31, 2023, reflecting a $5.2 million increase[58] - Nonaccrual loans totaled$26.8 million as of December 31, 2024, representing 1.47% of total loans outstanding[60] - The allowance for credit losses to total loans outstanding increased to 1.30% in 2024 from 1.19% in 2023[60] - The company recorded net charge-offs of $353 thousand during 2024, compared to$1.8 million in 2023[60] - Commercial real estate loans accounted for 76.1% of the allowance for credit losses in 2024, up from 73.7% in 2023[62] - The company is evaluating options regarding two delinquent commercial real estate loans totaling $25.4 million[59] - The allowance for credit losses may not be adequate to cover actual losses, and regulatory agencies may require an increase in this allowance, adversely affecting earnings[157] Deposits and Equity - Total deposits increased from$1.64 billion at December 31, 2023, to $2.03 billion at December 31, 2024, an increase of$396.9 million, or 24.26%[85] - Non-interest-bearing deposits increased by $51.7 million, or 20.7$301.0 million at December 31, 2024[85] - Interest-bearing deposits increased by $345.2 million, or 24.9$215.2 million acquired from CFC[85] - Average total deposits for the year ended December 31, 2024, were $1.83 billion, an increase of$318.9 million from $1.51 billion for the year ended December 31, 2023[183] - Total stockholders' equity increased by$21.8 million, or 9.09%, to $261.5 million at December 31, 2024[89] - The ratio of equity to total assets decreased from 12.5$5.5 million to $14.4 million at December 31, 2024, related to the acquisition of CFC[71] Regulatory Environment - The common equity Tier 1 capital requirement is at least 4.5$250,000, with potential adverse effects on operating expenses if insurance assessments increase[106] - The Bank is classified as a "small bank holding company" with less than $3 billion in consolidated assets, exempting it from certain capital requirements[118] - The Dodd-Frank Act expands limitations on affiliate transactions, impacting the Company's operational flexibility[98] - The Bank's leverage capital requirement is at least 3.0% of adjusted total assets, with additional requirements for other banking associations[113] - The Federal Reserve may require the Company to provide adequate capital funds to the Bank during financial stress[99] - The Company is prohibited from paying dividends if it would result in being undercapitalized or in default of any assessment due to the FDIC[108] Competition and Market Conditions - The Company faces substantial competition in both loan origination and deposit attraction, impacting net interest income and overall profitability[20][21] - Increased competition from other financial institutions may adversely affect profitability, as competitors may offer higher interest rates on deposits and lower rates on loans[181] - The company faces substantial competition in originating loans, primarily from banks, credit unions, and mortgage companies within a 100-mile radius of Princeton[179] - Market conditions and economic cyclicality may adversely affect the company's industry, leading to increased delinquencies and default rates[174] Economic Risks - A recession in the local economy could impair commercial real estate borrowers' ability to repay loans, potentially increasing nonperforming loans and negatively impacting net income[152] - The company is exposed to risks from economic downturns, which could lead to increased credit losses and negatively affect financial condition[156] - Inflation poses a risk to the company's business and its customers, potentially leading to increased loan delinquencies and non-performing assets[172] - The financial services industry is experiencing volatility, with changes in interest rates impacting net interest income, a significant portion of the company's earnings[159] - Instability in global economic conditions and geopolitical matters could materially affect the company's results of operations and financial condition[175] Operational Risks - The company faces increased regulatory scrutiny and potential changes in legislation that could impact its operating environment[142] - The company must maintain high underwriting standards to ensure safe asset growth, as weakening these standards could lead to loan defaults and increased credit loss allowances[184] - The company relies on third parties for key business infrastructure, and failures in these systems could disrupt operations and damage reputation[189] - The company utilizes AI for operational efficiency and customer service, but does not use it for decision-making processes, mitigating potential risks associated with AI[193] - Cybersecurity risks remain a significant concern, with potential exposure to cyber-attacks that could compromise confidential information and disrupt operations[198] - The sophistication of cyber threat actors has escalated, leading to increased risks of cyber-attacks and information security breaches[201] - The potential material loss from cyber-attacks could result in significant business disruption, reputational damage, and regulatory fines[203] - The Bank's existing insurance coverage may not adequately compensate for losses from major cyber-attacks[204] - The perception of a successful cyber-attack could damage the Bank's reputation with customers and clients, regardless of the actual occurrence[203] Employee and Growth Management - Attracting and retaining skilled employees is critical for managing growth and ensuring long-term profitability[209] - The loss of executive officers or key personnel could adversely affect the implementation of the Bank's long-term business strategy[211] - The Bank's growth strategy has substantially increased expenses, impacting results of operations, particularly in compensation and leasehold expenses[208] Reputation and Customer Confidence - Maintaining a strong reputation is essential for the company’s success, as any damage could adversely affect client confidence and operational results[185] - The increasing use of social media platforms presents new risks, including improper disclosure of proprietary information and negative publicity[205] - The ability to monitor third-party cybersecurity practices is limited, increasing the risk of breaches impacting the Bank's confidential information[202]