1st Quarter, 2010 Newsletter

May 24, 2010

To the Shareholders of The Bank of Princeton:

On April 23, 2010, The Bank of Princeton celebrated its third anniversary.

We are pleased to provide the unaudited financial results for The Bank of Princeton (“the Bank”) for the quarter ended March 31, 2010. The Bank had total assets of $289,708,000, reflecting deposits of $241,842,000, total gross loans outstanding of $181,626,000, and capital of $30,131,000. Our loan portfolio grew 4% ($ 6 million) while our deposits grew 11% ($23 million), of which $15 million represents new relationships. Our credit quality remains sound.

For the quarter ended March 31, 2010 the Bank realized a profit of $390,088. These results reflect interest income of $3,345,000, interest expense of $937,000, a $90,000 addition to the loan loss reserve, and $1,967,000 of non-interest expenses. Contributing to this profit was a lower cost of funds. We were able to reduce our cost of funds to 1.52% for the quarter. These results represent a significant improvement over the same three month period last year which showed a loss of $261,718 on interest income of $2,359,000, $1,125,000 in interest expense, a $153,594 addition to the loan loss reserve and $1,379,000 of non-interest expenses.

The strategies and programs implemented in 2009 continued to contribute to the overall positive growth and profitability in the first quarter of 2010. We are extremely pleased with the continued development between the Bank and the local municipalities. Strengthening these relationships has provided additional opportunities as we provide solutions through the challenging economic times.

Our healthcare program continues to make great strides with medical practices and other healthcare providers in our company.

A special shareholder’s meeting was held at Springdale Country Club in February. The well attended meeting gave us an opportunity to discuss accomplishments and the future of the Bank. We successfully raised an additional 5.5 million in capital as shareholders decided to exercise their warrants, demonstrating their continued commitment to the bank and its mission.

As previously reported the bank entered into an agreement to acquire the Rocky Hill Branch of the Provident Bank. On May 3, 2010, the Montgomery Branch of The Bank of Princeton opened its doors for business at 1185 Route 206 North in Princeton, complete with an ATM and a drive through facility.

Our committed staff continues to support many of the business associations, charitable organizations and community functions in the markets that we serve. Once again this year we supported PrincetonKIDS at the Family Fun Day event held at Quakerbridge Mall. You could also find us on Nassau Street participating in Communiversity and on Main Street in Pennington at Pennington Day. We partnered with McCarter Theater earlier this year as John Lithgow returned to his roots in Princeton for a one night, one man impressive performance. We invite you to join us on Tuesday, July 12, 2010, as The Bank of Princeton for the third season is proud to sponsor the Princeton Chamber’s Mid-Summer Marketing Showcase in Palmer Square.

Exciting opportunities continue at The Bank of Princeton. We have received regulatory approval for a new branch location at 1 Rossmoor Drive in Jamesburg. We anticipate opening for business in the third quarter of 2010. The bank entered into an agreement to purchase property on Bridge Street in Lambertville. This location, once regulatory approval is received, will become our seventh branch location as we expand into Hunterdon County.

On May 20, 2010, The Bank of Princeton and MoreBank signed a definitive merger agreement, which is subject to customary closing conditions, including regulatory approvals and approval by the shareholders of each bank. The parties expect the merger will take effect in the fourth quarter of 2010 or early 2011. MoreBank will keep its name and be run as a division of The Bank of Princeton. The Bank is excited to add MoreBank’s branch network to our existing franchise.

Overall, we are extremely pleased with our results for the first quarter of 2010. Achieving and maintaining profitability continues to be an exciting accomplishment made possible through the commitment and tireless dedication of our employees. We are once again positioned well to build upon these positive results and look forward to achieving our goals for 2010. The Directors, Management and Staff of The Bank of Princeton thank you for your continued support.

Sincerely,

Andrew M. Chon                                                                  Martin P. Melilli
Chairman of the Board                                                       President

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