2nd Quarter, 2010 Newsletter

August 2, 2010

To the Shareholders of The Bank of Princeton:

We are pleased to provide the unaudited financial results for The Bank of Princeton ("the Bank") for the quarter ended June 30, 2010. The Bank had total assets of $336,670,000, reflecting deposits of $284,885,000, total gross loans outstanding of $194,828,000, and capital of $34,791,000. Our loan portfolio grew 7% ($ 13 million) while our deposits grew 18% ($43 million). Our credit quality remains sound.

For the quarter ended June 30, 2010, the Bank realized a profit of $622,477. For the six months ending June 30, 2010, the Bank realized a profit of $1,012,565. The results for the second quarter reflect interest income of $3,587,000, interest expense of $1,132,000, a $383,100 addition to the loan loss reserve, and $2,178,000 of non-interest expenses. Contributing to this profit was a low cost of funds. We were able to maintain our cost of funds at 1.55% for the quarter. These results represent a significant improvement over the same three month period last year which showed a profit of $2,085 on interest income of $2,622,000, $888,497 in interest expense, a $242,884 addition to the loan loss reserve and $1,517,000 of non-interest expenses.

The strategies and programs implemented in 2009 continued to contribute to the overall positive growth and profitability in the first six months 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 continue to provide solutions through the challenging economic times.

At the end of June our former President, Mr. Martin Melilli, resigned to pursue a great new opportunity. The Board of Directors together with the entire staff of The Bank of Princeton would like to thank Martin for his dedication and leadership. We wish him continued success with his new venture. We are pleased to announce, the Board of Directors have identified and selected Mr. Steven C. Ackmann as the President of The Bank of Princeton. Steve brings nearly 40 years of banking experience to the Bank and since 1993 successfully held the position of President at two other banks.

As previously reported the Bank acquired the Rocky Hill Branch of the Provident Bank, and on May 3, 2010, the Montgomery Branch of The Bank of Princeton opened its doors for business at 1185 Route 206 North, complete with an ATM and a drive-through facility. Deposits have grown at that office from $6,498,000 to $13,148,000, representing the addition of nearly 150 new accounts at the end of June.

Our committed staff continues to support many of the business associations, charitable organizations and community functions in the markets that we serve. In April, many of you found us on Nassau St. participating in Communiversity. We joined with McCarter Theater and sponsored the John Lithgow one man, one night performance. Our partnership with PrincetonKIDS continues as we participated in the second annual Family Fun Day at Quakerbridge Mall. The Bank of Princeton’s Hamilton Branch staff left a lasting impression at the business expo hosted by the Hamilton Division of the Chamber of Commerce. In May our Pennington staff participated in Pennington Day hosting an interactive activity for children. Several employees from the bank attended and assisted with a homebuyer’s workshop given by Princeton Township’s Affordable Housing Division.

Our expansion plans continue at The Bank of Princeton. We are completing the construction for our new branch location at 1 Rossmoor Drive in Jamesburg, Monroe Township. We anticipate opening for business in the third quarter of 2010. The Bank is proceeding with the purchase of property on Bridge Street in Lambertville. This location, once local and regulatory approvals are received, will become our seventh branch location as we expand into Hunterdon County in early 2011.

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. MoreBank will maintain its name and operate 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 second quarter and first half of 2010. Achieving and maintaining profitability continues to be an exciting accomplishment and our focus. These achievements are made possible through the commitment and continued dedication of our employees. We are well positioned to build upon these positive results and look forward to reaching our goals for the second half of 2010. The Directors, Management and Staff of The Bank of Princeton thank you for your continued support.

Sincerely,

Andrew M. Chon                                                                  Steven C. Ackmann
Chairman of the Board                                                      President

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