3rd Quarter, 2009 Newsletter

October 16, 2009

To the Shareholders of The Bank of Princeton (“TBOP”):

We are pleased to provide the unaudited financial results for The Bank of Princeton (“the Bank”) for the third quarter of 2009. The Bank had total assets of $260,104,000, reflecting deposits of $217,735,000, total gross loans outstanding of $158,806,000, and capital of $27,563,000 as of September 30, 2009. At June 30, 2009 total assets were $240,087,000, deposits were $211,935,000, total gross loans outstanding were $127,021,000, and capital was $26,560,000.

For the third quarter of 2009 the Bank realized a profit of $272,766 as compared to a profit of $2,085 for the second quarter. This significant achievement has been the result of two factors. Our loan portfolio continued to grow ($31 million during the third quarter), and we have successfully maintained our cost of funds at 1.55% during the third quarter.

Year to date operations for the nine months September 30, 2009 resulted in our first year to date net profit of $13,132. These results reflect interest income of $8,073,000, interest expense of 2,885,000, a $743,000 addition to the loan loss reserve, and $4,532,000 of non-interest expenses. These results represent a significant improvement over the prior year nine month operations which showed a loss of $1,642,000 on interest income of $3,973,000 following $1,686,000 in interest expense, a $528,000 addition to the loan loss reserve and $3,609,000 of non-interest expenses.

In an effort to continue the positive growth and profitability momentum that has been created, we have implemented programs and strategies that are worth noting. We rolled out a new healthcare financing program, led by Kris Muse, which was created to address the unique banking needs of medical practices and other healthcare providers. Also, since hiring Mary Beth Gorecki, our Consumer Lending Manager, we began offering a residential first mortgage product effective June 1st. We have originated $2,129,000 in quality mortgage loans and purchased a residential first portfolio of $11,385,000. Offering this product not only diversifies our loan portfolio but allows us to address yet another one of our customers’ financial needs. With the government offering up to $8,000 in tax credits to a qualified first-time homebuyer as well as the already positive feedback from our customers, all indications thus far suggest this program will be a success. An excerpt of a letter we received from one of our new mortgage customers speaks to this. “Every step was easy and the loan was issued so quickly. It’s really wonderful to know that we have a treasure in our backyard, a bank and its staff that is helpful, on purpose, and that even has terrific rates to go along with it!!”

Another development at the Bank we are very proud to inform you of relates to a strategic realignment of staff. We have added a Chief Lending Officer, Douglas Conover, a Director of Corporate Development, Edward Dietzler, and a Chief Financial Officer, William Siegenthaler. In addition, to better provide for the banking requirements of the markets we currently serve we have placed our most experienced commercial lenders in each branch as Community Bank Executives (CBE’s). These Community Bank Executives are charged with understanding the territory they manage and developing strategies specific to these markets in an effort to provide a superior customer experience while maximizing potential profitability for the Bank. The CBE’s are veteran customer contact personnel that have both a retail and commercial background which allows for a full service presence in our branches at the management level.

Also, we have identified an additional branch site that is synergistic with our expansion plans and have executed an agreement to purchase the Rocky Hill office of Provident Bank, including $11 million in deposits. In the meantime our existing branch network continues to produce strong deposit growth as evidenced by an increase of nearly 30% ($51 million) during the first nine months of the year. During the second quarter of this year we were successful in attracting the account of another local municipality. This business line is quickly becoming a specialty for TBOP as we now bank several of these entities.

The Bank of Princeton continues to demonstrate its commitment to the community in the markets that we serve. During the last quarter alone our employees enthusiastically participated in the American Heart Walk, The Princeton Regional Chamber of Commerce Trade Show, the Alzheimer’s Association Memory Walk held on the ETS Campus and the Hopewell Harvest Fair to name a few examples of our commitment. Many of our employees take great pride in supporting the various non -profit organizations by attending the formal fundraising functions this time of the year.

Overall, we are very pleased with the results our dedicated staff has produced and our loyal customers and investors have allowed. Achieving profitability for a de novo bank is a hard earned milestone – one that we don’t take lightly. With the programs and strategies we are implementing, some of which were outlined in this report, we are positioning ourselves to build upon these positive results and look forward to meeting or exceeding our goals for 2009. As always, the Directors, Management, and Staff of The Bank of Princeton thank you for your continued support.

Sincerely,
AndrewsSignature
Andrew Chon Martin P. Melilli