Bank of Princeton : Q&A for Proxy Solicitation of Stockholders

FEDERAL DEPOSIT INSURANCE CORPORATION

Washington, D.C. 20429

SCHEDULE 14A

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183 Bayard Lane, Princeton, New Jersey 08540

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April 13, 2021

Q&A FOR PROXY SOLICITATION REGARDING PROPOSAL TO AMEND CERTIFICATE

OF INCORPORATION TO AUTHORIZE PREFERRED STOCK

A.-1. WHY SHOULD I/WE VOTE IN FAVOR OF THE PROPOSAL TO AUTHORIZE PREFERRED STOCK?

• ANSWER: THE AUTHORIZATION OF THE PREFERRED STOCK WOULD PERMIT THE BANK TO RAISE CAPITAL THROUGH THE ISSUANCE OF PERFERRED STOCK RATHER THAN COMMON STOCK. THIS WOULD PROVIDE THE BANK WITH MAXIMUM FLEXIBILITY IN STRUCTURING ACQUISITIONS, CAPITAL-RAISING TRANSACTIONS, AND STOCK DISTRIBUTIONS.
• ALSO THE ISSUANCE OF NON-CONVERTIBLE PREFERRED STOCK WOULD ALLOW THE BANK TO RAISE CAPITAL WITHOUT DILUTING THE COMMON STOCK HOLDERS.
• NON-CONVERTIBLEPREFERRED STOCK HAS BECOME A VIABLE AND POPULAR CAPITAL RAISING TOOL FOR BANKS, INCLUDING (1) THE AUGUST 2020 $60 MILLION OFFERING OF DEPOSITARY SHARES BY CNB FINANCIAL CORPORATION (CLEARFIELD, PA), EACH REPRESENTING A 1/40TH OWNERSHIP INTEREST IN A SHARE OF SERIES A PREFERRED STOCK; (2) THE DECEMBER 2019 BANCORPSOUTH BANK (NYSE:BXS) $150 MILLION PREFERRED STOCK OFFERING OF 5.50% SERIES A NON-
  CUMULATIVE PERPETUAL PREFERRED STOCK; (3) THE SEPTEMBER 2020

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MAINSTREET BANCSHARES, INC. (NASDAQ: MNSB) $25 MILLION OFFERING OF DEPOSITARY SHARES, EACH REPRESENTING A 1/40TH INTEREST IN A SHARE OF ITS SERIES A FIXED-RATENON-CUMULATIVE PERPETUAL PREFERRED STOCK; AND (4) THE TRIUMPH BANCORP, INC. (NASDAQ: TBK) JUNE 2020 $45 MILLION OFFERING OF DEPOSITARY SHARES, EACH OF WHICH REPRESENTED A 1/40TH INTEREST IN A SHARE OF ITS SERIES C FIXED-RATENON-CUMULATIVE PERPETUAL PREFERRED STOCK, AMONG MANY OTHERS.

A.-2. WHY ARE PROXY ADVISORS RECOMMENDING THAT I/WE VOTE AGAINST THE PROPOSAL TO AUTHORIZE PREFERRED STOCK?

• ANSWER: CERTAIN PROXY ADVISORS RECOMMEND A VOTE AGAINST THIS PROPOSAL BECAUSE THE BOARD HAS NOT SPECIFICALLY STATED THAT THE SHARES MAY NOT BE USED FOR ANTITAKEOVER PURPOSES IN THE FUTURE.

• THE BANK HAS NOPLANS TO USE PREFERRED STOCK FOR ANTI- TAKEOVER PURPOSES. THE PRIMARY REASON THAT THE BANK DESIRES TO HAVE PREFERRED STOCK AUTHORIZED IS SO THAT THE BANK CAN RESPOND PROMPTLY TO AND TAKE ADVANTAGE OF MARKET CONDITIONS AND OTHER FAVORABLE OPPORTUNITIES TO GROW THE BANK THROUGH ACQUISITIONS AND CAPITAL-RAISING TRANSACTIONS.
• INVESTMENT BANKING FIRMS ARE RECOMMENDING TO BANKS THAT THEY TAKE ANY NECESSARY STEPS TO AUTHORIZE PREFERRED STOCK TO POSSIBLY ASSIST WITH FINANCING POTENTIAL ACQUISITIONS THAT MAY ARISE.
• IF THIS PROPOSAL IS NOT APPROVED, THE BANK MAY HAVE A DISTINCT DISADVANTAGE AGAINST COMPETITORS IN THE CURRENT ENVIRONMENT AND MAY BE LIMITED IN ITS ABILITY TO RAISE AND ATTRACT CAPITAL TO SUSTAIN THE GROWTH OF THE BANK IN THE FUTURE.

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• IF THE BANK IS REQUIRED TO RAISE ADDITIONAL CAPITAL FOR REGULATORY OR OTHER REASONS, THE BANK MAY BE LIMITED TO OFFERING SHARES OF COMMON STOCK, WHICH MAY, BASED UPON MARKET CONDITIONS AT THE TIME, BE OFFERED AT DISCOUNTS TO THEN CURRENT TRADING PRICES.

Q&A FOR PROXY SOLICITATION REGARDING DIRECTOR ELECTION PROPOSAL

A.-3. WHY HAS A CERTAIN PROXY ADVISOR RECOMMENDED THAT I/WE WITHHOLD MY/OUR VOTE FOR DIRECTORS GILLESPIE, WISHNICK AND RIDOLFI?

• ANSWER: BECAUSE DIRECTORS GILLESPIE, WISHNICK AND RIDOLFI ARE THE MEMBERS OF THE BANK'S NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, AND THE PROXY ADVISOR INCORRECTLYBELIEVES THAT BANK BOARD HAS FAILED TO REMOVE, OR SUBJECT TO A SUNSET REQUIREMENT, THE SUPERMAJORITY (2/3) VOTE REQUIREMENT TO ENACT CERTAIN CHANGES TO THE BANK'S CHARTER.
• THE SUPERMAJORITY (2/3) VOTE REQUIREMENT TO AMEND THE BANK'S CHARTER IS A REQUIREMENT SET FORTH IN SECTION 17:9a - 117 OF THE NEW JERSEY BANKING ACT OF 1948, WHICH READS:

"17:9A-117. Procedure for amending certificate of incorporation. Whenever the board of directors shall deem it advisable to amend the certificate of incorporation, it shall adopt a resolution setting forth the proposed amendment and fixing a date for a meeting of stockholders to take action thereon, upon notice given pursuant to section 81. If, at such meeting or at any adjournment thereof, the holders of at least two-thirdsof the capital stock entitled to vote shall vote in favor of the proposed amendment or any modification thereof,a certificate thereof, setting forth the amendment in full and certifying that the amendment was made for a purpose authorized by law in the manner required by this article, … shall be submitted to the commissioner for approval…[emphasis added]."

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• THE BANK'S BOARD CANNOT UNDER ANY CIRCUMSTANCE REMOVE, MODIFY OR SUBJECT TO A SUNSET REQUIREMENT, THE SUPERMAJORITY (2/3) VOTE REQUIREMENT. IT IS THE VOTE REQUIRED BY NEW JERSEY LAW UNDER EVERY CIRCUMSTANCE WITHOUT EXCEPTION FOR NEW JERSEY STATE-CHARTERED BANKS.
• BECAUSE THE SUPERMAJORITY VOTING REQUIREMENT PROVISIONS CANNOT LEGALLY BE REMOVED OR MADE SUBJECT TO A SUNSET REQUIREMENT, THE BANK BELIEVES THAT WITHHOLD VOTES SOLELY BASED ON THAT PROXY ADVISOR'S RECOMMENDATION ARE NOTWARRANTED FOR THE INCUMBENT MEMBERS OF THE GOVERNANCE COMMITTEE.

A.-4. ARE THERE ANY PROVISIONS IN THE BANK'S CHARTER OR BYLAWS REQUIRING A VOTE OF TWO-THIRDS OF OUTSTANDING SHARES TO ADOPT, AMEND OR REPEAL THE BANK'S BYLAWS?

• NO. UNDER SECTION 17:9A - 78 OF THE NEW JERSEY BANKING ACT OF 1948 AND THE BANK'S BYLAWS, BY-LAWS SHALL NOT BE MADE, ALTERED OR REPEALED BY THE STOCKHOLDERS EXCEPT AT AN ANNUAL OR SPECIAL MEETING OF THE STOCKHOLDERS BY THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE CAPITAL STOCK OF THE BANK ENTITLED TO VOTE AT SUCH MEETING.

A.-5. HOW SHOULD WE/I VOTE WITH RESPECT TO DIRECTORS GILLESPIE, WISHNICK AND RIDOLFI?

• FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FORTHE ELECTION OF EACH OF DIRECTORS GILLESPIE, WISHNICK AND RIDOLFI.

Forward-Looking Statements

The Bank of Princeton may from time to time make written or oral "forward-looking statements," including statements contained in the Bank's filings with the FDIC, in its reports to stockholders and in other communications by the Bank (including these additional proxy materials), which are made in good faith by the Bank pursuant to the "safe harbor" provisions of

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