Business Overview and History
Parke Bancorp, Inc. (NASDAQ:PKBK) is a bank holding company headquartered in Sewell, New Jersey, providing a range of commercial and retail banking services to individuals, corporations, and other businesses primarily in the southern New Jersey and Philadelphia, Pennsylvania regions. With a focus on small to mid-sized businesses and retail customers, Parke Bancorp has steadily grown its presence and established itself as a resilient community bank navigating the evolving financial landscape.
Parke Bancorp was incorporated in January 2005 under the laws of the State of New Jersey with the sole purpose of becoming the holding company for Parke Bank, which was established in 1998 and commenced operations on January 28, 1999. The bank is chartered by the New Jersey Department of Banking and Insurance and its deposits are insured by the Federal Deposit Insurance Corporation (FDIC).
Over the past two decades, Parke Bancorp has expanded its footprint, currently maintaining its principal office at 601 Delsea Drive in Sewell, New Jersey, along with six additional branch locations and a loan office in Philadelphia, Pennsylvania. The company provides a range of commercial and retail banking services, with a primary focus on residential mortgage loans, commercial mortgage loans, and construction loans.
Parke Bancorp has faced some challenges in its history. In 2014, the company dealt with a legal dispute involving the Fee Owner Consent between Mori Restaurant and the bank, which terminated a lease and led to litigation regarding allegedly owed rent. The bank believed the suit was without merit and vigorously defended against it. Additionally, Parke Bancorp provides banking services to customers licensed in the cannabis industry, maintaining stringent policies and procedures while acknowledging the potential risk of changes in federal enforcement guidelines.
Despite these challenges, Parke Bancorp has demonstrated significant growth. As of December 31, 2023, the company reported total assets of $2.02 billion and total equity of $284.32 million, showcasing its ability to navigate complex financial landscapes and expand its operations.
Financial Performance and Ratios
As of September 30, 2024, Parke Bancorp reported total assets of $2.07 billion, reflecting a 2.10% increase from the $2.02 billion reported at the end of 2023. The company's loan portfolio stands at $1.84 billion, up 2.90% from the $1.79 billion recorded at the close of 2023. This growth was primarily driven by increases in the construction, commercial real estate - owner occupied, and residential multifamily loan segments.
Parke Bancorp's deposit base increased 0.40% to $1.56 billion as of September 30, 2024, compared to $1.55 billion at the end of 2023. The increase was largely attributable to a rise in brokered time deposits and time deposits, partially offset by decreases in non-interest-bearing deposits and savings deposits.
The company's net income available to common shareholders for the nine months ended September 30, 2024, was $20.10 million, slightly lower than the $20.27 million reported for the same period in 2023. Earnings per share stood at $1.68 basic and $1.66 diluted for the nine-month period, compared to $1.70 basic and $1.67 diluted in the prior-year period.
For the most recent fiscal year 2023, Parke Bancorp reported revenue of $70.91 million and net income of $28.46 million. The company's operating cash flow and free cash flow for 2023 both stood at $23.02 million. In the most recent quarter (Q3 2024), the company reported revenue of $32.84 million, net income of $7.51 million, operating cash flow of $9.42 million, and free cash flow of $9.47 million. Year-over-year revenue growth for Q3 2024 was -1.08%.
Parke Bancorp maintains a strong capital position, with a tier 1 leverage ratio of 15.46% for the company and 16.91% for the bank as of September 30, 2024, well above the regulatory requirements for a "well-capitalized" institution.
Liquidity and Funding
Parke Bancorp's primary source of funding has been deposits, which accounted for approximately 88% of total liabilities as of September 30, 2024. The bank also utilizes brokered deposits and secured borrowing lines with the Federal Home Loan Bank of New York (FHLBNY) and the Federal Reserve Bank (FRB) to maintain a diversified funding mix and ample liquidity.
As of September 30, 2024, the company had $172.45 million in cash and cash equivalents, down from $180.38 million at the end of 2023. Parke Bancorp's outstanding loan commitments totaled $121.50 million as of the same date, with the majority expected to be funded through normal deposit growth.
The company's liquidity position is further supported by its available credit lines. Parke Bancorp has lines of credit with the FHLBNY totaling $930.50 million, of which $145 million was outstanding as of September 30, 2024, leaving a remaining borrowing capacity of $735.50 million. Additionally, the company has a borrowing capacity of $76.30 million through the FRB discount window, with no balances outstanding.
Parke Bancorp's debt-to-equity ratio stands at 0.64, indicating a relatively conservative leverage position. The company's current ratio and quick ratio are both 0.98, suggesting adequate short-term liquidity to meet its obligations.
Regulatory Environment and Risk Management
Parke Bancorp operates in a highly regulated industry, subject to oversight by federal and state banking authorities. The company has established comprehensive risk management practices to monitor and mitigate various risks, including credit, interest rate, liquidity, and operational risks.
The bank's allowance for credit losses, which totaled $32.32 million as of September 30, 2024, is maintained at a level that management believes is appropriate to absorb estimated credit losses in the loan portfolio. Parke Bancorp's non-performing loans stood at $12.19 million, or 0.66% of total loans, as of the same date.
Outlook and Challenges
Parke Bancorp continues to navigate the evolving financial landscape, facing challenges such as the ongoing COVID-19 pandemic, rising interest rates, and heightened competition in its regional markets. The company has demonstrated resilience, leveraging its strong capital position, diverse funding sources, and disciplined risk management practices to support its growth and maintain profitability.
Looking ahead, Parke Bancorp remains focused on organic growth, deepening customer relationships, and prudent expansion of its lending and deposit-gathering activities. The company's ability to adapt to changing market conditions and regulatory requirements will be key to its continued success in the years to come.
While primarily operating in the southern New Jersey and Philadelphia, Pennsylvania regions, Parke Bancorp has also expanded its lending activities to other areas, including New York and South Carolina. This geographic diversification may provide additional growth opportunities and help mitigate regional economic risks.
The company continues to navigate the evolving regulatory landscape surrounding cannabis banking, which has been a source of both opportunities and challenges. In the first nine months of 2024, Parke Bancorp experienced a decline in non-interest income, particularly in service fees on deposit accounts related to its cannabis banking activities. This highlights the potential volatility associated with this segment of its business.
As Parke Bancorp moves forward, it will likely focus on further diversifying its loan portfolio, managing its funding costs, and exploring new avenues for generating non-interest income to support its profitability. The company's ability to maintain its strong capital position and navigate the changing interest rate environment will be crucial in sustaining its performance and growth trajectory.
Conclusion
Parke Bancorp has established itself as a well-capitalized and resilient community bank, weathering various economic and industry challenges over its two-decade history. With a focus on serving the financial needs of small to mid-sized businesses and retail customers in its regional markets, the company continues to demonstrate its ability to navigate the evolving financial landscape and deliver value to its shareholders. Its strong liquidity position, prudent risk management practices, and focus on organic growth position Parke Bancorp well for future opportunities in the competitive banking sector.