Business Overview and History Parke Bancorp, Inc. (PKBK) is a bank holding company headquartered in Washington Township, New Jersey, that provides a range of personal and business financial services through its wholly-owned subsidiary, Parke Bank. With a focus on serving small to mid-sized businesses and individuals in southern New Jersey, southeastern Pennsylvania, and the New York metropolitan area, Parke Bancorp has established itself as a steadfast community bank over the past two decades.
Parke Bancorp was incorporated in January 2005 with the primary purpose of becoming the holding company for Parke Bank, which was established in 1998 and commenced operations in January 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).
The company's banking operations are concentrated in southern New Jersey and the greater Philadelphia area, with seven branch offices located in Sewell (principal office), Galloway Township, Northfield, Washington Township, Collingswood (New Jersey), and Philadelphia (Pennsylvania). In 2020, Parke Bancorp expanded its lending footprint by adding lending capabilities in South Carolina.
In 2013, the company completed a significant private placement of newly designated 6% Non-Cumulative Perpetual Convertible Preferred Stock, Series B, with a liquidation preference of $1,000 per share. This placement resulted in the sale of 20,000 shares for gross proceeds of $20 million, strengthening the company's capital position.
Parke Bancorp's lending activities are focused on three main areas: residential real estate mortgages, commercial real estate mortgages, and construction loans. Additionally, the bank offers a variety of commercial and industrial loans, as well as consumer loan products.
In recent years, Parke Bancorp has also begun providing banking services to customers in the cannabis industry, which is legal in certain states where the company operates, although it remains illegal at the federal level. As of December 31, 2024, deposits from cannabis-related businesses accounted for approximately 9.3% of the company's total deposits, with two customers comprising 59.4% of this total.
Financial Performance and Ratios For the fiscal year ended December 31, 2024, Parke Bancorp reported net income available to common shareholders of $27.5 million, or $2.27 per diluted common share. This represents a 3.3% decrease compared to the previous year's net income of $28.4 million, or $2.35 per diluted common share. The company's total revenue for 2024 was $63.01 million.
The company's total assets stood at $2.14 billion as of December 31, 2024, an increase of 5.9% from the prior year's $2.02 billion. Total loans, net of unearned income, grew by 4.5% to $1.87 billion, while total deposits increased by 5.0% to $1.63 billion during the same period.
Parke Bancorp's key financial ratios as of December 31, 2024, include: - Return on Assets (ROA): 1.37% - Return on Equity (ROE): 9.74% - Net Interest Margin: 3.00% - Efficiency Ratio: 41.24% - Tier 1 Leverage Ratio: 15.00% - Common Equity Tier 1 Capital Ratio: 20.26% - Total Risk-Based Capital Ratio: 24.44%
These ratios demonstrate Parke Bancorp's strong financial position, with the company well-capitalized and maintaining healthy profitability and efficiency levels compared to industry peers.
For the most recent quarter (Q3 2024), Parke Bancorp reported revenue of $33.00 million and net income of $7.50 million. This represents a 5.2% increase in revenue and a 16.3% increase in net income compared to the previous quarter (Q2 2024).
Liquidity Parke Bancorp maintains a strong liquidity position, as evidenced by its financial ratios and available credit lines. As of December 31, 2024, the company reported cash and cash equivalents of $221.53 million. The debt-to-equity ratio stood at 0.635, indicating a manageable level of leverage.
The company has access to significant credit facilities to support its operations and potential growth. Parke Bancorp has a $740.50 million line of credit from the Federal Home Loan Bank of New York (FHLBNY), with $145.00 million outstanding, $50.00 million in letters of credit, and $545.50 million unused. Additionally, the company has a $252.00 million line of credit from the Federal Reserve Bank (FRB) with no outstanding balance.
The current ratio and quick ratio both stand at 0.978, reflecting the company's ability to meet its short-term obligations.
Challenges and Navigating Adversity Parke Bancorp has faced several challenges over the years, which the company has navigated through with resilience and strategic decision-making.
In the fourth quarter of 2020, the bank entered into consent orders with the FDIC and the New Jersey Department of Banking and Insurance related to weaknesses in its Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance program. The company has since taken numerous actions to strengthen its BSA/AML practices, policies, and controls, and it continues to work towards full compliance with the consent orders.
Additionally, the COVID-19 pandemic presented significant operational and economic challenges for Parke Bancorp, as it did for many financial institutions. The company responded by implementing remote work arrangements, enhancing its digital banking capabilities, and providing payment relief and other support to its customers impacted by the pandemic. Despite these challenges, Parke Bancorp was able to maintain its financial stability and continue serving its communities throughout the crisis.
Navigating the Evolving Regulatory Landscape The banking industry, including Parke Bancorp, is subject to a complex and ever-changing regulatory environment. In recent years, the company has had to adapt to various regulatory changes, such as the implementation of the Current Expected Credit Losses (CECL) accounting standard and the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).
The adoption of the CECL standard in 2023 required Parke Bancorp to modify its approach to estimating loan loss reserves, which has had a significant impact on the company's financial reporting and risk management practices. The EGRRCPA, on the other hand, provided some regulatory relief for community banks, such as the introduction of the Community Bank Leverage Ratio (CBLR) framework, which Parke Bancorp has elected to utilize.
Parke Bancorp's management team has demonstrated its ability to navigate these regulatory changes, ensuring the company's compliance while also maintaining its focus on serving the needs of its customers and communities.
Lending Activities Parke Bancorp's lending operations are focused on four main areas: residential mortgage loans, commercial mortgage loans, commercial and industrial loans, and construction loans. As of December 31, 2024, the company's total loan portfolio was $1.87 billion, representing a 4.5% increase from the prior year.
Residential Mortgage Loans: The bank originates adjustable and fixed-rate residential mortgage loans, which are typically originated under terms, conditions, and documentation acceptable to the secondary mortgage market. While the bank has placed the majority of these loans into its own portfolio, a substantial portion can be sold in the secondary market or pledged for potential borrowings.
Commercial Mortgage Loans: The bank originates mortgage loans secured by commercial real estate, such as office buildings, retail buildings, warehouses, and general purpose business space. These loans generally have maturities of 20 years but re-price within 5 years. As of December 31, 2024, commercial real estate loans totaled $531.7 million, representing 28.5% of the total loan portfolio.
Commercial and Industrial Loans: The bank originates secured loans for business purposes, including lines of credit secured by accounts receivable, inventory, equipment, or other assets. As of December 31, 2024, commercial and industrial loans totaled $35.4 million, or 1.9% of the total loan portfolio.
Construction Loans: The bank originates construction loans to individuals and real estate developers in its market area, providing interim financing on properties during the development and construction phase. As of December 31, 2024, construction loans totaled $149.4 million, or 8.0% of the total loan portfolio.
Deposits and Funding Parke Bancorp's primary source of funding is deposits, which totaled $1.63 billion as of December 31, 2024, an increase of 5.0% from the prior year. The deposit base consists of non-interest-bearing demand deposits, NOW accounts, money market deposits, savings deposits, and time deposits. To supplement deposit funding, the bank also utilizes borrowings from the Federal Home Loan Bank of New York and the Federal Reserve Bank.
Outlook and Future Prospects As Parke Bancorp looks to the future, the company remains committed to its strategy of organic growth and expansion within its existing markets. The bank's experienced management team and robust risk management practices position it well to capitalize on opportunities in the regional economy, while also managing the various risks and challenges inherent to the banking industry.
Moreover, the company's diversified loan portfolio, which includes a growing presence in the cannabis industry, provides Parke Bancorp with avenues for revenue growth, albeit with the added complexity of navigating the uncertain legal and regulatory landscape surrounding cannabis banking.
Overall, Parke Bancorp's history of weathering adversity, its strong financial performance, and its strategic focus on serving the needs of its community suggest that the company is well-equipped to continue its trajectory as a steadfast and reliable community bank in the years to come. The company's solid liquidity position, as evidenced by its $221.53 million in cash and cash equivalents and substantial available credit lines, further reinforces its ability to navigate future challenges and capitalize on growth opportunities.