Item 1A. Risk Factors.
Not applicable
Item 1B. Unresolved Staff Comments.
None.
Item 1C.Cybersecurity
The Risk Management Committee of the Board of Directors (the “Committee”) is responsible for overseeing the risks from cybersecurity threats. The Committee receives reports from, and oversees, IT Risk Assessment, Cybersecurity Risk Assessment, Annual IT Program Status Report, Vendor Management Risk Assessment, and Quarterly Internal Vulnerability Reports and current Cyber Events briefings. The Committee also makes budgeting, procedure, and policy decisions designed and intended to improve the Company’s residual risk.
The IT Steering Committee consists of the Company’s senior management, the entire IT team, and various operations personnel. The primary function of the IT Steering Committee is to perform Strategic Planning, discuss hardware and software replacement, new projects, current cybersecurity threats, and ongoing cybersecurity issues and threats.The IT manager provides an IT status report to the Risk Management committee on a quarterly basis.
Our IT department performs annual risk assessments to evaluate the effectiveness of the controls to support the requirements under Gramm-Leach Bliley Act ("GLBA"), and Federal Institutions Examination Council ("FFIEC") Guidance on Securing Customer Information. The focus areas include:
•technology systems used for information that is collected, processed, and stored;
•assessing internal and external cybersecurity threats and vulnerabilities;
•performing regular penetration and controls testing;
•evaluation and assessment of impact should the information or systems become compromised;
•evaluation for the effectiveness of the governance structure for Information security risk management.
Internal and external Penetration Testing is performed annually. Tests are conducted or reviewed by independent third parties or qualified Associates independent of those that develop or maintain the security program. Testing is performed annually by third party auditors contracted through the company's IT department. Management reviews test results promptly and ensures that appropriate steps are taken to address adverse test results. Remediation efforts are organized and made available to the Committee as well as for review by third party auditors and examiners.
The Company has adopted an Incident Response Plan (the “Plan”) to monitor, detect, mitigate and remediate cybersecurity incidents. The Plan requires all employees to have a working knowledge of the Company’s Information Security Program and Incident Response Policies. Pursuant to the Plan, the Information Technology Administrator and Senior\Compliance Management identify information owners for sensitive customer information and create an incident response team. Each Department Manager, upon notification of a potential unauthorized access, manipulation of data or theft of any item identified under GLBA Inventory and Asset Classification, is responsible for further assessing the situation in order to document the suspected or actual breech, and forward the appropriate documentation to the Information Technology Administrator. The documentation of the suspected or actual incident includes the following:
a.Identify the nature and scope of the incident.
b.Identify the information systems affected.
c.Identify the types of customer information potentially affected.
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Once the Department Manager has determined that unauthorized access, manipulation of data or theft of any item identified under GLBA Inventory and Asset Classification has occurred, Senior Management, the Compliance Officer and the Information Technology Administrator must be contacted immediately.
If theft of any item identified under GLBA Inventory and Asset Classification has occurred, and it cannot be determined what specific information was included on the Asset, the Asset is treated as if it contained sensitive customer information and Senior Management, the Compliance Officer and the Information Technology Administrator must be contacted immediately. If the Information Technology Administrator and Senior\Compliance Management declare an incident or if there is a confirmed theft or loss of customer information, appropriate regulatory authorities, law enforcement, and legal counsel are notified.
During the fiscal year ended December 31, 2024, the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, its business strategy, results of operations, or financial condition.
Item 2. Properties.
(a)Properties
Office Location Year Facility Opened Lease or Owned
Parke Main Office 1999 Owned
601 Delsea Drive
Northfield Branch 2002 Leased
Kennedy Branch 2003 Owned
567 Egg Harbor Road
Spruce Street Branch 2006 Leased
Galloway Township Branch 2010 Owned
67 E. Jimmy Leeds Road
Galloway Township, NJ 08205
Collingswood Branch 2016 Owned
Arch Street Branch 2016 Leased
Philadelphia Lending Office 2023 Leased
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Item 3. Legal Proceedings.
Information regarding legal proceedings is included in Note 14, Commitments and Contingencies, to the Consolidated Financial Statements under Part II, Item 8, "Financial Statement and Supplementary Data.
Item 4. Mine Safety Disclosures.
Not Applicable.
Part II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company's common stock is listed on the Nasdaq Capital Market under the trading symbol of "PKBK". The number of shareholders of record of common stock as of December 31, 2024, was approximately 223. This does not reflect the number of persons or entities who held stock in nominee or "street" name through various brokerage firms. As of March 11, 2024, there were 11,842,596shares of our common stock issued and outstanding.
The Company paid a $0.18 per share quarterly common stock cash dividend during each quarter of 2024. During 2024, the Company paid a total of $8.6 million in common stock cash dividends.
The Company also has 325 shares of 6% non-Cumulative Series B Preferred Stock outstanding at December 31, 2024. The preferred stock has a liquidation preference of $1,000 per share. Each share of Series B Preferred Stock is convertible, at the option of the holder into approximately 137.6 shares of Common Stock at December 31, 2024. Upon full conversion of the outstanding shares of the Series B Preferred Stock, the Company will issue approximately 44,720 shares of Common Stock assuming that the conversion rate does not change. The conversion rate and the total number of shares to be issued would be adjusted for future stock dividends, stock splits and other corporate actions.
The Company has recorded dividends on preferred stock in the approximate amount of $20,250 and $26,000 for the years ended December 31, 2024 and 2023, respectively. The Company paid quarterly cash dividends of $15 per share on the preferred stock for the years 2024 and 2023. During 2024, preferred stockholders converted 50 shares of preferred shares into 6,877 shares of common stock. The preferred stock qualifies, and is accounted, as equity securities and is included in the Company’s Tier I capital since issued.
The timing and amount of future dividends will be within the discretion of the Board of Directors and will depend on the consolidated earnings, financial condition, liquidity, and capital requirements of the Company and its subsidiaries, applicable governmental regulations and restrictions, and Board policies, and other factors deemed relevant by the Board.
The Company's ability to pay dividends is substantially dependent upon the dividends it receives from the Bank and is subject to other restrictions. Under current regulations, the Bank's ability to pay dividends is restricted as well.
Under the New Jersey Banking Act of 1948, a bank may declare and pay dividends only if after payment of the dividend the capital stock of the bank will be unimpaired and either the bank will have a surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce the bank's surplus.
Pursuant to the terms of the Series B Preferred Stock, the Company may not pay a cash dividend on the common stock unless all dividends on the Series B Preferred Stock for the then-current dividend period have been paid or set aside.
The Federal Deposit Insurance Act generally prohibits all payments of dividends by any insured bank that is in default of any assessment to the FDIC. Additionally, because the FDIC may prohibit a bank from engaging in unsafe or unsound practices, it is possible that under certain circumstances the FDIC could claim that a dividend payment constitutes an unsafe or unsound practice. The New Jersey Department of Banking and Insurance has similar power to issue cease and desist orders to prohibit
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what might constitute unsafe or unsound practices. The payment of dividends may also be affected by other factors (e.g., the need to maintain adequate capital or to meet loan loss reserve requirements).
Repurchases of the Company's Common Stock during the twelve months ended December 31, 2024 totaled 200,000 shares at an average price of $21.28. Set forth below is information regarding the Company's stock repurchases during the fiscal year ended December 31, 2024.
Issuer Purchases of Equity Securities
Shareholders wishing to change the name, address or ownership of the Company’s stock, report lost certificates or consolidate accounts are asked to contact the Company’s Transfer Agent and Registrar directly: Computershare Investor Services ("Computershare"), P.O. Box 43078, Providence, Rhode Island 02940-3078. Shareholders may also contact Computershare at 1-800-942-5909 and www.computershare.com.
Item 6. [Reserved]
Not applicable
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a bank holding company and are headquartered in Washington Township, New Jersey. Through the Bank, we provide personal and business financial services to individuals and small to mid-sized businesses primarily in New Jersey, Pennsylvania, and New York. The Bank has branches in Galloway Township, Northfield, Washington Township, and Collingswood, New Jersey and Philadelphia, Pennsylvania. The vast majority of our revenue and income is currently generated through the Bank.
We manage our Company for the long term. We are focused on the fundamentals of growing customers, loans, deposits and revenue and improving profitability, while investing for the future and managing risk, expenses and capital. We continue to invest in our products, markets and brand, and embrace our commitments to our customers, shareholders, employees and the communities where we do business. Our approach is concentrated on organically growing and deepening client relationships across our businesses that meet our risk/return measures.
We focus on small to mid - sized business and retail customers and offer a range of loan products, deposit services, and other financial products through our retail branches and other channels. The Company's results of operations are dependent primarily on its net interest income, which is the difference between the interest income earned on its interest earning-assets and the interest expense paid on its interest-bearing liabilities. In our operations, we have three major lines of lending: residential real estate mortgage, commercial real estate mortgage, and construction lending. Our interest income is primarily generated from our lending and investment activities. Our deposit products include checking, savings, money market accounts, and certificates
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of deposit. The majority of our deposit accounts are obtained through our retail banking business, which provides us with low cost funding to grow our lending efforts. The Company also generates income from loan and deposit fees and other non-interest related activities. The Company's non-interest expense primarily consists of employee compensation, administration, and other operating expenses.
As of December 31, 2024, we had total assets of $2.14 billion, total liabilities of $1.84 billion, and total shareholders' equity of $300.1 million. Net income available to common shareholders for 2024 was $27.5 million. In 2024, net income available to common shareholders decreased 3.3% over the previous year primarily due to a decrease in net interest income, an increase in the provision for credit losses, and a decrease in non-interest income, partially offset by a decrease in non-interest expense. At December 31, 2024, total assets increased 5.9% and total equity increased 5.5%, compared to December 31, 2023. Our risk based tier 1 capital ratio was 21.2% at December 31, 2024. In addition, during the fiscal year ended December 31, 2024 we returned $8.6 million of capital to our common shareholders through cash dividends, and we repurchased 200,000 common stock shares at a total cost of $4.3 million.
Our business operations are subject to risks and uncertainties that could materially affect our operating results. The extent of such impact will depend on future developments, which are highly uncertain. There continues to be various other risks and uncertainties that could impact the Company’s businesses and future results, such as changes to the U.S. economic condition, market interest rates, the Federal Reserve Board's monetary policy, other government policies, and actions of regulatory agencies.
Results of Operations
Net Income
We recorded net income available to common shareholders of $27.5 million or $2.30 per basic common share and $2.27 per diluted common share, for the year ended December 31, 2024, compared to $28.4 million, or $2.38 per basic common share and $2.35 per diluted common share, for the year ended December 31, 2023, a decrease of $0.9 million or 3.3%.
Net Interest Income
Net interest income decreased $5.5 million, or 8.6%, to $58.7 million for the year ended 2024 compared to $64.2 million for the year ended 2023. The decrease in net interest income was primarily due to an increase in interest expense of $17.9 million, partially offset by an increase in interest income of $12.4 million. Interest income for 2024 increased to $125.1 million, an increase of $12.4 million, or 11.0%, from $112.7 million for 2023, primarily due to an increase in interest and fees on loans of $11.8 million, or 11.1%. Interest and fees on loans increased during the year ended December 31, 2024, due to higher average outstanding loan balances and higher market interest rates. Interest expense increased to $66.4 million for 2024, from $48.5 million for 2023, an increase of $17.9 million, or 36.9%. The increase in interest expense was primarily due to an increase in market interest rates on deposit accounts at the Bank, as well as a change in the deposit mix. In addition, a decrease in non-interest bearing demand balances and an increase in interest-bearing deposit balances contributed to the increase in interest expense during the 2024 fiscal year..
Comparative Average Balances, Yields and Rates
The following table presents the average daily balances of assets, liabilities and equity and the respective interest earned or paid on interest-earning assets and interest-bearing liabilities, as well as average annualized rates, for the years ended December 31, 2024 and 2023. Interest rate spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is net interest income divided by average earning assets. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances and have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.
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For the Years Ended December 31,
(Dollars in thousands)
Assets
Liabilities and Equity
Interest bearing deposits
Interest rate spread 1.94 % 2.42 %
Net interest margin 3.00 % 3.34 %
(1) Interest income includes $3.6 million and $3.8 million of net fee income for the years ended 2024 and 2023, respectively.
(2) Average balances are net of unearned income and include nonperforming loans.
Net interest income and the net interest margin in any one period can be significantly affected by a variety of factors including the mix and overall size of our earning assets portfolio and the cost of funding those assets. We expect net interest income and our net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.
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Rate/Volume Analysis
For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by the previous rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.
Years ended December 31,
Variance due to change in
AverageVolume AverageRate NetIncrease/(Decrease)
(Dollars in thousands)
Interest Income:
Investment securities (62) 56 (6)
Interest Expense:
Provision for credit losses
Our provision for credit losses in each period is driven by net charge-offs and changes to the allowance for credit losses. We recorded a provision for credit losses of $0.7 million and a recovery for credit losses of $2.1 million in 2024 and 2023, respectively. The provision (recovery) for credit losses as a percentage of interest income was 0.58% and 1.82% in 2024 and 2023, respectively.
Our provision for credit losses increased by $2.8 million in 2024 compared to 2023 primarily as a result of an increase in outstanding loan balances, partially offset by a decrease in loss rates. Additionally, the provision for unfunded commitments contributed to $369.0 thousand of the increase. For more information about our provision and allowance for credit losses and our loss experience, see “Risk Management and Asset Quality-Allowance for Credit Losses” and NOTE 4. Loans and Allowance for Credit Losses in the Notes to the Consolidated Financial Statements.
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Non-interest Income
The table below shows the components of non-interest income for the years ended December 31, 2024 and 2023.
(Dollars in thousands)
Gain on sale of SBA loans 23 — 23 100.0 %
Gain on sale and valuation adjustments of OREO — 38 (38) (100.0) %
Non-interest income decreased by $2.4 million to $4.3 million during the year ended December 31, 2024 compared to 2023, primarily due to a decrease in fee income related to cannabis related business deposit fees and other loan fees.
The fee income for the year ended December 31, 2024 from the commercial deposit accounts of depositors who do business in the cannabis industry totaled $1.1 million and is included in service fees on deposit accounts in the accompanying consolidated statements of income. Such deposit fee income totaled $3.4 million during the year ended December 31, 2023. Please refer to Note 15. Commitments and Contingencies in the Notes to the Consolidated Financial Statements for our banking services to customers who do business in the cannabis industry.
Non-Interest Expense
The following table displays the components of non-interest expense for 2024 and 2023.
(Dollars in thousands)
Non-interest expense decreased $9.3 million to $26.0 million for the year ended December 31, 2024, from $35.3 million for 2023 primarily due to a decrease in other operating expense of $10.1 million, partially offset by an increase in compensation and benefits of $0.4 million, and an increase in professional services of $0.4 million. The decrease in other operating expense was primarily driven from the recognition of a one-time contingent loss during 2023 of $9.5 million. The increase in compensation and benefits during the year ended December 31, 2024, was primarily due to a $0.4 million increase in salaries, and a $0.2 million decrease in deferred loan origination costs attributable to a reduction in the number of loans originated, partially offset by a $0.2 million decrease in SERP expense. The increase in professional fees of $0.4 million was primarily due to a $0.7 million increase in consulting fees attributed to our Bank Secrecy Act compliance, partially offset by a decrease of $0.3 million decrease in legal expense.
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Income Tax
Income tax expense decreased $0.4 million to $8.8 million on income before taxes of $36.3 million for 2024, compared to income tax expense of $9.2 million on income before taxes of $37.7 million for 2023. The effective income tax rates for 2024 and 2023 were 24.2% and 24.5%, respectively.
Financial Condition
General
At December 31, 2024, the Company’s total assets were $2.14 billion, an increase of $118.7 million or 5.9%, from December 31, 2023. The increase in total assets was primarily attributable to an increase in cash and cash equivalents and total loans outstanding. Cash and cash equivalents increased $41.2 million, to $221.5 million at December 31, 2024. Total loans outstanding increased $80.8 million at December 31, 2024, primarily due to an increase in residential multi-family loans of $71.4 million, and commercial owner-occupied loans of $18.7 million, partially offset by a decrease in construction loans of $8.2 million.
Total liabilities were $1.84 billion at December 31, 2024. This represented a $103.0 million, or 5.9%, increase from $1.74 billion at December 31, 2023. The increase in total liabilities was primarily due to an increase in deposits. Total deposits increased $78.2 million, or 5.0%, to $1.63 billion at December 31, 2024, from $1.55 billion at December 31, 2023. Deposits from the cannabis industries increased to $151.9 million at December 31, 2024, from $96.7 million at December 31, 2023. Total borrowings were $188.3 million at December 31, 2024, an increase of $20.2 million, compared to December 31, 2023, primarily due to an increase in FHLB advances of $20.0 million.
Total equity was $300.1 million and $284.3 million at December 31, 2024 and December 31, 2023, respectively, an increase of $15.8 million from December 31, 2023.
The following table presents certain key condensed balance sheet data as of December 31, 2024 and December 31, 2023:
(Dollars in thousands)
Cash and cash equivalents
Cash and cash equivalents increased $41.2 million to $221.5 million at December 31, 2024, from $180.4 million at December 31, 2023, an increase of 22.8%. The increase was mainly due to an increase in deposits and borrowings, partially offset by an increase in loans.
Investment securities
Total investment securities decreased to $14.8 million at December 31, 2024, from $16.4 million at December 31, 2023, a decrease of $1.6 million or 9.9%. The decrease was primarily due to pay downs of $1.8 million, partially offset by a $0.1 million valuation increase.
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Loans, net unearned income
Loans receivable increased to $1.87 billion at December 31, 2024, from $1.79 billion at December 31, 2023. The increase was primarily due to an increase in residential multi-family loans of $71.4 million, and commercial owner-occupied loans of $18.7 million, partially offset by a decrease in construction loans of $8.2 million.
Allowance for credit losses
Allowance for credit losses increased $0.4 million, to $32.6 million, or 1.38%, at December 31, 2024, from $32.1 million at December 31, 2023. The increase was primarily due to an increase in the portfolio balance, partially offset by a decrease in historical loss rates.
Deposits
At December 31, 2024, the Bank’s total deposits increased to $1.63 billion from $1.55 billion at December 31, 2023, an increase of $78.2 million, or 5.0%. The increase in deposits was primarily attributed to an increase in time deposits of $108.1 million, and money market deposits of $48.4 million, partially offset by a decrease in non-interest bearing demand deposits of $48.2 million, and savings deposits of $27.6 million. Deposits from the cannabis businesses increased to $151.9 million at December 31, 2024, from $96.7 million at December 31, 2023, an increase of $55.2 million.
Borrowings
At December 31, 2024, total borrowings increased $20.2 million to $188.3 million at December 31, 2024, from $168.1 million at December 31, 2023. The increase in borrowings was primarily due to an increase in FHLBNY advances of $20.0 million.
Equity
Total shareholders’ equity increased to $300.1 million at December 31, 2024, from $284.3 million at December 31, 2023, an increase of $15.8 million or 5.5%. The increase in total shareholders' equity was primarily due to the retention of earnings from the period, partially offset by the recognition of $8.6 million of cash dividend, and repurchases of shares of the Company's common stock in the amount of $4.3 million during the year ended December 31, 2024.
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Liquidity and Capital Resources
Liquidity is a measure of our ability to generate cash to support asset growth, meet deposit withdrawals, satisfy other contractual obligations, and otherwise operate on an ongoing basis. At December 31, 2024, our cash position was $221.5 million. We invest cash that is in excess of our immediate operating needs primarily in our interest-bearing account at the Federal Reserve.
Our primary source of funding has been deposits. Funds from other operations, financing arrangements, investment securities available-for-sale also provide significant sources of funding. The Company seeks to rely primarily on core deposits from customers to provide stable and cost-effective sources of funding to support loan growth. We focus on customer service which we believe has resulted in a history of customer loyalty. Stability, low cost and customer loyalty comprise key characteristics of core deposits.
We also use brokered deposits as a funding source. The Bank joined the IntraFi network to secure an additional alternative funding source. IntraFi provides the Bank an additional source of external funds through their weekly CDARS® settlement process, as well as their ICS® money market product. As of December 31, 2024, the Company has $13.5 million of brokered deposits from IntraFi. Additionally, we have access to other brokered deposit funding sources that we utilize as a source of additional liquidity. In addition to IntraFi, we utilize Wells Fargo, Piper Sandler, and Stonecastle to obtain brokered deposits, and as of December 31, 2024, the Company had $202.2 million sourced from these broker relationships. While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY and the Federal Reserve Bank ("FRB"). During 2024, the Company reallocated a portion of its eligible collateral from the FHLBNY to the FRB discount window in order to diversify its borrowing capabilities. At December 31, 2024, the Company had a $740.5 million line of credit from the FHLBNY, of which $145.0 million was outstanding, $50.0 million was a letter of credit to secure public deposits, and $545.5 million was unused. As of December 31, 2024, the Company had a borrowing capacity through the FRB discount window of $252.0 million. There were no outstanding balances with the FRB as of December 31, 2024.
Our investment portfolio primarily consists of mortgage-backed available for sale securities issued by US government agency and government sponsored entities. These available for sale securities are readily marketable and are available to meet our additional liquidity needs. At December 31, 2024, the Company's investment securities portfolio classified as available for sale was $5.6 million.
We had unused loan commitments of $122.5 millionat December 31, 2024. Our loan commitments are normally originated with the full amount of collateral. Such commitments have historically been drawn at only a fraction of the total commitment. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.
Capital Adequacy
Consistent with the goal to operate a sound and profitable financial organization, the Company and Bank actively seeks to maintain their status as well-capitalized in accordance with regulatory standards. As of December 31, 2024, the Company and the Bank exceeded all applicable regulatory capital requirements. See Note 13 to our Consolidated Financial Statements for more information about the Company's and the Bank's regulatory capital compliance.
Interest Rate Sensitivity
Interest rate sensitivity is an important factor in the management of the composition and maturity configurations of earning assets and funding sources. The primary objective of asset/liability management is to ensure the steady growth of our primary earnings component, net interest income. Net interest income can fluctuate with significant interest rate movements. To lessen the impact of interest rate movements, management endeavors to structure the balance sheet so that repricing opportunities exist for both assets and liabilities in roughly equivalent amounts at approximately the same time intervals. Imbalances in these repricing opportunities at any point in time constitute interest rate sensitivity.
The measurement of our interest rate sensitivity, or "gap," is one of the principal techniques used in asset/liability management. Interest sensitive gap is the dollar difference between assets and liabilities that are subject to interest-rate pricing within a given time period, including both floating rate or adjustable rate instruments and instruments that are approaching maturity.
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Our management and the Board of Directors oversee the asset/liability management function through the asset/liability committee of the Board that meets periodically to monitor and manage the balance sheet, control interest rate exposure, and evaluate our pricing strategies. The asset mix of the balance sheet is continually evaluated in terms of several variables: yield, credit quality, appropriate funding sources and liquidity. Management of the liability mix of the balance sheet focuses on expanding the various funding sources.
In theory, interest rate risk can be diminished by maintaining a nominal level of interest rate sensitivity. In practice, this is made difficult by a number of factors, including cyclical variation in loan demand, different impacts on interest-sensitive assets and liabilities when interest rates change, and the availability of funding sources. Accordingly, we undertake to manage the interest-rate sensitivity gap by adjusting the maturity of and establishing rates on the earning asset portfolio and certain interest-bearing liabilities commensurate with management's expectations relative to market interest rates. Management generally attempts to maintain a balance between rate-sensitive assets and liabilities as the exposure period is lengthened to minimize our overall interest rate risk.
The interest rate sensitivity position as of December 31, 2024 is presented in the following table. Assets and liabilities are scheduled based on maturity or re-pricing data except for mortgage loans and mortgage-backed securities, which are based on prevailing prepayment assumptions and expected maturities and deposits which are based on recent retention experience of core deposits. The difference between rate-sensitive assets and rate-sensitive liabilities, or the interest rate sensitivity gap, is shown at the bottom of the table.
(Dollars in thousands)
Interest-earning assets:
Interest-bearing liabilities:
(1) Loan balances exclude non-accruing loans, deferred fees and costs, and loan discounts.
Off-Balance Sheet Arrangements and Contractual Obligations
In the ordinary course of business, we engage in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements include commitments to extend credit, standby letters of credit and other commitments. These transactions are primarily designed to meet the financial needs of our customers.
We enter into commitments to lend funds to customers, which are usually at a stated interest rate, if funded, and for specific purposes and time periods. When we make commitments, we are exposed to credit risk. However, the maximum credit risk for
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these commitments will generally be lower than the contractual amount because a significant portion of these commitments is expected to expire without being used by the customer. In addition, we manage the potential risk in commitments to lend by limiting the total amount of commitments, by monitoring maturity structure of these commitments and by applying the same credit standards for these commitments as for all of our credit activities.
For commitments to lend, we generally require collateral or a guarantee. We may require various types of collateral, including accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. Collateral requirements for each loan or commitment may vary based on the commitment type and our assessment of a customer’s credit risk according to the specific credit underwriting, including credit terms and structure.
Commitments to extend credit, or net unfunded loan commitments, represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. These commitments generally have fixed expiration dates, may require payment of a fee, and contain termination clauses in the event the customer’s credit quality deteriorates. At December 31, 2024 and December 31, 2023, unused commitments to extend credit amounted to approximately $122.5 million and $93.8 million, respectively. Commitments to fund fixed-rate loans were immaterial at December 31, 2024. Variable-rate commitments are generally issued for less than one year and carry market rates of interest. Such instruments are not likely to be affected by annual rate caps triggered by rising interest rates. Management believes that off-balance sheet risk is not material to the results of operations or financial condition of the Company.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. At December 31, 2024 and December 31, 2023, standby letters of credit with customers were $0.6 million and $1.5 million, respectively.
At December 31, 2024, we had contractual obligations primarily relating to commitments to extend credits, deposits, secured and unsecured borrowings, and operating leases. We have adequate resources to fund all unfunded commitments to the extent required and meet all contractual obligations as they come due. Please refer to Notes 6, 7, 9, and 15 of the Notes to the Consolidated Financial Statements for detailed information regarding our contractual obligations.
Impact of Inflation and Changing Prices
The financial statements included in this document have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.
Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturities of our assets and liabilities are critical to the maintenance of acceptable performance levels.
The principal effect of inflation on earnings, as distinct from levels of interest rates, is in the area of non-interest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans that we have made. We are unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar value due to inflation.
Critical Accounting Policies
The Company’s accounting policies are more fully described in Note 1 - Description of Business and Summary of Significant Accounting Policies in the Consolidated Financial Statements. As disclosed in Note 1, the preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
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Allowance for Credit Losses: Our allowances for credit losses represents management's best estimate of probable losses inherent in our investment and loan portfolios, excluding those loans accounted for under fair value. Refer to Note 1 in the Notes to the Consolidated Financial Statements for further information.
Our determination of the allowance for credit losses is based on periodic evaluations of the loan and lease portfolios and other relevant factors, broken down into vintage based on year of origination. These critical estimates include significant use of our own historical data and other qualitative, and quantitative data. These evaluations are inherently subjective, as they require material estimates and may be susceptible to significant change. Our allowance for credit losses is comprised of two components, a specific allowance and a general calculation. A specific allowance is calculated for loans and leases that do not share similar risk characteristics with other financial assets, and include collateral dependent loans. A loan is considered to be collateral dependent when foreclosure of the underlying collateral is probable. Parke has elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty. The general based component covers loans and leases on which there are expected credit losses that are not yet individually identifiable. The allowance calculation and determination process is dependent on the use of key assumptions. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower, projected industry outlook, and economic conditions. One key assumption in the vintage model is the underlying prepayment speeds, which is derived by the average loan life within the various pools. To provide a sensitivity of the impact to the ACL estimate, management adjusted the average lives of the vintage pools, by both increasing and decreasing the prepayment speeds by 20%, which provided an estimated range of impact between $0.9 million for a lower prepayment speed and $(1.2) million for a higher prepayment speed. This range was deemed immaterial to the overall ACL reserve balance.
The process of determining the level of the allowance for credit losses requires a high degree of judgment. To the extent actual outcomes differ from our estimates, additional provision for loan and lease losses may be required that would reduce future earnings.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
Item 8. Financial Statements and Supplementary Data.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Parke Bancorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Parke Bancorp, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023; the related consolidated statements of income, comprehensive income, equity, and cash flows for the years then ended; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2025, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent, with respect to the Company, in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involve our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses (ACL) – Qualitative Adjustments
Description of the Matter
The Company’s loan portfolio totaled $1.9 billion as of December 31, 2024, and the associated ACL was $32.6 million. As discussed in Notes 1 and 4 to the financial statements, the calculation of the ACL requires significant judgment about the expected future losses, which is based on a base loss projection determined through a historical vintage loss rate analysis, which is then adjusted for current qualitative conditions and reasonable and supportable forecasts. Management applies these qualitative adjustments to the base loss projection to reflect changes in the current and forecasted environment, both internal and external, that are different from the conditions that existed during the historical loss calculation period. The qualitative adjustments include analysis of items related to economic conditions, credit quality indicators within the loan portfolio, and other internal and external factors.
We identified these qualitative adjustments within the ACL as critical audit matters because they involve a high degree of subjectivity. While the determination of these qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality and magnitude of adjustments is highly subjective. Auditing these complex judgments and assumptions involved especially challenging auditor judgment due to the nature of audit evidence and the nature and extent of effort required to address these matters.
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How We Addressed the Matter in Our Audit
The primary procedures we performed to address this critical audit matter included:
–Testing the design, implementation, and operating effectiveness of internal controls over the calculation of the allowance for credit losses, including the qualitative factor adjustments.
–Testing the completeness and accuracy of the significant data points that management uses in their evaluation of the qualitative adjustments.
–Testing the anchoring calculation that management completes to properly align the magnitude of the adjustments with the Company's historical loss data.
–Evaluating the directional consistency and reasonableness of management's conclusions regarding basis points applied (whether positive or negative) based on the trends identified in the underlying data.
–Testing the mathematical accuracy of the application of the qualitative adjustments to the loan segments within the ACL calculation.
We have served as the Company’s auditor since 2022.
/s/ S.R. Snodgrass, P.C.
Cranberry Township, Pennsylvania
March 12, 2025
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Parke Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2024 and 2023
(Dollars in thousands except per share data)
December 31, December 31,
Assets
Investment securities available for sale, at fair value 5,551 7,095
Less: Allowance for credit losses (32,573) (32,131)
Other real estate owned (OREO) 1,562 1,550
Liabilities and Shareholders' Equity
Liabilities
Deposits
Accrued expenses and other liabilities 14,845 14,099
Shareholders' Equity
Accumulated other comprehensive loss (337) (404)
See accompanying notes to consolidated financial statements
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Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
Years Ended December 31, 2024 and 2023
(Dollars in thousands except per share data)
Interest income:
Interest and dividends on investments 1,042 1,048
Interest on deposits with banks 6,237 5,595
Interest expense:
Provision for (recovery of) credit losses 728 (2,051)
Non-interest income
Service fees on deposit accounts 1,387 3,872
Bank owned life insurance income 655 737
Gain on sale of SBA loans 23 —
Net gain on OREO — 38
Non-interest expense
FDIC insurance and other assessments 1,306 1,292
Less: Preferred stock dividend (20) (26)
Net income available to common shareholders $ 27,492 $ 28,436
Earnings per common share
Weighted average common shares outstanding
See accompanying notes to consolidated financial statements
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Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2024 and 2023
For the Year ended December 31,
(Dollars in thousands)
Unrealized gains on investment securities, net of reclassification into income:
Unrealized gains on available for sale securities 90 165
Tax impact on unrealized gain (23) (43)
Total other comprehensive gain 67 122
Comprehensive income attributable to the Company $ 27,579 $ 28,584
See accompanying notes to consolidated financial statements
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Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Equity
(Dollars in thousands except share data)
Cumulative effect of adoption of ASU 2016-13 — — — — — (2,102) — — (2,102)
Stock compensation issued/exercised — — 6,096 — 33 — — — 33
Preferred stock shares conversion (70) (70) 9,628 1 69 — — — —
Other comprehensive gain — — — — — — 122 — 122
Stock compensation expense — — — — 397 — — — 397
Dividend on preferred stock ($60.00 per share) — — — — — (26) — — (26)
Dividend on common stock ($0.72 per share) — — — — — (8,603) — — (8,603)
Stock compensation issued/exercised — — 65,791 7 699 — — — 706
Preferred stock shares conversion (50) (50) 6,877 — 49 — — — (1)
Other comprehensive gain — — — — — — 67 — 67
Stock compensation expense — — — — 336 — — — 336
Dividend on preferred stock ($60.00 per share) — — — — — (20) — — (20)
Dividend on common stock ($0.72 per share) — — — — — (8,582) — — (8,582)
See accompanying notes to consolidated financial statements
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Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2024 and 2023
(Dollars in thousands)
Cash Flows from Operating Activities
Depreciation and amortization 571 464
Provision for (recovery of) credit losses 728 (2,051)
Increase in value of bank-owned life insurance (655) (736)
Gain on sale of SBA loans (23) —
SBA loans originated for sale (300) —
Proceeds from sale of SBA loans originated for sale 323 —
Net gain on OREO — (38)
Net accretion of purchase premiums and discounts on securities (45) (37)
Stock based compensation 336 397
Decrease in deferred income tax 126 595
Net changes in:
Increase in accrued interest payable and other accrued liabilities 4,200 917
Net cash provided by operating activities 35,158 23,018
Cash Flows from Investing Activities
Repayments and maturities of investment securities held to maturity 148 147
(Purchases) sales of bank premises and equipment (119) 105
Proceeds from sale of OREO, net — 161
Proceeds from bank owned life insurance policy — 466
Purchases of restricted stock (8,196) (13,016)
Net cash used in investing activities (80,071) (34,892)
Cash Flows from Financing Activities
Proceeds from exercise of stock options 706 33
Treasury stock purchase (4,262) —
Conversion of Series B preferred stock (1) —
Increase (decrease) in FHLBNY short-term borrowings 95,000 (53,150)
(Decrease) increase in FHLBNY long-term borrowings (75,000) 95,000
Net decrease in noninterest-bearing deposits (48,152) (120,357)
Net increase in interest-bearing deposits 126,375 97,203
Net cash provided by financing activities 86,064 10,100
Increase (decrease) in cash and cash equivalents 41,151 (1,774)
Supplemental Disclosure of Cash Flow Information:
Non-cash Investing and Financing Items
Loans transferred to OREO $ — $ 123
Accrued dividends payable $ 2,141 $ 2,158
See accompanying notes to consolidated financial statements
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Note 1. Description of Business and Summary of Significant Accounting Policies
Business:
Parke Bancorp, Inc. (the “Company, we, us, our”) is a bank holding company headquartered in Sewell, New Jersey. Through subsidiaries, the Company provides individuals, corporations and other businesses, and institutions with commercial and retail banking services, principally loans and deposits. The Company was incorporated in January 2005 under the laws of the State of New Jersey for the sole purpose of becoming the holding company of Parke Bank (the "Bank").
The Bank is a commercial bank, which was incorporated on August 25, 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. The Bank maintains seven branch offices with its principal office at 601 Delsea Drive, Sewell, New Jersey, and additional branch office locations; 631 Tilton Road, Northfield, New Jersey, 567 Egg Harbor Road, Washington Township, New Jersey, 67 East Jimmie Leeds Road, Galloway Township, New Jersey, 1150 Haddon Avenue, Collingswood, New Jersey, 1610 Spruce Street, Philadelphia, Pennsylvania, and 1032 Arch Street, Philadelphia, Pennsylvania.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with GAAP. We have reclassified certain prior year amounts to conform to the 2024 presentation, which did not have a material impact on our consolidated financial condition or results of operations. The accounting policies that materially affect the determination of financial position, results of operations and cash flows are summarized below.
Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank. Parke Capital Trust I, Parke Capital Trust II and Parke Capital Trust III are wholly-owned subsidiaries but are not consolidated because they do not meet the requirements for consolidation under applicable accounting guidance. All material inter-company balances and transactions have been eliminated.
Cash and cash equivalents: Consists of cash and due from banks, and interest-bearing deposits and other-short term investments, all of which, if applicable, have stated maturities of three months or less when acquired.
Investment Securities: Debt securities are recorded on a trade-date basis. We classify debt securities as held to maturity if we have the positive intent and ability to hold the securities to maturity. We report securities held to maturity on our consolidated balance sheets at carrying value, which generally equals amortized cost. Amortized cost reflects historical cost adjusted for amortization of premiums, accretion of discounts and any previously recorded impairments. Debt securities not classified as held to maturity or trading are designated as securities available for sale ("AFS") and carried at fair value with unrealized gains and losses, net of income taxes, reflected in accumulated other comprehensive income (loss). We did not have any securities classified as trading securities during 2024 or 2023.
Interest on debt securities, including amortization of premiums and accretion of discounts, is included in interest income. Premiums and discounts are amortized or accreted to interest income at a constant effective yield over the contractual lives of the securities. Realized gains and losses from the sales of debt securities are determined on a specific security basis. These securities gains/(losses) are included in other noninterest income.
Restricted Stock: Restricted stock includes investments in the common stock of the FHLBNY and the Atlantic Central Bankers Bank for which no readily available market exists and, accordingly, is carried at cost. The stocks have no quoted market value and are subject to redemption restrictions. Management reviews these stocks for credit loss based on the ultimate recoverability of the cost basis in the stock. The stocks’ values are determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. Management considers such criteria as the significance of the decline in net assets, if any, the length of time this situation has persisted and the financial performance of the issuers. In addition, management considers any commitments by the FHLBNY to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLBNY and the liquidity position of the FHLBNY.
Loans: We classify loans as held for investment or held for sale based on our investment strategy and management’s intent and ability with regard to the loans which may change over time. The accounting and measurement framework for loans differs depending on the loan classification. Loans that we have the ability and intent to hold for the foreseeable future or until maturity or pay-off are classified as held for investment. Loans classified as held for investment are reported at their amortized cost, which is the outstanding principal balance, adjusted for any unearned income, unamortized deferred fees and costs, unamortized premiums and discounts and charge-offs. Interest income on the loans is recognized as earned based on contractual interest rates
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applied to daily principal amounts outstanding. Loan origination fees, direct loan origination costs, and loan premiums and discounts are deferred and accreted or amortized into net interest income using the constant effective yield method, over the contractual life of the loan.
Loans originated with the intent to sell or for which we do not have the ability and intent to hold for the foreseeable future are classified as held for sale. Interest on these loans is recognized on an accrual basis. These loans are recorded at the lower of cost or fair value. Our Small Business Administration ("SBA") loans that management has the intention to sell are designated as held for sale and are reported at fair value. Fair value represents the face value of the guaranteed portion of SBA loans pending settlement. Loan origination fees and direct loan origination costs are deferred until the loan is sold and are recognized as part of the total gain or loss on sale. We calculate the gross gain or loss on loan sales as the difference between the proceeds received and the carrying value of the loans sold.
Loan Fees: Loan fees and direct costs associated with loan originations are netted and deferred. The deferred amount is recognized as an adjustment to loan interest over the term of the related loan using the interest method. Prepayment penalties on loans are recognized in loan interest. Loan brokerage fees represent commissions earned for facilitating loans between borrowers and other companies and is recorded as other loan fee income.
Non-accrual Loans: Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet contractual payment obligations as they become due, as well as when a loan is 90 days past due, unless the loan is well secured and in the process of collection, as required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.
Allowance for Credit Losses on Loans and Leases: The allowance for credit losses represents management’s estimate of expected losses inherent in the Company’s lending activities excluding loans accounted for under fair value. The allowance for credit losses is maintained through charges to the provision for credit losses in the Consolidated Statements of Income as expected losses are estimated. Loans or portions thereof that are determined to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.
The Company performs periodic reviews of its loan and lease portfolios to identify credit risks and to assess the overall collectability of those portfolios. The Company's allowance for credit losses includes a general component and an asset-specific component for collateral-dependent loans. To determine the asset-specific component of the allowance, the loans are evaluated individually based on the fair value of the underlying collateral. The Company generally measures the asset-specific allowance as the difference between the net realizable value of loan collateral and the recorded investment of a loan.
The general component of the allowance evaluates the impairments of pools of the loan portfolio collectively. It incorporates a historical valuation allowance and qualitative allowance. The historical valuation utilizes a vintage loss rate approach utilizing a third party software model. The vintage loss rate approach creates pools of loans based on the segments defined by management, and consists of commercial and industrial, construction, commercial - owner occupied, commercial - non-owner occupied, residential - 1 to 4 family, residential - 1 to 4 family investment, residential - multifamily, and consumer. The loan pools are aggregated by origination year. Charge-offs, net of recoveries, are allocated by the year of charge-off to each loan pool. An average life is prescribed to a pool of loans that were originated in a particular year. The actual charge-offs as a percent of total loans are calculated for each historical year, and projected for future years for each year within the average life time horizon. The sum of the actual charge-offs and projected charge-offs are divided by the average amortized origination amount for each respective year. Those charge-off percentages are added together to obtain an aggregated vintage loss percentage which is then multiplied by the outstanding loan balances to obtain a reserve requirement.
The qualitative allowance component is based on general economic conditions and other qualitative risk factors both internal and external to the Company. It is generally determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank's lending management and staff; (ii) the effectiveness of the Bank's lending policies, procedures and internal controls; (iii) volume and severity of loan credit quality; (iv) nature and volume of portfolio and term of loans (v) the composition and concentrations of credit; (vi) the effectiveness of the internal loan review system;(vii) national and local economic trends and conditions, and industry conditions; and (viii) the valuation of loan collateral assessed by regional home valuation indexes. Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. Each component is determined to have either a high, high-moderate, moderate, low-moderate or low degree of risk. The results are then input into a "general allocation matrix" to determine an appropriate general valuation allowance.
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The Company has elected to exclude accrued interest receivable from the measurement of the ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is generally reversed against interest income. Accrued interest receivable, including loan and investment security, at December 31, 2024 and 2023 was $9.7 million and $8.6 million, respectively.
The process of determining the level of the allowance for credit losses requires a high degree of estimate and judgment. It is reasonably possible that actual outcomes may differ from our estimates.
Allowance for Credit Losses on Lending-Related Commitments: Parke estimates expected credit losses over the contractual period in which it is exposed to credit risk on contractual obligations to extend credit, unless the obligation is unconditionally cancellable by the Company. The allowance for credit losses on lending-related commitments is recorded in other liabilities in the consolidated balance sheet and is recorded as a provision for credit losses in the consolidated income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The lifetime loss rates for off-balance sheet credit exposures are calculated in the same manner as on-balance sheet credit exposures, using the same model and economic forecasts, adjusted for the estimated likelihood that funding will occur.
Individually Assessed Loans and Leases: A loan or lease is measured individually if it does not share similar risk characteristics with other financial assets. For Parke, loans and leases which are identified to be individually assessed under the Current Expected Credit Loss ("CECL") model typically are those that are on non-accrual at the reporting date, and include collateral dependent loans.
Collateral Dependent Loans
Parke considers a loan to be collateral dependent when foreclosure of the underlying collateral is probable. Parke has also elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.
Allowance for Credit Losses on Held to Maturity Securities: Parke measures expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
The Company classifies the held-to-maturity debt securities into the following major security types: residential mortgage backed, and state and political subdivisions. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience including no losses, we have determined that an allowance for credit loss on the held-to-maturity portfolio is not required
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition. At December 31, 2024 and 2023, accrued interest receivable on held-to-maturity debt securities was $12.7 thousand and $12.9 thousand, respectively.
Allowance for Credit Losses on Available for Sale Securities: For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to non-interest income in the Consolidated Statements of Income.
For debt securities available-for-sale which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, we evaluate whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating. In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.
Accrued interest receivable on available-for-sale securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition. At December 31, 2024 and 2023, accrued interest receivable on available-for-sale securities was $13.9 thousand and $17.5 thousand, respectively.
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Charge-Offs: We charge off loans as a reduction to the allowance for credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as an increase to the allowance for credit losses.
Concentration of Credit Risk: The Company’s loans are generally to customers in Southern New Jersey, the Philadelphia area of Pennsylvania, and New York, New York. Loans to general building contractors, general merchandise stores, restaurants, motels, warehouse space, and real estate ventures (including construction loans) constitute a majority of commercial loans. The concentrations of credit by type of loan are set forth in Note 4. Generally, loans are collateralized by assets of the borrower and are expected to be repaid from the borrower’s cash flow or proceeds from the sale of selected assets of the borrower.
Other Real Estate Owned (“OREO”): Real estate acquired through foreclosure or other proceedings is carried at the lower of cost or estimated fair value, less estimated costs to sell. When a property is acquired, the excess of the loan balance over the estimated fair value is charged to the allowance for credit losses. Costs of improving OREO are capitalized to the extent that the carrying value does not exceed its fair value less estimated selling costs. Subsequent valuation adjustments, declines, if any, are recognized as a charge against current earnings. Holding costs are charged to expense. Gains and losses on sales are recognized in non-interest income as they occur.
Bank-owned life insurance (“BOLI”): Policies insure the lives of officers and team members of the Company and name the Company as beneficiary. Non-interest income is generated tax free (subject to certain limitations) from the increase in value of the policies’ underlying investments made by the insurance company. Cash proceeds received from the settlement of the BOLI policies are generally tax-free and can be used to partially offset costs associated with employee compensation and benefit programs.
Interest Rate Risk: The Company is principally engaged in the business of attracting deposits from the general public and using these deposits, together with other borrowed and brokered funds, to make commercial, commercial mortgage, residential mortgage, and consumer loans, and to invest in overnight and term investment securities. Inherent in such activities is interest rate risk that results from differences in the maturities and repricing characteristics of these assets and liabilities. For this reason, management regularly monitors the level of interest rate risk and the potential impact on net income.
Bank Premises and Equipment: Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed and charged to expense using the straight-line method over the estimated useful lives of the assets, generally three years for computers and software, five to ten years for equipment and forty years for buildings. Leasehold improvements are amortized to expense over the shorter of the term of the respective lease or the estimated useful life of the improvements.
Lease: Lease classification is determined at inception for all lease transactions with an initial term greater than one year. Operating leases are included as right-of-use (“ROU”) assets within other assets, and operating lease liabilities are classified as other liabilities on our consolidated balance sheets. Our operating lease expense is included in occupancy and equipment within non-interest expense in our consolidated statements of income.
Stock-Based Compensation: Stock-based compensation expense is based on the grant date fair value, which is estimated using a Black-Scholes option pricing model. The fair value of stock-based compensation used in determining compensation expense generally equals the fair market value of our common stock on the date of grant. We generally recognize compensation expense on a straight-line basis over the award’s requisite service period based on the fair value of the award at grant date. Stock-based compensation expense is included in compensation and benefits in the consolidated statements of income.
Revenue recognition: Our revenue includes net interest income on financial instruments and non-interest income. Interest income and fees on loans, investment securities, and other financial instruments are recognized based on the contractual provisions of the underlying arrangements according to applicable accounting guidance. Deposit-related-fee-based revenue within the scope of ASC Topic 606 - Revenue from Contracts with Customers (Topic 606) is included in non-interest income in our consolidated statements of income.
Our deposit-related-fee-based revenues are recognized when or as those services are transferred to the customer and are generally recognized either immediately upon the completion of our service or over time as we perform services. Any services performed over time generally require that we render services each period and therefore we measure our progress in completing these services based upon the passage of time. Deposit-related fees are recognized over the period in which the related service is provided. Service charges on deposit accounts are earned on depository accounts for customers and include fees for account and overdraft services. Account services include fees for event-driven services and fees for periodic account maintenance activities. Our obligation for event-driven services is satisfied at the time of the event when the service is delivered, while our obligation
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for maintenance services is satisfied over the course of each month. Our obligation for overdraft services is satisfied at the time of the overdraft.
Income Taxes: We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded for the current period. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Thus, at the enactment date, deferred taxes are remeasured and the change is recognized in income tax expense. The recognition of deferred tax assets requires an assessment to determine the realization of such assets. Realization refers to the incremental benefit achieved through the reduction in future taxes payable or refunds receivable. We establish a valuation allowance for tax assets when it is more likely than not that they will not be realized, based upon all available evidence. Realization of deferred tax assets is dependent on generating sufficient taxable income in the future.
When tax returns are filed, it is highly certain that some positions taken will be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits would be recognized in income tax expense on the income statement.
The Company did not recognize any interest or penalties related to income tax during the years ended December 31, 2024 and 2023, respectively. The Company does not have an accrual for uncertain tax positions as of December 31, 2024 and 2023, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law. All years after 2020 are open under the original federal statute of limitations. For state tax returns, the Company is subject to income tax examinations by local tax authorities for years 2020 and after, except for the State of New Jersey which is still subject to income tax examinations for years 2019 and after.
Fair value: Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. Fair value measurement of a financial asset or liability is assigned to a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The accounting guidance for fair value requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value.
Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Our most significant estimates pertain to our allowances for credit losses, fair value measurements, individually evaluated loans, the carrying value of OREO, and the valuation of deferred income taxes. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.
Segment Reporting: The Company operates one reportable segment of business, “community banking”. Through its community banking segment, the Company provides a broad range of retail and community banking services. The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies.
The Company's chief operating decision maker ("CODM") is the President, Chief Executive Officer and Director, who decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income.
The measure of segment assets is reported on the balance sheet as total consolidated assets.
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The following table presents segment profit and significant expenses.
Community Banking Segment
(Dollars in thousands)
Provision for credit losses 728 -2051
Net interest income after provision for credit losses 57,980 66,265
Net income attributable to the Company $ 27,512 $ 28,462
Reconciliation of profit or loss
Adjustments and reconciling items — —
Other Comprehensive Income: Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under GAAP, are excluded from net income, including unrealized gains and losses on available for sale securities.
For the years ended December 31, 2024 and 2023, we did not reclassify any amounts from accumulated other comprehensive income to income. The following table provides the components of other comprehensive income, reclassifications to net income and the related tax effect for the years ended December 31, 2024 and 2023:
(Dollars in thousands)
Investment securities:
Net unrealized gain $ 90 $ 165
Tax effect related to the unrealized gain (23) (43)
Accumulated other comprehensive income $ 67 $ 122
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Earnings Per Common Share: Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share considers common stock equivalents (when dilutive) outstanding during the period such as options outstanding and convertible preferred stock. To the extent that stock equivalents are anti-dilutive, they have been excluded from the earnings per share calculation.Earnings per common share have been computed based on the following for the years ended December 31, 2024 and 2023:
(Dollars in thousands, except per share data)
Basic earnings per common share
Net income available to common shareholders $ 27,492 $ 28,436
Basic earnings per common share $ 2.30 $ 2.38
Diluted earnings per common share
Net income available to common shareholders $ 27,492 $ 28,436
Dividend on Preferred Series B 20 26
Net income attributable to diluted common shares $ 27,512 $ 28,462
Diluted earnings per common share $ 2.27 $ 2.35
For the years ended December 31, 2024 and 2023, there were 283,441 and 330,536 weighted average option shares outstanding, respectively, that were not included in the computation of diluted EPS because these shares were anti-dilutive.
Statement of Cash Flows: Cash and cash equivalents include cash and due from financial institutions and federal funds sold. For the purposes of the statement of cash flows, changes in loans and deposits are shown on a net basis.
Recently Issued Accounting Pronouncements:
ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted and should be applied either prospectively or retrospectively. The Company does not expect the application of this guidance to have a material impact on
the Consolidated Financial Statements.
Accounting Pronouncements Adopted in 2024
ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Adoption is required retrospectively to all prior periods presented in the financial statements. The implementation of this guidance did not have a material impact on the Consolidated Financial Statements.
Note 2. Cash and Due from Banks
The Company maintains various deposit accounts with other banks to meet normal funds transaction requirements, to satisfy deposit reserve requirements, and to compensate other banks for certain correspondent services. Management is responsible for assessing the credit risk of its correspondent banks. At December 31, 2024 and 2023, the vast majority of the Company's cash
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deposits with other banks were due from the Federal Reserve Bank of Philadelphia and the Federal Home Loan Bank of New York.
Note 3. Investment Securities
The following is a summary of the Company's investments in available for sale and held to maturity securities as of December 31, 2024 and 2023:
(Dollars in thousands)
Available for sale:
Residential mortgage-backed securities $ 6,005 $ 2 $ 456 $ 5,551 $ —
Held to maturity:
States and political subdivisions $ 3,953 $ 3 $ 515 $ 3,441 $ —
(Dollars in thousands)
Available for sale:
Residential mortgage-backed securities $ 7,639 $ 3 $ 547 $ 7,095 $ —
Held to maturity:
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The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of December 31, 2024, are as follows:
AmortizedCost FairValue
(Dollars in thousands)
Available for sale:
Due within one year $ — $ —
Due after one year through five years 2,117 1,997
Due after five years through ten years 727 681
Held to maturity:
Due within one year $ — $ —
Due after one year through five years 1,481 1,483
Due after five years through ten years 1,507 1,204
Expected maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without any penalty.
During the year ended December 31, 2024 and 2023, the Company did not sell any investment securities.
The following tables show the gross unrealized losses and fair value of the Company's available for sale securities which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and December 31, 2023.
As of December 31, 2024 Less Than 12 Months 12 Months or Greater Total
(Dollars in thousands)
Available for sale:
As of December 31, 2023 Less Than 12 Months 12 Months or Greater Total
(Dollars in thousands)
Available for sale:
The Company’s unrealized loss for the available for sale securities is comprised of 8 securities in the less than 12 months loss position and 14 securities in the 12 months or greater loss position at December 31, 2024. The mortgage-backed securities that had unrealized losses were issued or guaranteed by the US government or government sponsored entities. The unrealized losses associated with those mortgage-backed securities are generally driven by changes in interest rates and not due to credit losses given the explicit or implicit guarantees provided by the U.S. government. Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be a credit loss at December 31, 2024.
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Impairment of Debt Securities
On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for a credit loss. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. Amortized cost includes adjustments (if any) made to the cost basis of an investment for accretion, amortization, and previous other-than-temporary impairments. For individual debt securities classified as available for sale, we determine whether a decline in fair value below the amortized cost has resulted from a credit loss or other factors. If the decline in fair value is due to credit, we will record the portion of the impairment loss relating to credit through an allowance for credit losses. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes. Please refer to Note 1 - Description of Business and Summary of Significant Accounting Policies for a detailed description of our accounting policy for the impairment of securities.
Note 4. Loans Receivable and Allowance for Credit Losses
Loans Receivable
As of December 31, 2024, the Company had $1.87 billion in loans receivable outstanding. Outstanding balances include $1.8 million and $2.7 million at December 31, 2024 and 2023, respectively, for net deferred loan costs, and unamortized discounts.
The portfolios of loans receivable at December 31, 2024, and December 31, 2023, consist of the following, by portfolio segment:
(Dollars in thousands)
Real Estate Mortgage:
Allowance for credit losses on loans (32,573) (32,131)
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An age analysis of past due loans by class at December 31, 2024 and December 31, 2023 as follows:
(Dollars in thousands)
Real Estate Mortgage:
(Dollars in thousands)
Real Estate Mortgage:
The following table provides the amortized cost of loans on nonaccrual status:
Commercial and Industrial $ — $ 684 $ 684 $ — $ 684
Residential - Multifamily — — — — —
Consumer — — — — —
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Residential - 1 to 4 Family Investment — — — — —
Residential - Multifamily — — — — —
Consumer — — — — —
Allowance For Credit Losses (ACL)
We maintain the ACL at a level that we believe to be appropriate to absorb estimated credit losses in the loan portfolios as of the balance sheet date.
The following tables present the information regarding the allowance for credit losses and associated loan data by portfolio segment under the CECL model:
Twelve Months Ended December 31, 2024
As of December 31, 2024 Real Estate Mortgage
Charge-offs — — — — — — — (21) (21)
The increase in allowance for credit losses for residential multifamily is primarily due to an increase in the loan balance during the year, as well as an increase in the qualitative factor due to the increased volume of the portfolio. The decrease in construction is due to a decrease in the loan balance during the year, as well as a decrease in the qualitative factor due to the decrease in volume, as well as a decrease in the vintage loss factor due to amortization of prior year losses. The decrease in commercial non-owner occupied is due to a decrease in the qualitative factor due to a reduction in the problem loan balance, and a decrease in the vintage loss factor due to the amortization of prior year losses.
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Twelve Months Ended December 31, 2023
As of December 31, 2023 Real Estate Mortgage
Charge-offs — — — — — — — — —
Recoveries 15 — 3 — — — — — 18
The increase in allowance for credit losses for construction is due to an increase in the vintage loss rate upon the implementation of CECL, partially offset by a decrease in loan balance during the year. The increase in the allowance for credit losses for residential 1 to 4 family is due to an increase in the vintage loss rate upon the implementation of CECL, as well as an increase in loan balance during the year. The decrease in allowance for credit losses for residential 1 to 4 family investment, and residential multifamily is due to lower vintage loss rates upon the implementation of CECL, partially offset by increases in loan balances during the year. The decrease in allowance for credit losses for commercial non-owner occupied is due to lower vintage loss rates upon the implementation of CECL, a decrease in loan balance, and a decrease in loss rates due to a decrease in non-performing loans.
Collateral-Dependent Loans
The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2024:
(amounts in thousands) Real Estate Business Assets Other
Commercial and Industrial $ 684 $ — $ —
Construction 1,091 — —
Commercial - Owner Occupied 400 — —
Commercial - Non-owner Occupied 5,195 — —
Residential - 1 to 4 Family 2,794 — —
Residential - 1 to 4 Family Investment 1,609 — —
Residential - Multifamily — — —
Consumer — — —
Credit Quality Indicators: As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to the risk grades of loans, the level of classified loans, net charge-offs, nonperforming loans (see details above) and the general economic conditions in the region.
The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 7. Grades 1 through 4 are considered “Pass”. A description of the general characteristics of the seven risk grades is as follows:
1.Good: Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile.
2.Satisfactory (A): Borrower reflects a well-balanced financial condition, demonstrates a high level of creditworthiness and typically will have a strong banking relationship with the Bank.
3.Satisfactory (B): Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk. Loans are considered fully collectable.
4.Watch List: Borrower reflects a fair financial condition, but there exists an overall greater than average risk. Risk is deemed acceptable by virtue of increased monitoring and control over borrowings. Probability of timely repayment is present.
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5.Other Assets Especially Mentioned (OAEM): Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently individually evaluated. The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure. Includes loans that require an increased degree of monitoring or servicing as a result of internal or external changes.
6.Substandard: This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring. Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral. Asset has a well-defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value.
7.Doubtful: Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value; accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable. Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank.
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2024 and 2023.
Commercial and Industrial
OAEM — — — — — — — —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Construction
OAEM — — — — — — — —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Owner Occupied
OAEM — — — — — — — —
Substandard — — — — — 400 — 400
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Non-owner Occupied
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Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential – 1 to 4 Family
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential – 1 to 4 Family Investment
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential – Multifamily
OAEM — — — — — — — $ —
Substandard — — — — — — — $ —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Consumer
Nonperforming — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ 21 $ — $ 21
Commercial and Industrial
OAEM — — — — — — — —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
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Construction
OAEM — — — — — — — —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Owner Occupied
OAEM — — — — — — — —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Non-owner Occupied
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential – 1 to 4 Family
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential – 1 to 4 Family Investment
Nonperforming — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Residential – Multifamily
OAEM — — — — — — — $ —
Substandard — — — — — — — $ —
Doubtful — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Consumer
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Performing $ — $ — $ — $ — $ — $ 5,493 $ 16 $ 5,509
Nonperforming — — — — — — — —
Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —
Modifications to Borrowers Experiencing Financial Difficulty
At December 31, 2024 and 2023, the Company did not make any modifications to borrowers experiencing financial difficulty.
At December 31, 2024 and 2023, there was $4.9 million and $1.2 million, respectively, of residential real estate loans where the Company was actively pursuing foreclosure.
Loans to Related Parties:In the normal course of business, the Company has granted loans to its executive officers, directors and their affiliates (related parties). All loans to related parties were made in the ordinary course of business.
An analysis of the activity of such related party loans for 2024 is as follows:
(Dollars in thousands)
Balance, beginning of year $ 696
Less: repayments (510)
Balance, end of year $ 561
Pledged Loans: At December 31, 2024 and 2023, approximately$740.5 millionand $1.3 billion, respectively, of unpaid principal balance of loans were pledged to the FHLBNY on borrowings (Note 7). This pledge consists of a blanket lien on residential mortgages and certain qualifying commercial real estate loans.
At December 31, 2024, approximately $361.0 million of unpaid principal balance of loans were pledged to the FRB on borrowings. There were no loans pledged as of December 31, 2023.
Concentrations of Credit: Most of the Company's lending activity occurs within the areas of southern New Jersey and southeastern Pennsylvania, as well as other markets. We maintain discipline in our lending with a focus on portfolio diversification. In our underwriting process, we have limits on loans to one borrower, one industry as well as product concentrations. Our loan portfolio consists of residential, commercial real estate loans, construction loans, commercial and industry loans as well as consumer loans.
Note 5. OREO
Other real estate owned (OREO) at December 31, 2024 and 2023 was $1.6 million. The real estate owned at December 31, 2024, consisted of two properties. During the year ended December 31, 2024, the Company did not dispose of any OREO properties, compared to $161.0 thousand of OREO sold during the year ended December 31, 2023, recognizing a gain of $38.0 thousand. The Company did not write-down any OREO property during 2024 or 2023. Operating expenses related to OREO, net of related income, for 2024 and 2023, were $835.0 thousand and $839.0 thousand, respectively.
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An analysis of OREO activity for the years ended December 31, 2024 and 2023 is as follows:
For the Year EndedDecember 31,
(Dollars in thousands)
Balance at beginning of period $ 1,550 $ 1,550
Real estate acquired in settlement of loans — 123
Capital improvements to existing OREO properties 12 —
Sales of OREO, net — (161)
Valuation adjustments — 38
Note 6. Deposits
Deposits at December 31, 2024 and 2023, consisted of the following:
(Dollars in thousands)
Scheduled maturities of certificates of deposit at December 31, 2024 are as follows:
Years Ending December 31, (Dollars in thousands)
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The following table is a summary of interest expense on deposits by category:
(Dollars in thousands)
Note 7. Borrowings
An analysis of borrowings at December 31, 2024 and 2023 is as follows:
Maturity Date or Range Amount WeightedAverageRate Amount WeightedAverageRate
(Dollars in thousands)
Borrowed funds:
At December 31, 2024, the Company had a $740.5 million line of credit from the FHLBNY, of which $145.0 million, as detailed above, was outstanding, $50.0 million was a letter of credit to secure public deposits, and $545.5 million was unused.