Overview

Parke Bancorp, Inc. (the “Company”) is a bank holding company headquartered in Washington Township, New Jersey. Through its subsidiary, Parke Bank (the “Bank”), the Company provides personal and business financial services to individuals and small to mid-sized businesses primarily in New Jersey, Pennsylvania, and New York.

As of December 31, 2024, the Company 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, a decrease of 3.3% from the previous year.

The Company’s business operations are subject to various risks and uncertainties, including changes to the U.S. economic condition, market interest rates, the Federal Reserve Board’s monetary policy, government policies, and actions of regulatory agencies.

Financial Performance

Net Income The Company 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. This represents a decrease of $0.9 million, or 3.3%, compared to the previous year.

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 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 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. Interest expense increased to $66.4 million for 2024, from $48.5 million for 2023, an increase of $17.9 million, or 36.9%, primarily due to an increase in market interest rates on deposit accounts and a change in the deposit mix.

The following table presents the average daily balances, interest income/expense, and average yields/costs for the years ended December 31, 2024 and 2023:

Provision for Credit Losses The Company recorded a provision for credit losses of $0.7 million in 2024, compared to a recovery for credit losses of $2.1 million in 2023. The increase in the provision was primarily due to an increase in outstanding loan balances, partially offset by a decrease in loss rates.

Non-Interest Income Non-interest income decreased by $2.4 million to $4.3 million during the year ended December 31, 2024, primarily due to a decrease in fee income related to cannabis-related business deposit fees and other loan fees.

Non-Interest Expense Non-interest expense decreased $9.3 million to $26.0 million for the year ended December 31, 2024, primarily due to a decrease in other operating expense of $10.1 million, partially offset by increases in compensation and benefits and professional services.

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

Assets 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 was primarily attributable to an increase in cash and cash equivalents of $41.2 million and an increase in total loans outstanding of $80.8 million.

Loans Loans receivable, net of unearned income, 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 The allowance for credit losses increased $0.4 million, to $32.6 million, or 1.38% of total loans, 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 Total deposits increased to $1.63 billion at December 31, 2024, from $1.55 billion at December 31, 2023, an increase of $78.2 million, or 5.0%. The increase 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.

Borrowings Total borrowings increased $20.2 million to $188.3 million at December 31, 2024, from $168.1 million at December 31, 2023. The increase 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 was primarily due to the retention of earnings, partially offset by the recognition of $8.6 million of cash dividends and the repurchase of $4.3 million of the Company’s common stock.

Liquidity and Capital Resources The Company’s primary source of funding has been deposits, which comprised the vast majority of its funding needs. The Company also utilizes brokered deposits, secured borrowing lines with the FHLBNY and the Federal Reserve Bank, and its investment portfolio to provide additional liquidity.

As of December 31, 2024, the Company’s cash position was $221.5 million, and it 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. The Company also had a borrowing capacity through the FRB discount window of $252.0 million, with no outstanding balances.

The Company and the Bank exceeded all applicable regulatory capital requirements as of December 31, 2024, and were considered well-capitalized.

Strengths and Weaknesses

Strengths:

• Diversified loan portfolio with a focus on residential multi-family, commercial owner-occupied, and construction lending
• Stable and low-cost deposit base, with a growing presence in the cannabis industry
• Solid capital position, with a risk-based tier 1 capital ratio of 21.2% at December 31, 2024
• Effective risk management practices, including strong oversight of cybersecurity risks

Weaknesses:

• Declining net interest income and net interest margin due to rising interest rates and changes in the deposit mix
• Reliance on fee income from the cannabis industry, which could be impacted by regulatory changes
• Potential for increased credit risk if economic conditions deteriorate

Outlook

The Company’s financial performance in 2024 was impacted by a decline in net interest income and net interest margin, as well as a decrease in non-interest income. However, the Company’s balance sheet remains strong, with solid capital levels and ample liquidity.

Going forward, the Company will need to navigate the challenges of a rising interest rate environment and potential changes in the regulatory landscape for the cannabis industry. Maintaining strong asset quality and diversifying its revenue streams will be critical to the Company’s long-term success.

The Company’s focus on small to mid-sized business and retail customers, as well as its commitment to risk management and corporate governance, position it well to weather any future economic or industry-specific challenges. With a strong foundation in place, the Company is poised to continue delivering value to its shareholders, customers, and the communities it serves.