Parke Bancorp, Inc. Announces Fourth Quarter 2020 Earnings

Rhea-AI Summary

Parke Bancorp reported Q4 2020 net income of $8.1 million, or $0.69 per share, a 7.8% increase from Q4 2019. Revenue for the quarter stood at $23.2 million, with total assets rising 23.5% to $2.08 billion year-over-year. Loans reached $1.57 billion, marking a 10.2% increase, while deposits grew 18.9% to $1.59 billion. Despite challenges from COVID-19, the bank maintained a robust capital position and anticipates slow loan growth ahead.

Positive

• Net income increased by $585,000 or 7.8% year-over-year.
• Total assets rose by 23.5% year-over-year to $2.08 billion.
• Loans increased by 10.2% year-over-year to $1.57 billion.
• Total deposits grew by 18.9% year-over-year to $1.59 billion.
• Net interest income increased 16.7% to $17.1 million for Q4 2020.

Negative

• Loan loss provisions increased by $1.9 million in Q4 2020 due to economic uncertainty.
• Net income available for the year decreased by $1.4 million or 4.8% compared to 2019.

WASHINGTON TOWNSHIP, N.J., Jan. 21, 2021 /PRNewswire/ -- 

Highlights:
Net Income:		$8.1 million, Q4 results also reflected a $1.9 million loan loss provision
Revenue:		$23.2 million for Q4 2020
Total Assets:		$2.08 billion,  increased 23.5% over December 31, 2019
Total Loans:		$1.57 billion,  increased 10.2% over December 31, 2019
Total Deposits:		$1.59 billion,  increased 18.9% over December 31, 2019

Parke Bancorp, Inc. ("Parke Bancorp") (NASDAQ: "PKBK"), the parent company of Parke Bank, announced its operating results for the quarter and year ended  December 31, 2020.

Highlights for fourth quarter and year ended December 31, 2020:

• Net income available to common shareholders was $8.1 million, or $0.69 per basic common share and $0.68 per diluted common share for the fourth quarter of 2020, an increase of $585,000, or 7.8%, compared to net income available to common shareholders of $7.5 million, or $0.64 per basic common share and $0.63 per diluted common share for the same quarter in 2019. The increase is primarily driven by an increase in net interest income and higher non-interest income partially offset by a higher loan losses provision and non-interest expense.

• Net interest income increased 16.7% to $17.1 million for the fourth quarter of 2020, compared to $14.7 million for the same quarter of 2019.

• Net income available to common shareholders decreased $1.4 million or 4.8%, to $28.4 million or $2.40 per basic common share and $2.37 per diluted common share for the year to date period ended December 31, 2020, compared to net income available to common shareholders of $29.8 million, or $2.52 per basic common share and $2.48 per diluted common share for the year to date period ended December 31, 2019.

• Net interest income increased 10.1% to $62.6 million for the year to date period ended December 31, 2020, compared to $56.9 million for the same period in 2019.

The following is a recap of the significant items that impacted the fourth quarter and the year ended December 31, 2020 period:

Interest income increased $724,000 and $5.0 million for the fourth quarter of 2020 and year to date December 31, 2020 periods, respectively, compared to the same periods in 2019, primarily due to higher average loan volume, partially offset by the impact of lower interest rates on average loans and on average deposits held in the Federal Reserve Bank. The Federal Reserve Board had reduced rates in response to the COVID-19 pandemic. Also contributing to the increase in interest income for the fourth quarter and year to date December 31, 2020 were $594,000 and $1.4 million increase in interest and fees on loans from the SBA Paycheck Protection Program loans ("SBA PPP Loans"). 

Interest expense decreased $1.7 million and $762,000 for the fourth quarter and the year to date periods ended December 31, 2020, compared to the same periods in 2019, primarily due to lower interest rates partially offset by an increase in average volume on deposits and other borrowings.

The provision for loan losses increased $1.2 million to $1.9 million for the fourth quarter of 2020, compared to the same period in 2019. For the year to date period ended December 31, 2020, the provision for loan losses increased $4.9 million to $7.6 million, compared to year to date period ended December 31, 2019. The increase in the provision was primarily due to an increase in qualitative factors as economic uncertainty continues as a result of the COVID-19 pandemic on our borrowers as of December 31, 2020.

For the fourth quarter of 2020, non-interest income increased $664,000, compared to the same period of 2019, primarily attributable to an increase in service fees from deposit accounts and a decrease on net losses on sale of other real estate owned ("OREO"). For the year to date period ended December 31, 2020, non-interest income increased $344,000, compared to the same period of 2019. The increase is primarily due to increase in service fees from deposit accounts, partially offset by a decrease in loan fees, and  increased net losses on sale of OREO.

Non-interest expense increased $923,000 for the fourth quarter 2020, compared to the same period of 2019, primarily due to an increase in compensation, professional fees, and FDIC insurance assessment fee. For the year to date period ended December 31, 2020, non-interest expense increased $2.3 million, compared to the same periods of 2019, primarily attributable to an increase in compensation, FDIC insurance assessment fees, data processing cost, and occupancy and equipment cost. The increases in non-interest expenses mainly reflect the growth of the business.

Income tax expense increased $403,000 and $226,000 for the fourth quarter and the year to date period ended December 31, 2020, compared to the same periods in 2019. The effective tax rates for fourth quarter and year to date December 31, 2020 were 25.7%, compared to 24.2 % and 24.4% for the same periods in 2019.

December 31, 2020 discussion of financial condition

• Total assets increased to $2.08 billion at December 31, 2020, from $1.68 billion at December 31, 2019, an increase of $394.7 million, or 23.5%, primarily due to an increase in cash deposits with the Federal Reserve Bank, and an increase in loans, particularly a  $91.2 million increase in SBA PPP loans.

• Cash and cash equivalents totaled $458.6 million at December 31, 2020, as compared to $191.6 million at December 31, 2019.

• The investment securities portfolio decreased to $21.1 million at December 31, 2020, from $27.8 million at December 31, 2019, a decrease of $6.7 million, or 24.0%, primarily due to pay downs of securities.

• Gross loans increased to $1.57 billion at December 31, 2020, from $1.42 billion at December 31, 2019, an increase of $145.1 million or 10.2%. Gross loans at December 31, 2020, included SBA PPP Loans and loans from our deferment and relief programs, which are intended to provide an appropriate level of financial relief for the individuals and businesses experiencing hardship as a result of the COVID-19 pandemic. Majority of our originally classified deferred COVID-19 loans were no longer in deferral status at December 31, 2020.

• Nonperforming loans at December 31, 2020 increased to $8.7 million, representing 0.56% of total loans, an increase of $3.4 million, from $5.3 million of nonperforming loans at December 31, 2019. OREO at December 31, 2020 was $139,000, a decrease of $4.6 million compared to $4.7 million at December 31, 2019, primarily due to the sales of OREO assets. Nonperforming assets (consisting of nonperforming loans and OREO) represented 0.43% and 0.60% of total assets at December 31, 2020 and December 31, 2019, respectively. Loans past due 30 to 89 days were $2.8 million at December 31, 2020, an increase of $0.8 million from December 31, 2019.

• The allowance for loan losses was $29.7 million at December 31, 2020, as compared to $21.8 million at December 31, 2019. The ratio of the allowance for loan losses to total loans was 1.90% and 1.54% at December 31, 2020 and at December 31, 2019, respectively. The ratio of allowance for loan losses to non-performing loans was 340.2% at December 31, 2020, compared to 407.8%, at December 31, 2019.

• Total deposits were $1.59 billion at December 31, 2020, up from $1.34 billion at December 31, 2019, an increase of $253.2 million or 18.9% compared to December 31, 2019. Deposit growth was primarily due to an increase in non-interest bearing demand and money market deposits.

• Total borrowings were $267.2 million at December 31, 2020, an increase of $119.2 million, compared to December 31, 2019, primarily due to $90.0 million increase in advances from the Federal Reserve Bank for the SBA PPP Loans and the issuance on July 15, 2020 of $30.0 million subordinated notes due 2030 (the "Notes").

• Total equity increased to $202.6 million at December 31, 2020, up from $179.4 million at December 31, 2019, an increase of $23.2 million, or 12.9%, primarily due to the retention of earnings.

CEO outlook and commentary

Vito S. Pantilione, President and Chief Executive Officer of Parke Bancorp, Inc. and Parke Bank, provided the following statement:

"Like most, I'm glad 2020 is over. The country faced unprecedented turmoil and suffering. COVID-19 devastated people's lives and the economy. The second wave of COVID-19 once again locked down many businesses that were barely holding on after the first lockdown. The political chaos added additional fear and uncertainty about the future of this Country. I for one am optimistic that the resiliency of the people of this Country will once again emerge. Businesses will find new ways to not only survive but succeed in this new world, but it won't be easy. 2021 will also be a major challenge for the economy and businesses. The rollout of the much awaited COVID-19 vaccines will help calm many fears and instill some much-needed confidence in the future.

Parke Bank continued to generate very strong earnings during these troubling times. Although slightly less than our 2019 record earnings of $29 million, we still generated $28.4 million in Net Income while increasing our loan loss provision by close to $5 million over 2019's loan loss provision. When eliminating our SBA PPP Loans, which are 100% guaranteed by the SBA, from our outstanding loan portfolio, our ALLL is over 2%. We will continue to be cautious in this uncertain economy, ensuring that our strong financial condition is maintained.

Excluding our participation in round 1 of the SBA PPP Loans program, which was close to $100 million, loan growth in 2020 was relatively flat. We anticipate loan growth to continue to be very slow until there are clear indicators that the economy has sustainable strength. At the present time we anticipate participating in round 2 of the SBA PPP Loan program, although it will be restricted to existing customers only. This is a very important program to help our customers survive this devastating economy. This is a commitment that we have made to our customers even though the interest rate on PPP loans is fixed by law at only 1%.

Like the rest of the country, Parke Bank is facing many challenges in 2021. We are structured to face these challenges head on and succeed. Our control of operating expenses while still providing premium service to our customers will continue to be the foundation of our success. Through turmoil, sometimes opportunities appear. Parke Bank's strong capital position and flexibility puts us in position to evaluate these opportunities and take the steps needed to maintain and work to grow our financial strength."

This release may contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties which may cause actual results to differ materially from those currently anticipated due to a number of factors; our ability to maintain a strong capital base, strong earning and strict cost controls; our ability to generate strong revenues with increased interest income and net interest income; our ability to ensure our Company and our loan loss provision is  well positioned for the future as the COVID-19 pandemic continues; our ability to continue to reduce our nonperforming loans and delinquencies and the expenses associated with them; our ability to realize a high recovery rate on disposition of troubled assets; our ability to continue to pay a dividend in the future; our ability to enhance shareholder value in the future; our ability to continue growing our Company, our earnings and shareholders' equity; and our ability to continue to grow our loan portfolio; the possibility of additional corrective actions or limitations on the operations of Parke Bancorp and Parke Bank being imposed by banking regulators, therefore, readers should not place undue reliance on any forward-looking statements. Parke Bancorp, Inc. does not undertake, and specifically disclaims, any obligations to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such circumstance.

In addition, the COVID-19 pandemic is having an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board's target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; due to a decline in our stock price or other factors, and our cyber security risks are increased as the result of an increase in the number of employees working remotely.

Financial Supplement:

Table 1: Condensed Consolidated Balance Sheets (Unaudited)

Parke Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
	December 31,				December 31,
	2020				2019
	(Amounts in thousands)
Assets
Cash and cash equivalents	$	458,601			$	191,607
Investment securities	21,106				27,780
Loans held for sale	200				190
Loans, net of unearned income	1,565,807				1,420,749
Less: Allowance for loan losses	(29,698)				(21,811)
Net loans	1,536,109				1,398,938
Premises and equipment, net	6,698				6,946
Bank owned life insurance (BOLI)	27,002				26,410
Other assets	26,191				29,289
Total assets	$	2,075,907			$	1,681,160
Liabilities
Noninterest-bearing deposits	$	428,860			$	259,269
Interest-bearing deposits	1,163,583				1,079,950
FHLBNY borrowings	134,650				134,650
PPPLF advances from FRB	90,026				—
Subordinated debentures	42,542				13,403
Other liabilities	13,649				14,464
Total liabilities	1,873,310				1,501,736
Total shareholders' equity	200,925				177,605
Noncontrolling interest in consolidated subsidiaries	1,672				1,819
Total equity	202,597				179,424
Total liabilities and equity	$	2,075,907			$	1,681,160

Table 2: Consolidated Income Statements (Unaudited)

	For three months ended December 31,								For twelve months ended December 31,
	2020				2019				2020				2019
	(Amounts in thousands, except share data)
Interest income:
Interest and fees on loans	$	21,348			$	20,095			$	82,336			$	75,172
Interest and dividends on investments	211				272				1,008				1,161
Interest on federal funds sold and deposits with banks	106				574				1,194				3,207
Total interest income	21,665				20,941				84,538				79,540
Interest expense:
Interest on deposits	3,336				5,289				17,711				18,687
Interest on borrowings	1,214				981				4,182				3,968
Total interest expense	4,550				6,270				21,893				22,655
Net interest income	17,115				14,671				62,645				56,885
Provision for loan credit losses	1,850				650				7,646				2,700
Net interest income after provision for loan losses	15,265				14,021				54,999				54,185
Non-interest income
Gain on sale of SBA loans	—				—				—				116
Other loan fees	248				243				860				982
Bank owned life insurance income	149				151				592				601
Service fees on deposit accounts	919				524				2,521				1,921
Net loss on sale and valuation adjustment of OREO	(23)				(99)				(371)				(246)
Other	235				45				581				465
Total non-interest income	1,528				864				4,183				3,839
Non-interest expense
Compensation and benefits	2,938				2,493				10,612				9,188
Professional services	836				451				1,987				1,946
Occupancy and equipment	502				436				2,031				1,793
Data processing	321				316				1,290				1,046
FDIC insurance and other assessments	224				(14)				805				56
OREO expense	13				113				271				415
Other operating expense	899				1,015				3,300				3,508
Total non-interest expense	5,733				4,810				20,296				17,952
Income before income tax expense	11,060				10,075				38,886				40,072
Income tax expense	2,840				2,437				10,011				9,785
Net income attributable to Company and noncontrolling interest	8,220				7,638				28,875				30,287
Less: Net income attributable to noncontrolling interest	(88)				(90)				(447)				(446)
Net income attributable to Company	8,132				7,548				28,428				29,841
Less: Preferred stock dividend	(7)				(8)				(29)				(24)
Net income available to common shareholders	$	8,125			$	7,540			$	28,399			$	29,817
Earnings per common share
Basic	$	0.69			$	0.64			$	2.40			$	2.52
Diluted	$	0.68			$	0.63			$	2.37			$	2.48
Weighted average common shares outstanding
Basic	11,851,903				11,848,198				11,850,223				11,838,096
Diluted	11,997,542				12,016,387				11,989,608				12,011,082

Table 3: Operating Ratios

	Three months ended						For the year ended
	December 31,						December 31,
	2020			2019			2020			2019
Return on average assets	1.58	%		1.87	%		1.49	%		1.94	%
Return on average common equity	16.41	%		17.05	%		14.98	%		17.93	%
Interest rate spread	3.00	%		3.13	%		2.89	%		3.09	%
Net interest margin	3.36	%		3.69	%		3.31	%		3.75	%
Efficiency ratio	30.75	%		30.96	%		30.37	%		29.56	%

* Return on the average assets is calculated using net income attributable to Company and noncontrolling interest dividing average assets

Table 4: Asset Quality Data

	December 31,				December 31,
	2020				2019
	(Amounts in thousands except ratio data)
Allowance for loan losses	$	29,698			$	21,811
Allowance for loan losses to total loans	1.90		%		1.54		%
Allowance for loan losses to non-accrual loans	340.22		%		407.83		%
Non-accrual loans	$	8,729			$	5,348
OREO	$	139			$	4,727

 

 

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SOURCE Parke Bancorp, Inc.

FAQ

What was Parke Bancorp's net income for Q4 2020?

Parke Bancorp reported a net income of $8.1 million for Q4 2020.

How much did Parke Bancorp's total assets increase by in 2020?

Total assets increased by 23.5%, reaching $2.08 billion as of December 31, 2020.

What was the revenue for Parke Bancorp in Q4 2020?

The revenue for Q4 2020 was $23.2 million.

How much did Parke Bancorp's loans grow in 2020?

Loans grew by 10.2%, totaling $1.57 billion by December 31, 2020.

What challenges does Parke Bancorp anticipate in 2021?

Parke Bancorp anticipates slow loan growth and continued economic challenges in 2021.