PARKE BANCORP, INC. ANNOUNCES FOURTH QUARTER 2023 EARNINGS
- None.
- Net interest income decreased 18.0% to $15.5 million for Q4 2023, compared to the same period in 2022. Non-interest expense increased $11.4 million, or 48.0%, to $35.3 million for the fiscal year ended December 31, 2023, compared to $23.8 million for the same period in 2022.
Insights
An examination of Parke Bancorp, Inc.'s Q4 2023 financial results reveals a notable 21.8% decrease in net income compared to the same quarter in the previous year. This decline is attributed to a combination of lower net interest income and higher interest expenses—a reflection of the challenging interest rate environment. The financial institution also experienced a decrease in non-interest income and an increase in non-interest expenses, the latter driven by a significant one-time contingent loss. However, a silver lining can be found in the recovery of $0.5 million in the provision for credit losses, suggesting an improvement in loan quality or a favorable shift in the loan portfolio mix.
From a balance sheet perspective, the modest growth in total assets and loans indicates conservative asset expansion, while the decrease in total deposits, particularly from cannabis-related business accounts, could signal competitive pressures or industry consolidation. The rise in brokered deposits may also point to a search for alternative funding sources amidst a challenging deposit environment. With a Return On Average Assets (ROAA) of 1.45% and a Return On Average Equity (ROAE) over 10%, the bank maintains robust profitability metrics despite the year's difficulties.
The banking sector has been navigating a complex landscape characterized by high inflation and rapid interest rate hikes. Parke Bancorp's performance reflects these broader market trends, with the CEO's commentary underscoring the impact of the Federal Reserve's monetary policy on the institution's operations. The increase in net interest income due to higher loan balances and rates is counterbalanced by the surge in interest expenses, highlighting the sensitivity to interest rate fluctuations. This sensitivity is a critical factor for investors to monitor as it directly impacts the bank's net interest margin and, consequently, its profitability.
Furthermore, the bank's strategic focus on asset quality and reserve strength positions it to weather potential economic volatility. The reduction in nonperforming loans and a high ratio of allowance for credit losses to non-performing loans suggest a prudent approach to risk management. Investors should consider how these factors, along with the CEO's outlook on potential interest rate moderation, might influence the bank's performance in the upcoming year.
The financial results of Parke Bancorp, Inc. can be evaluated within the context of the macroeconomic environment of 2023, which was marked by high inflation and aggressive rate hikes. The CEO's mention of bank failures and military conflicts adds layers of uncertainty that have likely impacted consumer and business confidence, influencing the bank's deposit and lending activities. The dynamics of the real estate market, particularly the lag in rent increases relative to debt service costs, have constrained loan growth—a trend that may persist if economic conditions do not improve.
Looking ahead, the anticipation of potential rate cuts in 2024 could alleviate some pressure on the bank's interest expenses and improve its funding costs. However, the bank's performance will continue to be closely tied to broader economic trends, including the trajectory of inflation, interest rates and real estate market conditions. These factors must be considered when assessing the bank's future financial health and strategic direction.
Highlights: | ||||
Net Income: | ||||
Revenue: | ||||
Total Assets: | ||||
Total Loans: | ||||
Total Deposits: | ||||
Highlights for the fourth quarter and year ended December 31, 2023:
- Net income available to common shareholders was
$8.2 million $0.68 $0.67 $2.3 million 21.8% , compared to net income available to common shareholders of$10.4 million $0.88 $0.86 - Net interest income decreased
18.0% to$15.5 million $18.9 million - Provision for credit losses was a recovery of
$0.5 million $0.9 million - Non-interest income decreased
$0.3 million 18.0% , to$1.5 million $1.8 million - Non-interest expense increased
$0.1 million 2.2% , to$6.3 million $6.2 million - Net income available to common shareholders was
$28.4 million $2.38 $2.35 $13.4 million 32.0% , compared to net income available to common shareholders of$41.8 million $3.51 $3.44 $11.4 million $9.5 million - Net interest income decreased
12.4% to$64.2 million $73.3 million - Provision for credit losses decreased
$3.9 million $2.1 million $1.8 million - Non-interest expense increased
$11.4 million 48.0% , to$35.3 million $23.8 million $9.5 million
The following is a recap of the significant items that impacted the fourth quarter of 2023 and the year ended December 31, 2023:
Interest income increased
Interest expense increased
The provision for credit losses decreased
Non-interest income decreased
Non-interest expense increased
Income tax expense decreased
December 31, 2023 discussion of financial condition
- Total assets increased to
$2.02 billion $1.98 billion $38.6 million 1.9% . - Cash and cash equivalents totaled
$180.4 million $182.2 million - The investment securities portfolio decreased to
$16.4 million $18.7 million $2.4 million 12.6% , primarily due to pay downs of securities. - Gross loans increased to
$1.79 billion $1.75 billion $35.9 million 2.0% . The increase in loans was primarily due to an increase in residential 1 to 4 family investment portfolio of$41.8 million $16.4 million $12.2 million $11.1 million $27.8 million - Nonperforming loans at December 31, 2023 decreased to
$7.3 million 0.41% of total loans, a decrease of$9.0 million $16.3 million $1.6 million $1.6 million 0.44% and0.90% of total assets at December 31, 2023 and December 31, 2022, respectively. Loans past due 30 to 89 days were$3.9 million $3.5 million - The allowance for credit losses was
$32.1 million $31.8 million 1.80% and1.82% at December 31, 2023 and at December 31, 2022, respectively. The ratio of allowance for credit losses to non-performing loans was442.5% at December 31, 2023, compared to195.7% , at December 31, 2022. - Total deposits were
$1.55 billion $1.58 billion $23.2 million 1.5% compared to December 31, 2022. The decrease in deposits was attributed to a decrease in non-interest demand deposits of$120.4 million $105.1 million $20.1 million $222.4 million $82.7 million $223.4 million $140.8 million $80.7 million $96.7 million $177.3 million - Total borrowings increased
$42.0 million $168.1 million $126.1 million $41.9 million New York ("FHLBNY") advances. - Total equity increased to
$284.3 million $266.0 million $18.3 million 6.9% , primarily due to the retention of earnings, partially offset by the payment of$8.6 million
CEO outlook and commentary
Vito S. Pantilione, President and Chief Executive Officer of Parke Bancorp, Inc. and Parke Bank, provided the following statement:
"2023 was a challenging year for the country, our region and the banking industry. Inflation remained high, although some relief was experienced in the 4th quarter and interest rates remained high after an unprecedented 550 basis point increase over the last 18 months. There were also bank failures in 2023. World military conflicts continue to grow creating concern for the many innocent lives being lost and the uncertainty of the effect these wars are having on the world economy, including
"The challenges in 2023 were compounded for our Company with the booking of a
"Maintaining deposits remained challenging in 2023, triggering higher rates and the offering of special deposit programs. This caused a substantial increase in our interest expense as rates continued to climb. If interest rates do moderate in 2024, we anticipate seeing a lower cost of funding and stronger deposits. Loan growth was less than projected, again due to higher interest rates and difficulties in the real estate industry. It became more difficult to qualify new loan requests with the higher debt service. Increased rents did not keep pace with the rising debt service cost. We have, however, seen an increase in loan activity in the beginning of 2024 due to the anticipated interest rate cuts."
"Although 2023 had many challenges as mentioned above, our Company generated a Return On Average Assets of
Forward Looking Statement Disclaimer
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 strong capital, strong asset quality and strong reserves; our ability to recover or partially offset any losses resulting from loss of stored or missing cash; our ability to generate strong revenues with increased interest income and net interest income;; our ability to continue the financial strength and growth of our Company and Parke Bank; our ability to continue to increase shareholders' equity, good credit quality; our ability to be well structured to face challenging economic conditions; our ability to ensure that our loan loss provision is well positioned for the future; 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, Inc. 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.
(PKBK-ER)
Financial Supplement:
Table 1: Condensed Consolidated Balance Sheets (Unaudited) | |||
Parke Bancorp, Inc. and Subsidiaries | |||
Condensed Consolidated Balance Sheets | |||
December 31, | December 31, | ||
2023 | 2022 | ||
(Dollars in thousands) | |||
Assets | |||
Cash and cash equivalents | $ 180,376 | $ 182,150 | |
Investment securities | 16,387 | 18,744 | |
Loans, net of unearned income | 1,787,340 | 1,751,459 | |
Less: Allowance for credit losses | (32,131) | (31,845) | |
Net loans | 1,755,209 | 1,719,614 | |
Premises and equipment, net | 5,579 | 5,958 | |
Bank owned life insurance (BOLI) | 28,415 | 28,145 | |
Other assets | 37,534 | 30,304 | |
Total assets | $ 2,023,500 | $ 1,984,915 | |
Liabilities and Equity | |||
Non-interest bearing deposits | $ 232,189 | $ 352,546 | |
Interest bearing deposits | 1,320,638 | 1,223,436 | |
FHLBNY borrowings | 125,000 | 83,150 | |
Subordinated debentures | 43,111 | 42,921 | |
Other liabilities | 18,245 | 16,828 | |
Total liabilities | 1,739,183 | 1,718,881 | |
Total shareholders' equity | 284,317 | 266,034 | |
Total equity | 284,317 | 266,034 | |
Total liabilities and equity | $ 2,023,500 | $ 1,984,915 | |
Table 2: Consolidated Income Statements (Unaudited) | |||||||
For the three months ended | For the twelve months ended | ||||||
2023 | 2022 | 2023 | 2022 | ||||
(Dollars in thousands, except share data) | |||||||
Interest income: | |||||||
Interest and fees on loans | $ 28,459 | $ 23,389 | $ 106,061 | $ 82,900 | |||
Interest and dividends on investments | 303 | 207 | 1,048 | 772 | |||
Interest on deposits with banks | 1,537 | 1,407 | 5,595 | 3,811 | |||
Total interest income | 30,299 | 25,003 | 112,704 | 87,483 | |||
Interest expense: | |||||||
Interest on deposits | 13,214 | 5,178 | 41,259 | 11,071 | |||
Interest on borrowings | 1,570 | 909 | 7,231 | 3,085 | |||
Total interest expense | 14,784 | 6,087 | 48,490 | 14,156 | |||
Net interest income | 15,515 | 18,916 | 64,214 | 73,327 | |||
(Recovery of) provision for credit losses | (451) | 850 | (2,051) | 1,800 | |||
Net interest income after (recovery of) provision for credit losses | 15,966 | 18,066 | 66,265 | 71,527 | |||
Non-interest income | |||||||
Service fees on deposit accounts | 724 | 1,165 | 3,872 | 4,927 | |||
Gain on sale of SBA loans | — | — | — | 98 | |||
Other loan fees | 239 | 241 | 851 | 1,379 | |||
Bank owned life insurance income | 294 | 144 | 737 | 568 | |||
Net gain on sale and valuation adjustment of OREO | — | — | 38 | 328 | |||
Other | 223 | 255 | 1,194 | 1,082 | |||
Total non-interest income | 1,480 | 1,805 | 6,692 | 8,382 | |||
Non-interest expense | |||||||
Compensation and benefits | 2,925 | 2,871 | 12,340 | 10,835 | |||
Professional services | 583 | 579 | 2,328 | 2,249 | |||
Occupancy and equipment | 666 | 631 | 2,604 | 2,522 | |||
Data processing | 348 | 308 | 1,385 | 1,293 | |||
FDIC insurance and other assessments | 332 | 239 | 1,292 | 1,050 | |||
OREO expense | 229 | 89 | 839 | 493 | |||
Other operating expense | 1,204 | 1,434 | 14,479 | 5,391 | |||
Total non-interest expense | 6,287 | 6,151 | 35,267 | 23,833 | |||
Income before income tax expense | 11,159 | 13,720 | 37,690 | 56,076 | |||
Income tax expense | 2,986 | 3,266 | 9,228 | 14,253 | |||
Net income attributable to Company | 8,173 | 10,454 | 28,462 | 41,823 | |||
Less: Preferred stock dividend | (6) | (7) | (26) | (27) | |||
Net income available to common shareholders | $ 8,167 | $ 10,447 | $ 28,436 | $ 41,796 | |||
Earnings per common share | |||||||
Basic | $ 0.68 | $ 0.88 | $ 2.38 | $ 3.51 | |||
Diluted | $ 0.67 | $ 0.86 | $ 2.35 | $ 3.44 | |||
Weighted average common shares outstanding | |||||||
Basic | 11,947,530 | 11,934,021 | 11,945,740 | 11,918,319 | |||
Diluted | 12,133,511 | 12,166,044 | 12,137,052 | 12,175,440 | |||
Table 3: Operating Ratios | |||||||
Three months ended | Twelve months ended | ||||||
December 31, | December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Return on average assets | 1.64 % | 2.13 % | 1.45 % | 2.10 % | |||
Return on average common equity | 11.50 % | 15.77 % | 10.21 % | 16.72 % | |||
Interest rate spread | 2.17 % | 3.33 % | 2.42 % | 3.08 % | |||
Net interest margin | 3.17 % | 3.91 % | 3.34 % | 3.77 % | |||
Efficiency ratio* | 36.99 % | 29.68 % | 48.34 % | 29.17 % | |||
* Efficiency ratio is calculated using non-interest expense divided by the sum of net interest income and non-interest income. |
Table 4: Asset Quality Data | |||
December 31, | December 31, | ||
2023 | 2022 | ||
(Amounts in thousands except ratio data) | |||
Allowance for credit losses | $ 32,131 | $ 31,845 | |
Allowance for credit losses to total loans | 1.80 % | 1.82 % | |
Allowance for credit losses to non-accrual loans | 442.51 % | 195.66 % | |
Non-accrual loans | $ 7,261 | $ 16,276 | |
OREO | $ 1,550 | $ 1,550 | |
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SOURCE Parke Bancorp, Inc.
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