Parke Bancorp, Inc. Announces Third Quarter Earnings

Rhea-AI Summary

Parke Bancorp (PKBK) reported solid Q3 2021 results, boasting a net income of $10.5 million or $0.88 per share, marking a 60.6% increase from Q3 2020. Total revenue reached $22.8 million, driven by a 13.2% rise in net interest income to $17.5 million. Total assets increased 3.7% to $2.16 billion, while total deposits surged 11.9% to $1.78 billion. However, total loans decreased 5.9% to $1.47 billion, influenced by pandemic-related economic uncertainty. Despite challenges, the company maintained a strong capital position and earnings.

Positive

• Net income increased to $10.5 million, up 60.6% YoY.
• Revenue reached $22.8 million, boosted by higher net interest income.
• Total assets rose to $2.16 billion, a 3.7% increase.
• Total deposits grew to $1.78 billion, an 11.9% increase.

Negative

• Total loans decreased by 5.9% to $1.47 billion, indicating lowered lending activity.
• Economic uncertainty from the COVID-19 pandemic continues to affect loan generation.

WASHINGTON TOWNSHIP, N.J., Oct. 20, 2021 /PRNewswire/ --

Highlights:
Net Income:		$10.5 million
Revenue:		$22.8 million for Q3 2021
Total Assets:		$2.16 billion,  increased 3.7% over December 31, 2020
Total Loans:		$1.47 billion,  decreased 5.9% over December 31, 2020
Total Deposits:		$1.78 billion,  increased 11.9% over December 31, 2020

Parke Bancorp, Inc. ("Parke Bancorp" or the "Company") (NASDAQ: "PKBK"), the parent company of Parke Bank, announced its operating results for the quarter ended  September 30, 2021.

Highlights for the three and nine months ended September 30, 2021:

• Net income available to common shareholders was $10.5 million, or $0.88 per basic common share and $0.87 per diluted common share, for the three months ended September 30, 2021, an increase of $4.0 million, or 60.6%, compared to net income available to common shareholders of $6.5 million, or $0.55 per basic common share and $0.55 per diluted common share, for the same quarter in 2020. The increase is primarily driven by an increase in net interest income, reduced loan loss provision, and higher non-interest income, partially offset by higher non-interest expense.

• Net interest income increased 13.2% to $17.5 million for the three months ended September 30, 2021, compared to $15.4 million for the same period in 2020.

• Net income available to common shareholders was $30.7 million, or $2.58 per basic common share and $2.53 per diluted common share, for the nine months ended September 30, 2021, an increase of $10.4 million, or 51.3%, compared to net income available to common shareholders of $20.3 million, or $1.71 per basic common share and $1.69 per diluted common share, for the same period in 2020. The increase is primarily driven by an increase in net interest income, reduced loan loss provision, and higher non-interest income, partially offset by higher non-interest expense.

• Net interest income increased 15.0% to $52.4 million for the nine months ended September 30, 2021, compared to $45.5 million for the same period in 2020.

The following is a recap of the significant items that impacted the three and nine months ended September 30, 2021 period:

Interest income decreased $0.3 million for the third quarter of 2021 compared to the same period in 2020, primarily due to a decrease in interest and fees on loans attributed to lower loan portfolio balances.  For the year to date period ended September 30, 2021, interest income decreased $0.4 million from the same period in 2020, primarily driven by the impact of lower interest rates on average deposits held in the Federal Reserve Bank ("FRB"). The Federal Reserve Board reduced interest rates in response to the COVID-19 pandemic.

Interest expense decreased $2.3 million and $7.2 million for the third quarter of 2021 and year to date September 30, 2021, respectively, compared to the same periods in 2020, primarily due to lower interest rates on deposits.

The provision for loan losses decreased $2.4 million and $5.3 million for the third quarter of 2021 and year to date September 30, 2021, compared to the same periods in 2020. The decrease in the provision was primarily due to the increase in qualitative factors made in 2020 as a result of economic uncertainty associated with the COVID-19 pandemic.

For the third quarter of 2021, non-interest income increased $1.5 million, compared to the same period in 2020.  For the year to date September 30, 2021, non-interest income increased $3.9 million compared to the same period in 2020.  The increases were primarily attributable to an increase in service fees from deposit accounts related to our cannabis related businesses (CRB).

Non-interest expense increased $0.6 million and $2.4 million for the third quarter 2021 and year to date September 30, 2021, respectively, compared to the same periods in 2020, primarily due to an increase in professional fees related to our Bank Secrecy Act (BSA) remediation efforts, and various other expense categories as a result of the growth of the Company.

Income tax expense increased $1.4 million for the third quarter 2021 and $3.4 million for the year to date September 30, 2021, respectively, compared to the same periods in 2020. The effective tax rates for the third quarter of 2021 and for the year to date September 30, 2021 were 26.0% and 25.5%, respectively, compared to 25.8% for the same periods in 2020.

September 30, 2021 discussion of financial condition

• Total assets increased to $2.16 billion at September 30, 2021, from $2.08 billion at December 31, 2020, an increase of $77.3 million, or 3.7%, primarily due to an increase in cash deposits with the Federal Reserve Bank, net of a decrease in loans receivable.

• Cash and cash equivalents totaled $623.8 million at September 30, 2021, as compared to $458.6 million at December 31, 2020.

• The investment securities portfolio increased to $24.6 million at September 30, 2021, from $21.1 million at December 31, 2020, an increase of $3.5 million, or 16.7%, primarily due to the purchase of $8.7 million of securities classified as held-to-maturity, net of pay downs of securities.

• Gross loans decreased to $1.47 billion at September 30, 2021, from $1.57 billion at December 31, 2020, a decrease of $92.2 million or 5.9%.

• Nonperforming loans at September 30, 2021 decreased to $4.5 million, representing 0.30% of total loans, a decrease of $4.2 million, from $8.7 million of nonperforming loans at December 31, 2020. OREO at September 30, 2021 was $1.8 million, an increase of $1.6 million compared to $139 thousand at December 31, 2020, primarily due to the repossession of one commercial property. Nonperforming assets (consisting of nonperforming loans and OREO) represented 0.29% and 0.43% of total assets at September 30, 2021 and December 31, 2020, respectively. Loans past due 30 to 89 days were $259 thousand at September 30, 2021, a decrease of $2.5 million from December 31, 2020.

• The allowance for loan losses was $29.8 million at September 30, 2021, as compared to $29.7 million at December 31, 2020. The ratio of the allowance for loan losses to total loans was 2.02% and 1.90% at September 30, 2021 and at December 31, 2020, respectively. The ratio of allowance for loan losses to non-performing loans was 664.1% at September 30, 2021, compared to 340.2%, at December 31, 2020.

• Total deposits were $1.78 billion at September 30, 2021, up from $1.59 billion at December 31, 2020, an increase of $188.8 million or 11.9% compared to December 31, 2020. Deposit growth was primarily due to an increase in non-interest bearing demand, savings, and time deposits.

• Total borrowings were $133.8 million at September 30, 2021, a decrease of $133.4 million, compared to December 31, 2020, primarily due to the repayment of $90.0 million in advances from the Federal Reserve Bank PPP Liquidity Facility ("PPPLF") for the Small Business Administration ("SBA") PPP Loans, and $43.5 million in pay downs of Federal Home Loan Bank advances.

• Total equity increased to $225.7 million at September 30, 2021, up from $202.6 million at December 31, 2020, an increase of $23.1 million, or 11.4%, 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:

"Parke Bancorp continues to generate strong earnings with third quarter Net Income of $10.5 million, up over 60% from the same period in 2020. Net Income year to date is close to $31 million, up over 50% from the same period in 2020. Although our assets have grown 3.7% year to date, the growth has been driven by the excess liquidity in the market and held in cash. We continue to work hard to reduce our cost of deposits, which is reflected in the growth of our net interest income. Our outstanding loan portfolio went down, partly due to the SBA forgiveness of many of the PPP loans. The pandemic concerns and economic challenges continue to dictate caution in generating new loans."

"The COVID-19 pandemic continues to fuel uncertainty in the regional and national economy. Complications from vaccination requirements and reinstated COVID-19 public health restrictions have had an effect on employment and inflation. There is a concern that the current growth in inflation is not simply transitory but may possibly be a mainstay of the economy for a period of time. The Federal Reserve has already stated that they may need to move interest rates up in 2023 rather than 2024 as initially reported. Shortage of goods, including electronics and other critically important products that are stuck on cargo ships unable to be unloaded, is having a negative effect on the economy. The construction industry continues to be hit with skyrocketing costs of materials and manpower shortages causing cost overruns on many projects."

"One of the more concerning issues that is facing the banking industry is the pending legislation that includes the requirement of banks to track every $600 transaction of their customers' accounts.  If enacted, this legislation will put an immense burden on all banks and drive up the cost of banking for our customers.  In our view, this would be an unnecessary level of government intrusion into people's private lives and make banking services more expensive for the average customer."

"There are many clouds on the horizon, however we continue to maintain strict controls on our expenses, have a strong capital position and earnings, all critical to the financial strength of our Company."

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 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 continue the financial strength and growth of our Company and Parke Bank; our ability to continue to increase shareholders' equity, maintain strong reserves and good credit quality; our ability to ensure our Company continues to have strong loan loss reserves; our ability to ensure that 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.

(PKBK-ER)

Financial Supplement:

Table 1: Condensed Consolidated Balance Sheets (Unaudited)
Parke Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
	September 30,				December 31,
	2021				2020
	(Amounts in thousands)
Assets
Cash and cash equivalents	$	623,825			$	458,601
Investment securities	24,635				21,106
Loans held for sale	—				200
Loans, net of unearned income	1,473,816				1,565,807
Less: Allowance for loan losses	(29,838)				(29,698)
Net loans	1,443,978				1,536,109
Premises and equipment, net	6,370				6,698
Bank owned life insurance (BOLI)	27,431				27,002
Other assets	29,409				28,606
Total assets	$	2,155,648			$	2,078,322
Liabilities and Equity
Non-interest bearing deposits	$	542,596			$	428,860
Interest bearing deposits	1,238,644				1,163,583
FHLBNY borrowings	91,150				134,650
PPPLF advances from FRB	—				90,026
Subordinated debentures	42,684				42,542
Other liabilities	14,887				16,064
Total liabilities	1,929,961				1,875,725
Total shareholders' equity	224,256				200,925
Noncontrolling interest in consolidated subsidiaries	1,431				1,672
Total equity	225,687				202,597
Total liabilities and equity	$	2,155,648			$	2,078,322

 

Table 2: Consolidated Income Statements (Unaudited)
	For three months ended September 30,								For nine months ended September 30,
	2021				2020				2021				2020
	(Amounts in thousands, except share data)
Interest income:
Interest and fees on loans	$	20,211			$	20,521			$	61,502			$	60,988
Interest and dividends on investments	170				260				552				797
Interest on federal funds sold and deposits with banks	199				92				455				1,088
Total interest income	20,580				20,873				62,509				62,873
Interest expense:
Interest on deposits	2,356				4,165				7,654				14,375
Interest on borrowings	743				1,268				2,482				2,968
Total interest expense	3,099				5,433				10,136				17,343
Net interest income	17,481				15,440				52,373				45,530
Provision for loan losses	—				2,400				500				5,796
Net interest income after provision for loan losses	17,481				13,040				51,873				39,734
Non-interest income
Service fees on deposit accounts	1,350				520				4,173				1,602
Gain on sale of SBA loans	56				—				180				—
Other loan fees	403				206				998				612
Bank owned life insurance income	146				150				429				443
Net gain (loss) on sale and valuation adjustment of OREO	—				(195)				51				(348)
Other	240				60				691				346
Total non-interest income	2,195				741				6,522				2,655
Non-interest expense
Compensation and benefits	2,281				2,440				7,360				7,674
Professional services	998				400				2,740				1,151
Occupancy and equipment	623				531				1,773				1,529
Data processing	303				344				986				969
FDIC insurance and other assessments	261				287				833				581
OREO expense	72				80				199				258
Other operating expense	890				750				3,026				2,401
Total non-interest expense	5,428				4,832				16,917				14,563
Income before income tax expense	14,248				8,949				41,478				27,826
Income tax expense	3,705				2,306				10,584				7,171
Net income attributable to Company and noncontrolling interest	10,543				6,643				30,894				20,655
Less: Net income attributable to noncontrolling interest	(42)				(100)				(207)				(359)
Net income attributable to Company	10,501				6,543				30,687				20,296
Less: Preferred stock dividend	(7)				(7)				(21)				(22)
Net income available to common shareholders	$	10,494			$	6,536			$	30,666			$	20,274
Earnings per common share
Basic	$	0.88			$	0.55			$	2.58			$	1.71
Diluted	$	0.87			$	0.55			$	2.53			$	1.69
Weighted average common shares outstanding
Basic	11,893,323				11,850,882				11,885,709				11,849,659
Diluted	12,125,628				11,975,094				12,115,389				11,986,964

 

Table 3: Operating Ratios
	Three months ended						For the nine months ended
	September 30,						September 30,
	2021			2020			2021			2020
Return on average assets	2.01	%		1.32	%		1.96	%		1.46	%
Return on average common equity	18.85	%		13.55	%		19.27	%		14.48	%
Interest rate spread	3.11	%		2.73	%		3.05	%		2.93	%
Net interest margin	3.41	%		3.14	%		3.37	%		3.29	%
Efficiency ratio	27.59	%		29.86	%		28.72	%		30.22	%
* Return on the average assets is calculated using net income attributable to Company and noncontrolling interest dividing average assets

 

Table 4: Asset Quality Data
	September 30,				December 31,
	2021				2020
	(Amounts in thousands except ratio data)
Allowance for loan losses	$	29,838			$	29,698
Allowance for loan losses to total loans	2.02		%		1.90		%
Allowance for loan losses to non-accrual loans	664.14		%		340.22		%
Non-accrual loans	$	4,493			$	8,729
OREO	$	1,756			$	139

 

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SOURCE Parke Bancorp, Inc.

FAQ

What were Parke Bancorp's Q3 2021 earnings results?

Parke Bancorp reported a net income of $10.5 million or $0.88 per share for Q3 2021.

How much did Parke Bancorp's total revenue increase in Q3 2021?

Total revenue for Q3 2021 reached $22.8 million.

What is the total asset value of Parke Bancorp as of September 30, 2021?

As of September 30, 2021, Parke Bancorp's total assets were valued at $2.16 billion.

How have total deposits changed as of Q3 2021 for Parke Bancorp?

Total deposits increased by 11.9% to $1.78 billion as of Q3 2021.

What is the outlook for Parke Bancorp given recent economic conditions?

Parke Bancorp continues to face challenges from economic uncertainty due to the COVID-19 pandemic, impacting loan growth.