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Parke Bancorp, Inc. Announces Fourth Quarter 2020 Earnings

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Cision

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


SOURCE Parke Bancorp, Inc.