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Highlights: | ||||
Net Income: | $11.1 million | |||
Revenue: | $27.8 million for Q1 2023 | |||
Total Assets: | $1.96 billion, decreased 1.0% over December 31, 2022 | |||
Total Loans: | $1.76 billion, increased 0.6% over December 31, 2022 | |||
Total Deposits: | $1.46 billion, decreased 7.1% over December 31, 2022 |
WASHINGTON TOWNSHIP, N.J., April 24, 2023 /PRNewswire/ -- Parke Bancorp, Inc. ("Parke Bancorp" or the "Company") (NASDAQ: "PKBK"), the parent company of Parke Bank, announced its operating results for the quarter ended March 31, 2023.
Highlights for the three months ended March 31, 2023:
The following is a recap of the significant items that impacted the three months ended March 31, 2023:
Interest income increased $6.4 million for the first quarter of 2023 compared to the same period in 2022, primarily due to an increase in interest and fees on loans of $5.3 million to $24.5 million, a 27.8% increase, driven by an increase in average outstanding loan balances and higher interest rates. Additionally, interest earned on average deposits held at the Federal Reserve Bank ("FRB") increased by $1.0 million to $1.3 million during the three months ended March 31, 2023, due to higher interest rates paid on such deposits.
Interest expense increased $6.3 million, or 250.0%, to $8.9 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to higher interest rates and a decrease in non-interest bearing deposits and an increase of $82.0 million in borrowings from the Federal Home Loan Bank of New York ("FHLBNY").
The provision for credit losses decreased $2.4 million for the three months ended March 31, 2023, compared to the same period in 2022, as a result of a reduction in the estimated risk of loss to the loan portfolio attributed to a decrease in construction loans.
Non-interest income decreased $293.0 thousand for the three months ended March 31, 2023 compared to the same period in 2022, primarily as a result of a decrease in service fees on deposit accounts of $101.0 thousand and a decrease in loan fees of $97.0 thousand. The decrease in service fees on deposit accounts was primarily attributable to a decrease in service fees from deposit accounts related to our cannabis related businesses.
Non-interest expense increased $1.1 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily driven by an increase in compensation and benefits of $953.0 thousand and an increase in OREO expense of $139.0 thousand, partially offset by a decrease in FDIC and other assessment expense of $62.0 thousand. The increase in compensation and benefits was due to an increase in salary expense of $661.0 thousand, a reduction in deferred loan origination costs of $151.0 thousand, an increase in pension cost of $59.1 thousand, and an increase in payroll taxes of $74.1 thousand. The increase in OREO expense is mainly due to increases in legal, utilities, and real estate taxes related to our OREO portfolio. The decrease in FDIC and other assessment expense is attributed to lower FDIC insurance premium.
Income tax expense increased $34.0 thousand for the first quarter 2023 compared to the same period in 2022. The effective tax rate for the three months ended March 31, 2023 was 23.6%, compared to 25.2% for the same period in 2022.
March 31, 2023 discussion of financial condition
CEO outlook and commentary
Vito S. Pantilione, President and Chief Executive Officer of Parke Bancorp, Inc. and Parke Bank, provided the following statement:
"We continued to generate strong earnings in the first quarter of 2023, although deposits continue to be a challenge. Cost of funding increased as the battle for retail deposits intensified. Loan generation also slowed in the first quarter of 2023, which is due to a few factors; much higher interest rates, increasing by 5% in the last year, borrowers putting expansion plans on hold due to the uncertain economy and higher balance sheet liquidity requirements due to the current turmoil in the banking sector. However, there are still opportunities in the market. Our company has a strong loan pipeline with existing borrowers that have demonstrated their ability to navigate a challenging economy."
"The future is still uncertain and most likely the Federal Reserve will increase interest rates yet again, although inflation has slowed slightly. Some experts still predict that there will be a recession, with many thinking that we are already in one, and others believing there could be a soft landing. The failure of two banks adds additional pressure to the banking industry with undoubtedly increased regulatory monitoring being implemented. Our focus is to continue carefully monitoring the market and identifying opportunities, to maintain strong reserves, strong capital, and continued tight control of expenses. We are not only in position to face the current challenges in the market, but also well positioned to take advantage of opportunities."
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; our ability to face current challenges in the market; our ability to be well positioned to take advantage of opportunities; 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 | |||
March 31, | December 31, | ||
2023 | 2022 | ||
(Dollars in thousands) | |||
Assets | |||
Cash and cash equivalents | $ 145,974 | $ 182,150 | |
Investment securities | 18,336 | 18,744 | |
Loans, net of unearned income | 1,762,696 | 1,751,459 | |
Less: Allowance for credit losses | (31,507) | (31,845) | |
Net loans | 1,731,189 | 1,719,615 | |
Premises and equipment, net | 5,842 | 5,958 | |
Bank owned life insurance (BOLI) | 28,288 | 28,145 | |
Other assets | 34,616 | 30,303 | |
Total assets | $ 1,964,245 | $ 1,984,915 | |
Liabilities and Equity | |||
Non-interest bearing deposits | $ 277,128 | $ 352,546 | |
Interest bearing deposits | 1,186,666 | 1,223,436 | |
FHLBNY borrowings | 165,150 | 83,150 | |
Subordinated debentures | 42,969 | 42,921 | |
Other liabilities | 19,226 | 16,828 | |
Total liabilities | 1,691,139 | 1,718,881 | |
Total shareholders' equity | 273,106 | 266,034 | |
Total equity | 273,106 | 266,034 | |
Total liabilities and equity | $ 1,964,245 | $ 1,984,915 | |
Table 2: Consolidated Income Statements (Unaudited) | |||
For the three months ended | |||
2023 | 2022 | ||
(Dollars in thousands, except per | |||
Interest income: | |||
Interest and fees on loans | $ 24,545 | $ 19,199 | |
Interest and dividends on investments | 210 | 189 | |
Interest on deposits with banks | 1,269 | 248 | |
Total interest income | 26,024 | 19,636 | |
Interest expense: | |||
Interest on deposits | 7,582 | 1,840 | |
Interest on borrowings | 1,293 | 696 | |
Total interest expense | 8,875 | 2,536 | |
Net interest income | 17,149 | 17,100 | |
(Recovery of) provision for loan losses | (2,400) | — | |
Net interest income after provision for credit losses | 19,549 | 17,100 | |
Non-interest income | |||
Service fees on deposit accounts | 1,215 | 1,316 | |
Other loan fees | 178 | 276 | |
Bank owned life insurance income | 143 | 138 | |
Net gain on sale and valuation adjustment of OREO | — | 47 | |
Other | 246 | 298 | |
Total non-interest income | 1,782 | 2,075 | |
Non-interest expense | |||
Compensation and benefits | 3,641 | 2,688 | |
Professional services | 593 | 551 | |
Occupancy and equipment | 644 | 645 | |
Data processing | 301 | 324 | |
FDIC insurance and other assessments | 225 | 287 | |
OREO expense | 172 | 34 | |
Other operating expense | 1,185 | 1,149 | |
Total non-interest expense | 6,761 | 5,678 | |
Income before income tax expense | 14,570 | 13,497 | |
Income tax expense | 3,440 | 3,406 | |
Net income attributable to Company | 11,130 | 10,091 | |
Less: Preferred stock dividend | (7) | (7) | |
Net income available to common shareholders | $ 11,123 | $ 10,084 | |
Earnings per common share | |||
Basic | $ 0.93 | $ 0.85 | |
Diluted | $ 0.92 | $ 0.83 | |
Weighted average common shares outstanding | |||
Basic | 11,944,163 | 11,905,264 | |
Diluted | 12,160,793 | 12,180,320 | |
Table 3: Operating Ratios | |||
Three months ended | |||
March 31, | |||
2023 | 2022 | ||
Return on average assets* | 2.31 % | 1.97 % | |
Return on average common equity | 16.65 % | 17.23 % | |
Interest rate spread | 2.87 % | 3.15 % | |
Net interest margin | 3.65 % | 3.41 % | |
Efficiency ratio | 35.71 % | 29.61 % | |
* Return on the average assets is calculated using net income attributable to Company and | |||
Table 4: Asset Quality Data | |||
March 31, | December 31, | ||
2023 | 2022 | ||
(Amounts in thousands except ratio data) | |||
Allowance for credit losses | $ 31,507 | $ 31,845 | |
Allowance for credit losses to total loans | 1.79 % | 1.82 % | |
Allowance for credit losses to non-accrual loans | 195.22 % | 195.66 % | |
Non-accrual loans | $ 16,139 | $ 16,276 | |
OREO | $ 1,673 | $ 1,550 |
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SOURCE Parke Bancorp, Inc.