What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-08 · 141 added, 231 removed, 749 unchanged (33% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(Dollars in thousands except share and per share data)

September 30,

(Dollars in thousands except share data)

2022 December 31,

4 unchanged sentences

Investment securities available for sale, at fair value 11,810 13,351

Investment securities held to maturity (fair value of $ 10,078 at September 30,

Investment securities held to maturity (fair value of $ 9,058 at March 31,

2022 and $ 10,025 at December 31, 2021)

Total investment securities 21,707 23,269

Loans held for sale — 200

Loans, net of unearned income 1,495,839 1,484,847

18 unchanged sentences

78,150 78,150

FRB advances — 90,026

Subordinated debentures

5 unchanged sentences

Preferred stock, 1,000,000 shares authorized, $ 1,000 liquidation value Series B non-cumulative convertible;

470 shares and 480 shares outstanding at September 30, 2021 and December 31, 2020, respectively

445 shares and 445 shares outstanding at March 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.10 par value;

authorized 15,000,000 shares;

12,178,497 shares and 12,136,567 shares at September 30, 2021 and December 31, 2020, respectively

12,198,019 shares and 12,182,081 shares at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 135,623 135,451

Retained earnings 106,194 98,017

Accumulated other comprehensive income 347 463

Treasury stock, 284,522 shares at September 30, 2021 and Dec.

Accumulated other comprehensive (loss) income ( 188 ) 245

Treasury stock, 284,522 shares at March 31, 2022 and Dec.

31, 2021, at cost

1 unchanged sentence

Total shareholders’ equity 240,279 232,361

Noncontrolling interest in consolidated subsidiaries 1,431 1,672

Total equity 225,687 202,597

Total liabilities and equity $ 2,054,191 $ 2,136,445

4 unchanged sentences

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in thousands except share data)

46 unchanged sentences

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2021 2020 2021 2020

(Dollars in thousands)

Net income $ 10,091 $ 9,526

Unrealized gains on investment securities, net of reclassification into income:

Unrealized (losses) gains on non-OTTI securities ( 30 ) ( 184 ) ( 156 ) 590

Tax impact on unrealized gain (loss) 8 45 40 ( 145 )

Total unrealized (losses) gains on investment securities ( 22 ) ( 139 ) ( 116 ) 445

Unrealized losses on investment securities, net of reclassification into income:

Unrealized losses on non-OTTI securities ( 584 ) ( 112 )

Tax impact on unrealized loss 151 29

Total unrealized losses on investment securities ( 433 ) ( 83 )

Comprehensive income 9,658 9,443

11 unchanged sentences

(Dollars in thousands except share data)

Balance, June 30, 2021 $ 470 12,177,765 $ 1,218 $ 135,318 $ 81,262 $ 369 $ ( 3,015 ) $ 215,622 $ 1,389 $ 217,011

Net income — — — — 10,501 — — 10,501 42 10,543

Common stock options exercised — 732 — 6 — — — 6 — 6

Other comprehensive loss — — — — — ( 22 ) — ( 22 ) — ( 22 )

Stock compensation expense — — — 59 — — — 59 — 59

Dividend on preferred stock — — — — ( 7 ) — — ( 7 ) — ( 7 )

Dividend on common stock — — — — ( 1,903 ) — — ( 1,903 ) — ( 1,903 )

Balance, September 30, 2021 $ 470 12,178,497 $ 1,218 $ 135,383 $ 89,853 $ 347 $ ( 3,015 ) $ 224,256 $ 1,431 $ 225,687

Balance, December 31, 2020 $ 480 12,136,567 $ 1,214 $ 134,989 $ 66,794 $ 463 $ ( 3,015 ) $ 200,925 $ 1,672 $ 202,597

5 unchanged sentences

Stock compensation expense — — — 50 — — — 50 — 50

Dividend on preferred stock — — — — ( 21 ) — — ( 21 ) — ( 21 )

Dividend on common stock — — — — ( 1,899 ) — — ( 1,899 ) — ( 1,899 )

Balance, September 30, 2021 $ 470 12,178,497 $ 1,218 $ 135,383 $ 89,853 $ 347 $ ( 3,015 ) $ 224,256 $ 1,431 $ 225,687

See accompanying notes to consolidated financial statements

Stock Shares of Common Stock issued Common

Stock Additional

Earnings Accumulated

Other Comprehensive Income Treasury

Stock Total Shareholders' Equity Non-Controlling Interest Total Equity

(Dollars in thousands except share data)

Balance, June 30, 2020 $ 500 12,133,640 $ 1,213 $ 134,830 $ 54,087 $ 642 $ ( 3,015 ) $ 188,257 $ 1,484 $ 189,741

Net income — — — — 6,543 — — 6,543 100 6,643

Preferred stock shares conversion ( 20 ) 2,751 1 19 — — — — — —

Other comprehensive loss — — — — — ( 139 ) — ( 139 ) — ( 139 )

Stock compensation expense — — — 70 — — — 70 — 70

Dividend on preferred stock — — — — ( 7 ) — — ( 7 ) — ( 7 )

Dividend on common stock — — — — ( 1,897 ) — — ( 1,897 ) — ( 1,897 )

Balance, September 30, 2020 $ 480 12,136,391 $ 1,214 $ 134,919 $ 58,726 $ 503 $ ( 3,015 ) $ 192,827 $ 1,584 $ 194,411

Balance, March 31, 2021 $ 470 12,167,887 $ 1,217 $ 135,246 $ 74,324 $ 380 $ ( 3,015 ) $ 208,622 $ 1,322 $ 209,944

Balance, December 31, 2021 $ 445 12,182,081 $ 1,218 $ 135,451 $ 98,017 $ 245 $ ( 3,015 ) $ 232,361 $ — $ 232,361

Net income — — — — 10,091 — — 10,091 — 10,091

Earnings distribution to non-controlling interest — — — — — — — — ( 594 ) ( 594 )

Common stock options exercised — 15,938 2 112 — — — 114 — 114

Preferred stock shares conversion ( 20 ) 2,751 1 19 — — — — — —

Other comprehensive income — — — — — 445 — 445 — 445

Other comprehensive loss — — — — — ( 433 ) — ( 433 ) — ( 433 )

Stock compensation expense — — — 60 — — — 60 — 60

Stock dividend — ( 60 ) — ( 1 ) ( 2 ) — — ( 3 ) — ( 3 )

Dividend on preferred stock — — — — ( 7 ) — — ( 7 ) — ( 7 )

Dividend on common stock — — — — ( 1,907 ) — — ( 1,907 ) — ( 1,907 )

Balance, September 30, 2020 $ 480 12,136,391 $ 1,214 $ 134,919 $ 58,726 $ 503 $ ( 3,015 ) $ 192,827 $ 1,584 $ 194,411

Balance, March 31, 2022 $ 445 12,198,019 $ 1,220 $ 135,623 $ 106,194 $ ( 188 ) $ ( 3,015 ) $ 240,279 $ — $ 240,279

See accompanying notes to consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

For the Three Months Ended

(Dollars in thousands)

13 unchanged sentences

Increase in accrued interest receivable and other assets ( 2,443 ) ( 682 )

Decrease in accrued interest payable and other accrued liabilities ( 1,177 ) ( 27 )

Increase in accrued interest payable and other accrued liabilities 981 2,131

Net cash provided by operating activities 8,669 11,051

1 unchanged sentence

Repayments and maturities of investment securities available for sale 944 1,870

Purchases of investment securities ( 8,693 ) —

Net decrease (increase) in loans 90,020 ( 153,881 )

Repayments and maturities of investment securities held to maturity 35 —

Net (increase) decrease in loans ( 10,927 ) 18,227

Purchases of bank premises and equipment ( 38 ) ( 25 )

Proceeds from sale of OREO, net 1,606 48

Redemptions (purchase) of restricted stock 1,813 ( 102 )

Net cash provided by (used) in investing activities 88,310 ( 145,375 )

(Purchase) redemptions of restricted stock ( 13 ) 1,435

Net cash (used in) provided by investing activities ( 8,393 ) 21,555

Cash Flows from Financing Activities:

2 unchanged sentences

Proceeds from exercise of stock options 114 200

Net proceeds from issuing subordinated debt — 29,052

Net decrease in FHLBNY and short-term borrowings — ( 33,000 )

Net (decrease) increase in other borrowings ( 90,026 ) 93,801

Net increase in noninterest-bearing deposits 113,736 162,568

Net increase in interest-bearing deposits 75,061 94,714

Net cash provided by financing activities 47,416 374,000

Net increase in cash and cash equivalents 165,224 251,115

Net decrease in other borrowings — ( 90,026 )

Net (decrease) increase in noninterest-bearing deposits ( 81,870 ) 101,373

Net (decrease) increase in interest-bearing deposits ( 9,330 ) 36,949

Net cash (used in) provided by financing activities ( 93,000 ) 13,150

Net (decrease) increase in cash and cash equivalents ( 92,724 ) 45,756

Cash and Cash Equivalents, January 1, 596,553 458,601

Cash and Cash Equivalents, September 30, $ 623,825 $ 442,722

Cash and Cash Equivalents, March 31, $ 503,829 $ 504,357

Supplemental Disclosure of Cash Flow Information:

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The Bank is chartered by the New Jersey Department of Banking and Insurance and its deposits are insured by the Federal Deposit Insurance Corporation.

The Bank maintains its principal office at 601 Delsea Drive, Sewell, New Jersey, and seven additional branch office locations;

The Bank maintains its principal office at 601 Delsea Drive, Sewell, New Jersey, and has six additional branch office locations;

501 Tilton Road, Northfield, New Jersey, 567 Egg Harbor Road, Washington Township, New Jersey, 67 East Jimmie Leeds Road, Galloway Township, New Jersey, 1150 Haddon Avenue, Collingswood, New Jersey, 1610 Spruce Street, Philadelphia, Pennsylvania, and 1032 Arch Street, Philadelphia, Pennsylvania.

4 unchanged sentences

Also included are the accounts of Parke Direct Lending LLC ("PDL"), a joint venture formed in 2018 to originate short-term alternative real estate loan products.

Parke Bank has a 51 % ownership interest in the joint venture.

Parke Bank had a 51 % ownership interest in the joint venture.

In 2021, PDL was fully liquidated and all earnings were distributed.

Parke Capital Trust I, Parke Capital Trust II and Parke Capital Trust III are wholly-owned subsidiaries but are not consolidated as they do not meet the requirements for consolidation under applicable accounting guidance.

2 unchanged sentences

The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The accompanying interim financial statements for the three and nine months ended September 30, 2021 and 2020 are unaudited.

The accompanying interim financial statements for the three months ended March 31, 2022 and 2021 are unaudited.

The balance sheet as of December 31, 2021, was derived from the audited financial statements.

In the opinion of management, these financial statements include all normal and recurring adjustments necessary for a fair statement of the results for such interim periods.

Results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results for the full year or any other period.

Results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results for the full year or any other period.

Use of Estimates:

3 unchanged sentences

Recently Issued Accounting Pronouncements:

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (ASC 326):

Troubled Debt Restructurings (TDRs) and Vintage Disclosures .

The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty.

Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan.

These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

Additionally, the amendments to ASC 326 require that an entity disclose current-period gross write-offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

The guidance is only for entities that have adopted the amendments in Update 2016-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

Early adoption using prospective application, including adoption in an interim period where the guidance should be applied as of the beginning of the fiscal year.

The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations .

During June 2016, the Financial Accounting Standard Board (FASB) issued accounting standards update ("ASU") 2016-13, Financial Instruments-Credit Losses.

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For all entities, early adoption will continue to be allowed.

As a small reporting company, CECL is effective for fiscal years beginning after December 15, 2022.

As a small reporting company, CECL is effective for fiscal years beginning after December 15, 2022 and interim periods within those years.

The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-3, Codification Improvements to Financial Instruments .

ASU 2020-3 improves various financial instruments topics in the Accounting Standard Codification, such as:

fair value option, applicability of portfolio exception in Topic 820 to nonfinancial items, disclosures for depository and lending institutions, etc.

The confirming amendments

are effective upon issuance of this Update for public entities.

The amendments related to other issues are effective on various dates depending on the affects the guidance in the amendments in Accounting Standards Updates.

The Company has adopted certain items in the guidance and is currently evaluating the impact of the other areas of the guidance and doesn't expect the adoption of the ASU have or will have a material impact to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

4 unchanged sentences

INVESTMENT SECURITIES

The following is a summary of the Company's investments in available for sale and held to maturity securities as of September 30, 2021 and December 31, 2020:

As of September 30, 2021 Amortized

The following is a summary of the Company's investments in available for sale and held to maturity securities as of March 31, 2022 and December 31, 2021:

As of March 31, 2022 Amortized

losses Fair value

19 unchanged sentences

States and political subdivisions $ 3,761 $ 241 $ 16 $ 3,986

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of September 30, 2021 are as follows:

Residential mortgage-backed securities 6,157 — 118 6,039

Total held to maturity $ 9,918 $ 241 $ 134 $ 10,025

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of March 31, 2022 are as follows:

(Dollars in thousands)

12 unchanged sentences

Expected maturities may differ from contractual maturities because the issuers of certain debt securities do have the right to call or prepay their obligations without any penalty.

The Company did not sell any securities during the three and nine months ended September 30, 2021.

The following tables show the gross unrealized losses and fair value of the Company's investments which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2021 and December 31, 2020:

As of September 30, 2021 Less Than 12 Months 12 Months or Greater Total

The Company did not sell any securities during the three months ended March 31, 2022.

As of March 31, 2022 Less Than 12 Months 12 Months or Greater Total

Description of Securities Fair

19 unchanged sentences

Total available for sale $ 168 $ 1 $ 1,418 $ 41 $ 1,586 $ 42

Held to maturity:

Residential mortgage-backed securities $ 6 $ 118 $ — $ — $ 6 $ 118

States and political subdivisions 2,462 16 — — 2,462 16

Total held to maturity $ 2,468 $ 134 $ — $ — $ 2,468 $ 134

Other Than Temporarily Impaired Debt Securities (OTTI)

1 unchanged sentence

An investment security is deemed impaired if the fair value of the investment is less than its amortized cost.

Amortized cost includes adjustments (if any)

made to the cost basis of an investment for accretion, amortization, and previous other-than-temporary impairments.

Amortized cost includes adjustments (if any) made to the cost basis of an investment for accretion, amortization, and previous other-than-temporary impairments.

After an investment security is determined to be impaired, we evaluate whether the decline in value is other-than-temporary.

13 unchanged sentences

(4) any change in rating agencies’ credit ratings at evaluation date from acquisition date and any likely imminent action;

(5) for asset-backed securities, the credit performance of the underlying collateral, including delinquency rates, level of non-performing assets, cumulative losses to date, collateral value and the remaining credit enhancement compared with expected credit losses.

The Company’s unrealized loss for the debt securities is comprised of 5 securities in the less than 12 months loss position and 3 securities in the 12 months or greater loss position at September 30, 2021, and 2 securities in the less than 12 months loss position and 2 securities in the 12 months or greater loss position at December 31, 2020.

(5) for asset-backed securities, the credit performance of the underlying collateral, including delinquency rates, level of

non-performing assets, cumulative losses to date, collateral value and the remaining credit enhancement compared with expected credit losses.

The Company’s unrealized loss for the debt securities is comprised of 15 securities in the less than 12 months loss position and 3 securities in the 12 months or greater loss position at March 31, 2022, and 5 securities in the less than 12 months loss position and 3 securities in the 12 months or greater loss position at December 31, 2021.

The mortgage-backed securities that had unrealized losses were issued or guaranteed by the US government or US government sponsored entities.

The unrealized losses associated with those mortgage-backed securities are generally driven by changes in interest rates and are not due to credit losses given the explicit or implicit guarantees provided by the U.S.

Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be OTTI at September 30, 2021.

The states and political subdivisions securities that had unrealized losses were issued by a school district, and the loss is attributed to changes in interest rates and not due to credit losses.

LOANS AND ALLOWANCE FOR LOAN LOSSES

At September 30, 2021 and December 31, 2020, the Company had $ 1.47 billion and $ 1.57 billion, respectively, in loans receivable outstanding.

Outstanding balances include a total net increase of $ 1.2 million and net reduction of $ 0.2 million at September 30, 2021 and December 31, 2020, respectively, for unearned income, net deferred loan fees, and unamortized discounts and premiums.

We had zero and $ 200,000 in loans held for sale at September 30, 2021 and December 31, 2020, respectively.

Also, at September 30, 2021 and December 31, 2020, our commercial and industrial loan portfolio includes $ 37.0 million and $ 91.2 million, respectively, of loans to small businesses through the Paycheck Protection Program ("SBA PPP" loans), which is a loan designed by the Federal government to provide a direct incentive for small businesses to keep their workers on the payroll.

The portfolios of loans receivable at September 30, 2021 and December 31, 2020, consist of the following:

September 30, 2021 December 31, 2020

At March 31, 2022 and December 31, 2021, the Company had $ 1.50 billion and $ 1.48 billion, respectively, in loans receivable outstanding.

Outstanding balances include a total net increase of $ 1.6 million and $ 1.7 million at March 31, 2022 and December 31, 2021, respectively, for unearned income, net deferred loan fees, and unamortized discounts and premiums.

We had no loans held for sale at March 31, 2022 and December 31, 2021, respectively.

Also, at March 31, 2022 and December 31, 2021, our commercial and industrial loan portfolio includes $ 10.0 million and $ 27.8 million, respectively, of loans to small businesses through the Paycheck Protection Program ("SBA PPP" loans), which is a loan designed by the Federal government to provide a direct incentive for small businesses to keep their workers on the payroll.

The portfolios of loans receivable at March 31, 2022 and December 31, 2021, consist of the following:

March 31, 2022 December 31, 2021

Amount Amount

9 unchanged sentences

Total Loans $ 1,495,839 $ 1,484,847

An age analysis of past due loans by class at September 30, 2021 and December 31, 2020 is as follows:

September 30, 2021 30-59

An age analysis of past due loans by class at March 31, 2022 and December 31, 2021 is as follows:

March 31, 2022 30-59

Accruing Total Past

60 unchanged sentences

Allowance for loan losses (Dollars in thousands)

Three months ended September 30, 2021

June 30, 2021 $ 312 $ 3,482 $ 3,502 $ 8,514 $ 12,883 $ 1,250 $ 125 $ 30,068

Charge-offs — ( 226 ) — — ( 49 ) — — ( 275 )

Recoveries 2 — 38 4 — — — 44

Provisions (benefits) 95 ( 349 ) ( 105 ) ( 350 ) 878 ( 166 ) ( 2 ) 1

Ending Balance at September 30, 2021

$ 409 $ 2,907 $ 3,435 $ 8,168 $ 13,712 $ 1,084 $ 123 $ 29,838

Allowance for loan losses

Nine months ended September 30, 2021

Three months ended March 31, 2022

December 31, 2021 $ 417 $ 2,662 $ 2,997 $ 7,476 $ 14,970 $ 1,215 $ 108 $ 29,845

2 unchanged sentences

Provisions (benefits) 86 ( 465 ) 13 ( 223 ) 391 193 5 —

Ending Balance at September 30, 2021

Ending Balance at March 31, 2022

$ 509 $ 2,197 $ 3,012 $ 7,253 $ 15,482 $ 1,415 $ 113 $ 29,981

2 unchanged sentences

Collectively evaluated for impairment 509 2,197 3,008 7,105 15,453 1,415 113 29,800

Ending Balance at September 30, 2021

Ending Balance at March 31, 2022

$ 509 $ 2,197 $ 3,012 $ 7,253 $ 15,482 $ 1,415 $ 113 $ 29,981

1 unchanged sentence

Collectively evaluated for impairment 38,629 134,871 129,842 310,884 779,195 84,970 7,624 1,486,015

Ending Balance at September 30, 2021

Ending Balance at March 31, 2022

$ 38,825 $ 136,010 $ 132,275 $ 316,253 $ 779,882 $ 84,970 $ 7,624 $ 1,495,839

2 unchanged sentences

Allowance for loan losses (Dollars in thousands)

Three months ended September 30, 2020

June 30, 2020 $ 987 $ 3,660 $ 2,414 $ 6,181 $ 10,766 $ 1,058 $ 162 $ 25,228

Charge-offs — — — — ( 54 ) — — ( 54 )

Recoveries 11 — 1 2 — — — 14

Provisions (benefits) ( 385 ) 1,284 421 648 ( 65 ) 511 ( 14 ) 2,400

Ending Balance at September 30, 2020 $ 613 $ 4,944 $ 2,836 $ 6,831 $ 10,647 $ 1,569 $ 148 $ 27,588

Allowance for loan losses

Nine months ended September 30, 2020

Three months ended March 31, 2021

December 31, 2020 $ 492 $ 3,359 $ 3,078 $ 8,398 $ 12,595 $ 1,639 $ 137 $ 29,698

2 unchanged sentences

Provisions (benefits) ( 22 ) 385 249 762 ( 770 ) ( 101 ) ( 3 ) 500

Ending Balance at September 30, 2020 $ 613 $ 4,944 $ 2,836 $ 6,831 $ 10,647 $ 1,569 $ 148 $ 27,588

Ending Balance at March 31, 2021 $ 474 $ 3,744 $ 3,335 $ 9,160 $ 11,825 $ 1,538 $ 134 $ 30,210

Allowance for loan losses

1 unchanged sentence

Collectively evaluated for impairment 463 3,449 3,295 8,934 11,688 1,538 134 29,501

Ending Balance at September 30, 2020 $ 613 $ 4,944 $ 2,836 $ 6,831 $ 10,647 $ 1,569 $ 148 $ 27,588

Ending Balance at March 31, 2021 $ 474 $ 3,744 $ 3,335 $ 9,160 $ 11,825 $ 1,538 $ 134 $ 30,210

Individually evaluated for impairment $ 49 $ 4,690 $ 4,370 $ 5,741 $ 1,495 $ — $ — $ 16,345

Collectively evaluated for impairment 120,013 203,060 127,920 320,972 665,876 83,864 9,689 1,531,394

Ending Balance at September 30, 2020 $ 126,508 $ 263,874 $ 136,497 $ 301,034 $ 650,894 $ 84,819 $ 10,985 $ 1,574,611

Ending Balance at March 31, 2021 $ 120,062 $ 207,750 $ 132,290 $ 326,713 $ 667,371 $ 83,864 $ 9,689 $ 1,547,739

Impaired Loans

5 unchanged sentences

All our impaired loans are assessed for recoverability based on an independent third-party full appraisal to determine the net realizable value (“NRV”) based on the fair value of the underlying collateral, less cost to sell and other costs or the present value of discounted cash flows in the case of certain impaired loans that are not collateral dependent.

The following tables provide further detail on impaired loans and the associated ALLL at September 30, 2021 and December 31, 2020:

September 30, 2021 Recorded

The following tables provide further detail on impaired loans and the associated ALLL at March 31, 2022 and December 31, 2021:

March 31, 2022 Recorded

Investment Unpaid

4 unchanged sentences

$ 196 $ 196 $ —

1,139 5,856 —

Real Estate Mortgage:

7 unchanged sentences

Commercial and Industrial

1,139 5,856 300

Real Estate Mortgage:

13 unchanged sentences

Residential – 1 to 4 Family

1,022 1,155 63

Residential – Multifamily

19 unchanged sentences

Commercial – Owner Occupied

2,882 2,882 200

Commercial – Non-owner Occupied

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Residential – 1 to 4 Family

1,875 1,875 141

Residential – Multifamily

$ 10,302 $ 15,161 $ 591

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Investment Interest

Recognized Average

Investment Interest

(Dollars in thousands)

Commercial and Industrial $ 48 $ — $ 221 $ 1

Construction 1,290 — 4,990 40

Real Estate Mortgage:

Commercial – Owner Occupied

2,446 3 7,515 14

Commercial – Non-owner Occupied

5,651 123 10,240 158

Residential – 1 to 4 Family

1,332 8 2,994 33

Residential – Multifamily

Consumer 178 2 — —

Total $ 10,945 $ 136 $ 25,960 $ 246

Nine Months Ended September 30,

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Investment Interest

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Troubled debt restructuring (TDRs)

We reported performing TDR loans (not reported as non-accrual loans) of $ 6.1 million and $ 13.9 million, respectively, at September 30, 2021 and December 31, 2020.

Nonperforming TDR loans were zero and $ 274,000 at September 30, 2021 and December 31, 2020, respectively.

There were no new loans modified as a TDR and no additional commitments to lend additional funds to debtors whose loans have been modified in TDRs for the three and nine months ended September 30, 2021 and the year ended December 31, 2020, respectively.

Under Interagency Statement ("Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)") issued by Federal banking agencies, financial institutions generally do not need to categorize COVID-19-related modifications as TDRs.

As a result, loans that have been restructured for short term deferrals through our loan deferral program for COVID-19 related hardships and meet certain other criteria specified in the Interagency Statement are not categorized as TDRs.

We reported performing TDR loans (not reported as non-accrual loans) of $ 5.9 million and $ 6.0 million, respectively, at March 31, 2022 and December 31, 2021.

Nonperforming TDR loans were zero at March 31, 2022 and December 31, 2021, respectively.

There were no new loans modified as a TDR and no additional commitments to lend additional funds to debtors whose loans have been modified in TDRs for the three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

A TDR is a loan the terms of which have been restructured in a manner that grants a concession to a borrower experiencing financial difficulty.

1 unchanged sentence

TDRs are classified as impaired loans and are included in the impaired loan disclosures.

TDRs are also evaluated to determine whether

they should be placed on non-accrual status.

TDRs are also evaluated to determine whether they should be placed on non-accrual status.

Once a loan becomes a TDR, it will continue to be reported as a TDR until it is repaid in full, foreclosed, sold or it meets the criteria to be removed from TDR status.

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The nature and extent of impairment of TDRs, including those that have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for loan losses.

For TDR loans, we had specific reserves of $ 261,006 and $ 420,000 in the allowance at September 30, 2021 and December 31, 2020, respectively.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and result in potential incremental losses.

For TDR loans, we had specific reserves of $ 181,000 and $ 254,000 in the allowance at March 31, 2022 and December 31, 2021, respectively.

Some loan modifications classified as TDRs may not ultimately result in the full collection of

principal and interest, as modified, and result in potential incremental losses.

These potential incremental losses have been factored into our overall allowance for loan losses estimate.

26 unchanged sentences

Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank.

An analysis of the credit risk profile by internally assigned grades as of September 30, 2021 and December 31, 2020 is as follows:

At September 30, 2021 Pass OAEM Substandard Doubtful Total

An analysis of the credit risk profile by internally assigned grades as of March 31, 2022 and December 31, 2021 is as follows:

At March 31, 2022 Pass OAEM Substandard Doubtful Total

(Dollars in thousands)

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EQUITY AND CHANGES IN OTHER COMPREHENSIVE INCOME

The Company's total equity was $ 225.7 million and $ 202.6 million at September 30, 2021 and December 31, 2020, respectively.

The Company's total equity was $ 240.3 million and $ 232.4 million at March 31, 2022 and December 31, 2021, respectively.

Common stock dividend :

On September 22, 2021, the Company declared a quarterly cash dividend of $ 0.16 per share to the common shareholders of record as of October 6, 2021, and paid the dividend on October 20, 2021.

On June 22, 2021, the Company declared a quarterly cash dividend of $ 0.16 per share to the common shareholders of record as of July 6, 2021, and paid the dividend on July 20, 2021.

On April 23, 2021, the Company declared a quarterly cash dividend of $ 0.16 per share to the common shareholders of record as of May 4, 2021, and paid the dividend on May 18, 2021.

On January 19, 2021, the Company declared a cash dividend of $ 0.16 per share to common shareholders of record as of February 1, 2021, and paid the dividend February 16, 2021.

On March 22, 2022, the Company declared a cash dividend of $ 0.16 per share to common shareholders of record as of April 6, 2022, and paid the dividend April 20, 2022.

Preferred stock dividend :

The Company declared cash dividends of $ 7,050 and $ 7,200 to preferred stockholders during the three months ended September 30, 2021 and September 30, 2020, respectively.

The Company declared cash dividends of $ 21,150 and $ 22,200 to preferred stockholders during the nine months ended September 30, 2021 and September 30, 2020, respectively.

The Company declared cash dividends of $ 6,675 and $ 7,050 to preferred stockholders during the three months ended March 31, 2022 and March 31, 2021, respectively.

Conversion of preferred stock :

During the nine months ended September 30, 2021, preferred stockholders converted 10 shares of preferred shares into 1,375 shares of common stock.

During the nine months ended September 30, 2020, preferred stockholders converted 20 shares of preferred shares into 2,751 shares of common stock.

During the three months ended March 31, 2022, there were no conversions from preferred stock to common shares.

During the three months ended March 31, 2021, preferred stockholders converted 10 shares of preferred shares into 1,375 shares of common stock.

Non-controlling interests :

The Company has a joint venture with Bridgestone Capital LLC in PDL LLC, a joint venture formed in 2018 to originate short-term alternative real estate loan products.

The Company has a 51 % ownership interest in the joint venture.

The Company distributed PDL earnings of $ 447,000 and $ 594,000 to Bridgestone during the first nine months of 2021 and 2020, respectively.

The Company had a joint venture with Bridgestone Capital LLC in PDL LLC, a joint venture formed in 2018 to originate short-term alternative real estate loan products.

In 2021, the joint venture was liquidated and all earnings in the joint venture were distributed.

Prior to the liquidation, the Company had a 51 % ownership interest in the joint venture.

The Company distributed PDL earnings of $ 447,000 to Bridgestone during the first three months of 2021.

Other comprehensive income

The changes in accumulated other comprehensive income (loss) consisted of the following for the nine months ended September 30, 2021 and 2020:

The changes in accumulated other comprehensive loss consisted of the following for the three months ended March 31, 2022 and 2021:

For the Three Months Ended

September 30,

(Dollars in thousands)

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Loss in other comprehensive income $ ( 433 ) $ ( 83 )

For the Nine Months Ended September 30,

(Dollars in thousands)

Investment securities:

Net unrealized (losses) gains arising during the period $ ( 156 ) $ 590

Tax effect related to the unrealized (loss) gain during the periods 40 ( 145 )

Change in other comprehensive income $ ( 116 ) $ 445

EARNINGS PER SHARE (“EPS”)

The following tables set forth the calculation of basic and diluted EPS for the three and nine-month periods ended September 30, 2021 and 2020.

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

The following tables set forth the calculation of basic and diluted EPS for the three-month periods ended March 31, 2022 and 2021.

Three months ended March 31,

(Dollars in thousands except share and per share data)

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Available for Sale Securities and Loans Held for Sale

As of September 30, 2021

As of March 31, 2022

Corporate debt obligations $ — $ 500 $ — $ 500

1 unchanged sentence

Collateralized mortgage-backed securities — 6 — 6

Loans held for sale — — — —

Total $ — $ 11,810 $ — $ 11,810

3 unchanged sentences

Collateralized mortgage-backed securities — 8 — 8

Loans held for sale — 200 — 200

Total $ — $ 13,351 $ — $ 13,351

For the nine months ended September 30, 2021, there were no transfers between the levels within the fair value hierarchy.

There were no level 3 assets or liabilities held during the three and nine months ended September 30, 2021 and 2020.

For the three months ended March 31, 2022, there were no transfers between the levels within the fair value hierarchy.

There were no level 3 assets or liabilities held during the three months ended March 31, 2022 and 2021.

Fair Value on a Non-recurring Basis:

2 unchanged sentences

(Dollars in thousands)

As of September 30, 2021

As of March 31, 2022

Collateral-dependent impaired loans $ — $ — $ 4,014 $ 4,014

OREO — — 1,756 1,756

As of December 31, 2021

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Accordingly, the above fair values are not intended to represent the aggregate fair value of the Company.

The following table summarizes the carrying amounts and fair values for financial instruments at September 30, 2021 and December 31, 2020:

September 30, 2021 Carrying Amount Fair Value

The following table summarizes the carrying amounts and fair values for financial instruments at March 31, 2022 and December 31, 2021:

March 31, 2022 Carrying Amount Fair Value

Total Level 1 Level 2 Level 3

5 unchanged sentences

Restricted stock 5,157 5,157 — — 5,157

Loans held for sale — — — — —

Loans, net 1,465,858 1,431,268 — 1,426,302 4,966

13 unchanged sentences

Restricted stock 5,144 5,144 — — 5,144

Loans held for sale 200 200 — 200 —

Loans, net 1,455,002 1,440,398 — 1,430,686 9,712

9 unchanged sentences

The exercise of lease renewals is at our sole discretion.

Upon adoption of Accounting Standards Update (ASU) 2016-02, we recognized operating right-of-use ("ROU") assets and liabilities each for $ 2.8 million.

Additionally, the practical expedient package was elected, which allows us to not reassess the lease classification for any existing lease.

As such, all our leases remain classified as operating leases.

Our ROU assets and lease liabilities for operating leases are included in other assets and other liabilities on our consolidated balance sheets.

We use the interest rate implicit in the lease or incremental borrowing rate in determining the present value of lease payments.

At September 30, 2021, we had future minimum lease payments of $ 27.1 million and lease liability $ 2.1 million.

The weighted average remaining lease term was 56.5 years and weighted average discount rate was 7.4 % at September 30, 2021, respectively.

At March 31, 2022, we had future minimum lease payments of $ 26.9 million and lease liability $ 2.0 million.

The weighted average remaining lease term was 50.0 years and weighted average discount rate was 7.3 % at March 31, 2022,

respectively.

We also sublease some space for one of our leased facilities to a company.

1 unchanged sentence

Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred.

The following table presents information about our operating leases at the year ended September 30, 2021:

September 30, 2021

The following table presents information about our operating leases at March 31, 2022:

March 31, 2022

(Dollars in thousands)

2 unchanged sentences

The following table presents future undiscounted cash flows on our operating leases:

September 30, 2021

March 31, 2022

(Dollars in thousands)

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Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Commitments to fund fixed-rate loans were immaterial at September 30, 2021.

Commitments to fund fixed-rate loans were immaterial at March 31, 2022.

Variable-rate commitments are generally issued for less than one year and carry market rates of interest.

1 unchanged sentence

Management believes that off-balance sheet risk is not material to the results of operations or financial condition.

As of September 30, 2021 and December 31, 2020, unused commitments to extend credit amounted to approximately $ 120.9 million and $ 144.6 million, respectively.

As of March 31, 2022 and December 31, 2021, unused commitments to extend credit amounted to approximately $ 125.5 million and $ 117.7 million, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

As of September 30, 2021 and December 31, 2020, standby letters of credit with customers were $ 1.7 million and $ 1.7 million, respectively.

As of March 31, 2022 and December 31, 2021, standby letters of credit with customers were $ 1.5 million and $ 1.5 million, respectively.

On March 8, 2022, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $ 50.0 million.

The MLOC is used to pledge against public deposits and expires on March 7, 2022.

There were no outstanding borrowings on the letter of credit as of September 30, 2021.

The MLOC is used to pledge against public deposits and expires on June 29, 2022.

There were no outstanding borrowings on the letter of credit as of March 31, 2022.

The Company also has entered into an employment contract with the President of the Company, which provides for continued payment of certain employment salary and benefits prior to the expiration date of the agreement and in the event of a change in control, as defined.

The Company has also entered in Change-in-Control Severance Agreements with certain officers which provide for the payment of severance in certain circumstances following a change in control.

We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries.

Cannabis businesses are legal in these States, although it is not legal at the federal level.

In 2021, cannabis in the State of New Jersey became legal for recreational use.

An amendment legalizing cannabis became part of the New Jersey State Constitution , and enabling legislation and related bills were signed into law in 2021.

The new law legalized and regulated cannabis use and possession for adults 21 years and older.

The new law also clarifies marijuana and cannabis use and possession penalties for individuals younger than 21 years old.

Retail sales of cannabis began in New Jersey in April 2022.

We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries and who participate in retail sales of cannabis in New Jersey.

Cannabis businesses are legal in these States and now in New Jersey, although it is not legal at the federal level.

Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses.

A financial institution that provides services to cannabis-related businesses can comply with Bank Secrecy Act (“BSA”) disclosure standards by following the FinCEN guidelines.

We maintain stringent written policies and procedures related to the acceptance of such businesses and to the monitoring and maintenance of such

business accounts.

We maintain stringent written policies and procedures related to the acceptance of such businesses and to the monitoring and maintenance of such business accounts.

We conduct a significant due diligence review of the cannabis business before the business is accepted, including confirmation that the business is properly licensed by the applicable state.

3 unchanged sentences

Any change in the Federal government’s enforcement position, could cause us to immediately cease providing banking services to the cannabis industry.

At September 30, 2021 and December 31, 2020, deposit balances from cannabis customers were approximately $ 354.5 million and $ 259.4 million, or 19.9 % and 16.3 % of total deposits, respectively, with two customers accounting for 20.6 % and 19.2 % of the total at September 30, 2021 and December 31, 2020.

At September 30, 2021 and December 31, 2020, there were cannabis-related loans in the amounts of $ 6.3 million and $ 8.0 million, respectively.

We recorded approximately $ 288 thousand and $ 465 thousand of interest income in the nine months ended September 30, 2021 and year ended December 31, 2020, respectively, related to these loans.

The fee income for the nine months ended September 30, 2021 and year ended December 31, 2020, from the commercial deposit accounts of depositors who do business in the cannabis industry were $ 3.7 million and $ 2.2 million, respectively, and are included in service fees on deposit accounts, in the accompanying consolidated statements of income.

At March 31, 2022 and December 31, 2021, deposit balances from cannabis customers were approximately $ 289.1 million and $ 375.2 million, or 17.2 % and 21.2 % of total deposits, respectively, with two customers accounting for 26.1 % and 19.3 % of the total at March 31, 2022 and December 31, 2021.

At March 31, 2022 and December 31, 2021, there were cannabis-related loans in the amounts of $ 4.0 million and $ 5.4 million, respectively.

We recorded approximately $ 23 thousand and $ 336 thousand of interest income in the three months ended March 31, 2022 and year ended December 31, 2021, respectively, related to these loans.

The fee income for the three months ended March 31, 2022 and year ended December 31, 2021, from the commercial deposit accounts of depositors who do business in the cannabis industry were $ 1.2 million and $ 5.1 million, respectively, and are included in service fees on deposit accounts, in the accompanying consolidated statements of income.

REGULATORY MATTERS

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The Bank made a one-time election to opt-out of including the net unrealized gain or loss on available for sale securities in computing regulatory capital.

At September 30, 2021 and December 31, 2020, the Company and Bank were both considered “well capitalized".

At March 31, 2022 and December 31, 2021, the Company and Bank were both considered “well capitalized".

Prompt corrective action regulations provide five classifications:

2 unchanged sentences

If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

As of September 30, 2021 and December 31, 2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.

As of March 31, 2022 and December 31, 2021, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory

framework for prompt corrective action.

There are no conditions or events since that notification that management believes have changed the institution's category.

In November 2019, Federal bank regulatory agencies finalized a rule that simplifies capital requirements for community banks by allowing them to optionally adopt a simple leverage ratio to measure capital adequacy, which removes requirements for calculating and reporting risk-based capital ratios for a qualifying community bank that have less than $10 billion in total consolidated assets, limited amounts of off-balance-sheet exposures and trading assets and liabilities, and a leverage ratio greater than 9 percent.

The community bank leverage ratio framework was effective on January 1, 2020.

The Company elected to adopt the optional community bank leverage ratio framework in the first quarter of 2020.

In April 2020, the Federal banking regulatory agencies modified the original Community Bank Leverage Ratio (CBLR) framework and provided that, as of the second quarter 2020, a banking organization with a leverage ratio of 8 percent or greater and that meets the other existing qualifying criteria may elect to use the community bank leverage ratio framework.

The modified rule also states that the community bank leverage ratio requirement will be greater than 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter.

The transition rule also maintains a two-quarter grace period for a qualifying community banking organization whose leverage ratio falls no more than 100 basis points below the applicable community bank leverage ratio requirement.

The leverage ratios of the Company and the Bank at September 30, 2021 are as follows:

Under final regulations adopted by the federal banking agencies under the Economic Growth, Regulatory Relief and Consumer Protection Acct ( "EGRRCPA"), a community banking organization may opt into the Community Bank Leverage Ratio ("CBLR") framework if it has a Tier 1 leverage ratio of at least 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities.

A qualifying community banking organization that opts into the CBLR framework will not be required to report or calculate compliance with risk-based capital requirements and will also be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations.

We have elected to use the CBLR framework and is presented as of March 31, 2022.

On April 6, 2020, federal banking regulatory agencies modified the original (CBLR) framework and provided that, as of the second quarter 2020, a banking organization with a leverage ratio of 8 percent or greater and that meets the other existing qualifying criteria may elect to use the CBLR framework.

The modified rule also states that the CBLR requirement will be greater than 8 percent for the second through fourth quarters of calendar year 2020, greater than 8.5 percent for calendar year 2021, and greater than 9 percent thereafter.

The leverage ratios of the Company and the Bank at March 31, 2022 are as follows:

Regulatory Capital Compliance

As of September 30, 2021 Actual For Capital Adequacy

As of March 31, 2022 Actual For Capital Adequacy

(Dollars in thousands except ratios) Amount Ratio Amount Ratio

Tier 1 leverage $ 253,870 12.21 % $ 187,147 9.00 %

Tier 1 leverage $ 267,546 12.83 % $ 177,187 8.50 %

Community Bank Leverage Ratio $ 282,651 13.60 % $ 187,111 9.00 %

The Company and Bank's regulatory capital as of December 31, 2021, is presented in the following table.

7 unchanged sentences

* Combination of both community bank leverage approach and the regular rule of capital adequacy.

Consent Orders with Banking Regulators

During the fourth quarter of 2020, the Bank entered into a Stipulation to the Issuance of a Consent Order with each of the Federal Deposit Insurance Corporation (the “FDIC”) and the New Jersey Department of Banking and Insurance (the “NJDOBI”) (the “Consent Orders”), relating to weaknesses in the Bank’s Bank Secrecy Act and Anti-Money Laundering (collectively “BSA”) compliance program.

In consenting to the issuance of the Consent Orders, the Bank did not admit or deny any charges of unsafe or unsound banking practices related to the BSA compliance program.

Under the terms of the Consent Orders the Bank and/or its Board of Directors is required to take certain actions including, among other things, increasing supervision and direction of the Bank’s BSA compliance program, implementation of sound BSA policies and procedures, reviewing and improving the Bank’s BSA compliance program, BSA risk assessment, system of BSA internal controls, and customer due diligence policies and reviewing and improving policies and procedures for monitoring and reporting suspicious activity.

Numerous actions have been taken or completed by the Bank in complying with the Consent Orders and strengthening its BSA compliance practices, policies, procedures and controls.

The Consent Orders have resulted in additional BSA compliance expenses for the Bank and the Company.

The Consent Orders do not otherwise impact the Bank’s business activities outside of BSA and did not require the Bank to pay any civil money penalty or require additional capital.

The Consent Orders will remain in effect and be enforceable until they are modified, terminated, suspended or set aside by the FDIC and the NJDOBI.

Management and the Board have expressed their full intention to comply with all parts of the Consent Orders at the earliest possible date.

Issuance of the Consent Orders do not preclude further government action with respect to the Bank’s BSA program, including the imposition of fines, sanctions, additional expenses and compliance cost, and/or restrictions on the activities of the Bank.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements