What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 182 added, 135 removed, 755 unchanged (30% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(Dollars in thousands except share data)

(Dollars in thousands except per share data)

2022 December 31,

4 unchanged sentences

Investment securities available for sale, at fair value 10,903 13,351

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

Investment securities held to maturity (fair value of $ 8,408 at June 30,

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

27 unchanged sentences

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

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

445 shares and 445 shares outstanding at June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.10 par value;

authorized 15,000,000 shares;

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

12,199,483 shares and 12,182,081 shares at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 135,709 135,451

1 unchanged sentence

Accumulated other comprehensive (loss) income ( 262 ) 245

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

Treasury stock, 284,522 shares at June 30, 2022 and Dec.

31, 2021, at cost

6 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands except per share data)

For the Three Months Ended

(Dollars in thousands except share data)

June 30, For the Six Months Ended

2022 2021 2022 2021

Interest income:

15 unchanged sentences

Bank owned life insurance income 141 143 279 283

Net gain (loss) on sale and valuation adjustment of OREO 47 ( 21 )

Net gain on sale and valuation adjustment of OREO 281 72 328 51

Other 316 257 616 452

26 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended

(Dollars in thousands)

For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Net income $ 10,738 $ 10,824 $ 20,829 $ 20,350

4 unchanged sentences

Comprehensive income 10,664 10,813 20,322 20,256

Comprehensive loss attributable to noncontrolling interests — ( 97 )

Comprehensive income attributable to noncontrolling interests — ( 67 ) — ( 164 )

Comprehensive income attributable to the Company $ 10,664 $ 10,746 $ 20,322 $ 20,092

3 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands except share data)

Stock Shares of Common

3 unchanged sentences

Stock Total Shareholders' Equity Non-Controlling Interest Total Equity

(Dollars in thousands except share data)

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

Net income — — — — 10,738 — — 10,738 — 10,738

Common stock options exercised — 1,464 — 11 — — — 11 — 11

Other comprehensive loss — — — — — ( 74 ) — ( 74 ) — ( 74 )

Stock compensation expense — — — 75 — — — 75 — 75

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

Dividend on common stock — — — — ( 1,905 ) — — ( 1,905 ) — ( 1,905 )

Balance, June 30, 2022 $ 445 12,199,483 $ 1,220 $ 135,709 $ 115,020 $ ( 262 ) $ ( 3,015 ) $ 249,117 $ — $ 249,117

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

Net income — — — — 20,829 — — 20,829 — 20,829

Earnings distribution to non-controlling interest — — — — — — — — ( 447 ) ( 447 )

Common stock options exercised — 17,402 2 123 — — — 125 — 125

Preferred stock shares conversion ( 10 ) 1,375 — 10 — — — — — —

Other comprehensive loss — — — — — ( 507 ) — ( 507 ) — ( 507 )

Stock compensation expense — — — 135 — — — 135 — 135

Dividend on preferred stock — — — — ( 14 ) — — ( 14 ) — ( 14 )

Dividend on common stock — — — — ( 3,812 ) — — ( 3,812 ) — ( 3,812 )

Balance, June 30, 2022 $ 445 12,199,483 $ 1,220 $ 135,709 $ 115,020 $ ( 262 ) $ ( 3,015 ) $ 249,117 $ — $ 249,117

See accompanying notes to consolidated financial statements

Parke Bancorp, Inc.

and Subsidiaries

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands except share data)

Stock Shares of Common Stock issued Common

Stock Additional

Earnings Accumulated

Other Comprehensive (Loss) Income Treasury

Stock Total Shareholders' Equity Non-Controlling Interest Total Equity

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

Net income — — — — 10,757 — — 10,757 67 10,824

Common stock options exercised — 9,878 1 13 — — — 14 — 14

Other comprehensive loss — — — — — ( 11 ) — ( 11 ) — ( 11 )

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

Dividend on preferred stock — — — — ( 14 ) — — ( 14 ) — ( 14 )

Dividend on common stock — — — — ( 3,805 ) — — ( 3,805 ) — ( 3,805 )

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

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

Net income — — — — 20,186 — — 20,186 164 20,350

Earnings distribution to non-controlling interest — — — — — — — — ( 447 ) ( 447 )

Common stock options exercised — 39,823 4 210 — — — 214 — 214

Preferred stock shares conversion ( 10 ) 1,375 — 10 — — — — — —

Other comprehensive loss — — — — — ( 94 ) — ( 94 ) — ( 94 )

2 unchanged sentences

Dividend on common stock — — — — ( 5,704 ) — — ( 5,704 ) — ( 5,704 )

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

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

See accompanying notes to consolidated financial statements

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

(Dollars in thousands)

For the Six Months Ended

Cash Flows from Operating Activities:

7 unchanged sentences

Proceeds from sale of SBA loans originated for sale 283 1,026

Net (gain) loss on sale of OREO and valuation adjustments ( 47 ) 21

Net gain on sale of OREO and valuation adjustments ( 328 ) ( 51 )

Net accretion of purchase premiums and discounts on securities — 31

1 unchanged sentence

Net changes in:

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

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

Decrease (increase) in accrued interest receivable and other assets 1,677 ( 1,693 )

Decrease in accrued interest payable and other accrued liabilities ( 808 ) ( 396 )

Net cash provided by operating activities 21,903 18,912

18 unchanged sentences

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

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

Cash and Cash Equivalents, June 30, $ 393,241 $ 530,794

Supplemental Disclosure of Cash Flow Information:

24 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 months ended March 31, 2022 and 2021 are unaudited.

The accompanying interim financial statements for the three and six months ended June 30, 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 months ended March 31, 2022 are not necessarily indicative of the results for the full year or any other period.

Results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results for the full year or any other period.

Use of Estimates:

20 unchanged sentences

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.

The Company has selected a third-party software vendor for the CECL calculation and to assist in the implementation of the model.

The Company will utilize a lifetime loss rate calculation for all its loan portfolio's, as well as supplement the loss estimate by including reasonable and supportable forecasts of macroeconomic conditions.

The Company began to perform parallel runs of the new model to its current ALLL model during the first quarter of 2022 and continues to evaluate the results and assumptions.

Implementation efforts are continuing to focus on model validation, model calibration, qualitative factors, finalizing procedures and other governance and control documentation.

The Company will adopt this new guidance on January 1, 2023, and is currently evaluating the impact of this new guidance on its 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 March 31, 2022 and December 31, 2021:

As of March 31, 2022 Amortized

The following is a summary of the Company's investments in available for sale and held to maturity securities as of June 30, 2022 and December 31, 2021:

As of June 30, 2022 Amortized

losses Fair value

21 unchanged sentences

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:

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of June 30, 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 months ended March 31, 2022.

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 March 31, 2022 and December 31, 2021:

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

The Company did not sell any securities during the three and six months ended June 30, 2022.

As of June 30, 2022 Less Than 12 Months 12 Months or Greater Total

Description of Securities Fair

44 unchanged sentences

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 Company’s unrealized loss for the debt securities is comprised of 17 securities in the less than 12 months loss position and 2 securities in the 12 months or greater loss position at June 30, 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.

1 unchanged sentence

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.

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 March 31, 2022.

LOANS AND ALLOWANCE FOR LOAN LOSSES

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

At June 30, 2022 and December 31, 2021, the Company had $ 1.55 billion and $ 1.48 billion, respectively, in loans receivable outstanding.

Outstanding balances include a total net increase of $ 2.0 million and $ 1.7 million at June 30, 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 June 30, 2022 and December 31, 2021, respectively.

Also, at June 30, 2022 and December 31, 2021, our commercial and industrial loan portfolio includes $ 4.4 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 June 30, 2022 and December 31, 2021, consist of the following:

June 30, 2022 December 31, 2021

Amount Amount

9 unchanged sentences

Total Loans $ 1,548,133 $ 1,484,847

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

An age analysis of past due loans by class at June 30, 2022 and December 31, 2021 is as follows:

June 30, 2022 30-59

Accruing Total Past

60 unchanged sentences

Allowance for loan losses (Dollars in thousands)

Three months ended March 31, 2022

Three months ended June 30, 2022

March 31, 2022 $ 509 $ 2,197 $ 3,012 $ 7,253 $ 15,482 $ 1,415 $ 113 $ 29,981

Charge-offs — — — — — — — —

Recoveries 2 100 2 — 13 — — 117

Provisions (benefits) 40 ( 95 ) ( 272 ) 296 716 ( 317 ) ( 18 ) 350

Ending Balance at June 30, 2022

$ 551 $ 2,202 $ 2,742 $ 7,549 $ 16,211 $ 1,098 $ 95 $ 30,448

Allowance for loan losses

Six months ended June 30, 2022

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

2 unchanged sentences

Provisions (benefits) 126 ( 560 ) ( 260 ) 73 1,107 ( 123 ) ( 13 ) 350

Ending Balance at March 31, 2022

Ending Balance at June 30, 2022

$ 551 $ 2,202 $ 2,742 $ 7,549 $ 16,211 $ 1,098 $ 95 $ 30,448

2 unchanged sentences

Collectively evaluated for impairment 551 2,202 2,738 7,429 16,189 1,098 95 30,302

Ending Balance at March 31, 2022

Ending Balance at June 30, 2022

$ 551 $ 2,202 $ 2,742 $ 7,549 $ 16,211 $ 1,098 $ 95 $ 30,448

1 unchanged sentence

Collectively evaluated for impairment 35,581 145,667 126,418 319,772 826,014 77,797 7,370 1,538,619

Ending Balance at March 31, 2022

Ending Balance at June 30, 2022

$ 35,739 $ 146,806 $ 128,782 $ 325,135 $ 826,504 $ 77,797 $ 7,370 $ 1,548,133

2 unchanged sentences

Allowance for loan losses (Dollars in thousands)

Three months ended March 31, 2021

Three months ended June 30, 2021

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

Charge-offs — — — ( 153 ) — — — ( 153 )

Recoveries 8 — 3 — — — — 11

Provisions (benefits) ( 170 ) ( 262 ) 164 ( 493 ) 1,058 ( 288 ) ( 9 ) —

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

Allowance for loan losses

Six months ended June 30, 2021

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

2 unchanged sentences

Provisions (benefits) ( 192 ) 123 413 269 288 ( 389 ) ( 12 ) 500

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

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

Allowance for loan losses

1 unchanged sentence

Collectively evaluated for impairment 302 3,262 3,496 8,278 12,750 1,250 125 29,463

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

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

Individually evaluated for impairment $ 48 $ 1,365 $ 2,379 $ 5,724 $ 1,478 $ — $ 178 $ 11,172

Collectively evaluated for impairment 94,808 198,867 128,779 312,789 679,870 83,806 9,000 1,507,919

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

Ending Balance at June 30, 2021 $ 94,856 $ 200,232 $ 131,158 $ 318,513 $ 681,348 $ 83,806 $ 9,178 $ 1,519,091

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 March 31, 2022 and December 31, 2021:

March 31, 2022 Recorded

The following tables provide further detail on impaired loans and the associated ALLL at June 30, 2022 and December 31, 2021:

June 30, 2022 Recorded

Investment Unpaid

65 unchanged sentences

$ 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 months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Investment Interest

14 unchanged sentences

Total $ 9,673 $ 75 $ 11,194 $ 86

Six Months Ended June 30,

Investment Interest

Recognized Average

Investment Interest

(Dollars in thousands)

Commercial and Industrial $ 190 $ — $ 51 $ —

Construction 1,139 — 1,365 —

Real Estate Mortgage:

Commercial – Owner Occupied

2,367 6 2,449 6

Commercial – Non-owner Occupied

5,436 135 5,673 135

Residential – 1 to 4 Family

623 11 1,496 26

Residential – Multifamily

Consumer — — 178 4

Total $ 9,755 $ 152 $ 11,212 $ 171

Troubled debt restructuring (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.

We reported performing TDR loans (not reported as non-accrual loans) of $ 5.6 million and $ 6.0 million, respectively, at June 30, 2022 and December 31, 2021.

Nonperforming TDR loans were zero at June 30, 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 and six months ended June 30, 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.

16 unchanged sentences

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 $ 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.

For TDR loans, we had specific reserves of $ 146,000 and $ 254,000 in the allowance at June 30, 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 March 31, 2022 and December 31, 2021 is as follows:

At March 31, 2022 Pass OAEM Substandard Doubtful Total

An analysis of the credit risk profile by internally assigned grades as of June 30, 2022 and December 31, 2021 is as follows:

At June 30, 2022 Pass OAEM Substandard Doubtful Total

(Dollars in thousands)

20 unchanged sentences

EQUITY AND CHANGES IN OTHER COMPREHENSIVE INCOME

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

The Company's total equity was $ 249.1 million and $ 232.4 million at June 30, 2022 and December 31, 2021, respectively.

Common stock dividend :

On June 21, 2022, the Company declared a cash dividend of $ 0.16 per share to common shareholders of record as of July 5, 2022, and paid the dividend July 19, 2022.

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.

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.

Preferred stock dividend :

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.

The Company declared cash dividends of $ 6,675 and $ 14,100 to preferred stockholders during the three months ended June 30, 2022 and June 30, 2021, respectively.

The Company declared cash dividends of $ 13,350 and $ 14,100 for the six months ended June 30, 2022 and June 30, 2021, respectively.

Conversion of preferred 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 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.

During the six months ended June 30, 2022, there were no conversions from preferred stock to common shares.

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

Other comprehensive income

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

The changes in accumulated other comprehensive loss consisted of the following for the six months ended June 30, 2022 and 2021, and there were no reclassification adjustments during the period:

For the Three Months Ended

3 unchanged sentences

Tax effect related to the unrealized loss during the periods 25 4

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

Change in other comprehensive loss $ ( 74 ) $ ( 11 )

For the Six Months Ended June 30,

(Dollars in thousands)

Investment securities:

Net unrealized losses arising during the period $ ( 683 ) $ ( 127 )

Tax effect related to the unrealized loss during the periods 176 33

Change in other comprehensive loss $ ( 507 ) $ ( 94 )

EARNINGS PER SHARE (“EPS”)

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,

The following tables set forth the calculation of basic and diluted EPS for the three and six-month periods ended June 30, 2022 and 2021.

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

(Dollars in thousands except share and per share data)

41 unchanged sentences

Furthermore, while the Company believes that its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting measurement date.

Investments in Available for Sale Securities and Loans Held for Sale:

Investments in Available for Sale Securities:

Where quoted prices are available in an active market, securities or other assets are classified in Level 1 of the valuation hierarchy.

2 unchanged sentences

As part of the Company’s overall valuation process, management evaluates these third-party methodologies to ensure that they are representative of exit prices in the Company’s principal markets.

For the loans held for sale, the fair value represents the face value of the guaranteed portion of the SBA loans pending settlement.

Securities and loans in Level 2 include mortgage-backed securities, corporate debt obligations, collateralized mortgage-backed securities, and SBA loans available for sale.

For loans held for sale, the fair value represents the value of the guaranteed portion of the SBA loans pending settlement.

There were no loans held for sale at June 30, 2022 and December 31, 2022.

Securities in Level 2 include mortgage-backed securities, corporate debt obligations, and collateralized mortgage-backed securities.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.

1 unchanged sentence

(Dollars in thousands)

Available for Sale Securities and Loans Held for Sale

As of March 31, 2022

Available for Sale Securities

As of June 30, 2022

Corporate debt obligations $ — $ 500 $ — $ 500

7 unchanged sentences

Total $ — $ 13,351 $ — $ 13,351

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.

For the six months ended June 30, 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 and six months ended June 30, 2022 and 2021.

Fair Value on a Non-recurring Basis:

2 unchanged sentences

(Dollars in thousands)

As of March 31, 2022

As of June 30, 2022

Collateral-dependent impaired loans $ — $ — $ 3,972 $ 3,972

12 unchanged sentences

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument.

These instruments include cash and cash equivalents, accrued interest receivable, demand and other non-maturity deposits and accrued interest payable.

The Company used the following methods and assumptions in estimating the fair value of the following financial instruments:

Investment Securities:

Fair value of securities available for sale is described above.

Fair value of held to maturity securities is based upon quoted market prices for identical or similar assets.

Loans Held for Sale:

Fair value represents the face value of the guaranteed portion of SBA loans pending settlement.

Loans Receivable:

For residential mortgages loans, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics.

The fair value of other types of loans is estimated by discounting the future cash flows using the risk adjusting current interest rates at which similar loans would be made to borrowers with similar credit ratings and same remaining maturities, adjusted for the liquidity discount and underwriting uncertainty.

Restricted stock:

Carrying value of Federal Home Loan Bank of New York ("FHLBNY") and the Atlantic Central Bankers Bank stocks represent the par values of the stocks and is adjusted for impairments if any.

The carrying value approximated fair value.

Time deposits:

The fair value of time deposits is based on the discounted value of contractual cash flows, where the discount rate is estimated using the market rates currently offered for deposits of similar remaining maturities.

The fair values of FHLBNY borrowings and Federal Reserve Bank advance, other borrowed funds and subordinated debt are based on the discounted value of estimated cash flows.

The discounted rate is estimated using market rates currently offered for debts with similar credit rating, terms and remaining maturities.

For a further discussion of the Company’s valuation methodologies for financial instruments measured at fair value, see the descriptions in the Company's 2021 Annual Report on Form 10-K.

Bank premises and equipment, customer relationships, deposit base and other information required to compute the Company’s aggregate fair value are not included in the above information.

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 March 31, 2022 and December 31, 2021:

March 31, 2022 Carrying Amount Fair Value

These instruments include cash and cash equivalents, accrued interest receivable, demand and other non-maturity deposits and accrued interest payable, and they are considered to be level 1 measurements.

The following table summarizes the carrying amounts and fair values for financial instruments at June 30, 2022 and December 31, 2021:

June 30, 2022 Carrying Amount Fair Value

Total Level 1 Level 2 Level 3

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Financial Assets:

Cash and cash equivalents $ 503,829 $ 503,829 $ 503,829 $ — $ —

Investment securities AFS 10,903 10,903 — 10,903 —

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Loans, net 1,517,685 1,482,195 — 1,477,214 4,981

Accrued interest receivable 7,344 7,344 — 7,344 —

Financial Liabilities:

Non-time deposits $ 1,136,827 $ 1,136,827 $ — $ 1,136,827 $ —

Time deposits 508,589 511,448 — 511,448 —

Borrowings 120,976 117,656 — 117,656 —

Accrued interest payable 1,029 1,029 — 1,029 —

December 31, 2021 Carrying Amount Fair Value

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Financial Assets:

Cash and cash equivalents $ 596,553 $ 596,553 $ 596,553 $ — $ —

Investment securities AFS 13,351 13,351 — 13,351 —

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

Accrued interest receivable 7,681 7,681 — 7,681 —

Financial Liabilities:

Non-time deposits $ 1,174,664 $ 1,174,664 $ — $ 1,174,664 $ —

Time deposits 593,746 597,791 — 597,791 —

Borrowings 120,882 117,636 — 117,636 —

Accrued interest payable 1,603 1,603 — 1,603 —

We lease three retail branches and a parcel of land for a retail branch location.

These leases generally have remaining terms of 5 years or less except the land lease, which has a remaining lease term of eighty-four years .

These leases generally have remaining terms of 10 years or less except the land lease, which has a remaining lease term of eighty-three years .

Some of the leases may include options to renew the leases.

The exercise of lease renewals is at our sole discretion.

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

Our Right of Use ("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 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.

At June 30, 2022, we had future minimum lease payments of $ 27.8 million and lease liability $ 1.9 million.

The weighted average remaining lease term was 43.6 years and weighted average discount rate was 7.1 % at June 30, 2022, respectively.

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

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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 March 31, 2022:

March 31, 2022

The following table presents information about our operating leases at June 30, 2022:

June 30, 2022

(Dollars in thousands)

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

March 31, 2022

June 30, 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 March 31, 2022.

Commitments to fund fixed-rate loans were immaterial at June 30, 2022.

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

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

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.

As of June 30, 2022 and December 31, 2021, unused commitments to extend credit amounted to approximately $ 140.2 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 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 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.

As of June 30, 2022 and December 31, 2021, standby letters of credit with customers were $ 1.5 million and $ 1.5 million, respectively.

On June 27, 2022, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $ 10.0 million.

On June 30, 2022, the Bank entered into an agreement with the FHLBNY for a MLOC of $ 50.0 million.

The MLOC's are used to pledge against public deposits and expire on July 27, 2022, and September 29, 2022, respectively.

There were no outstanding borrowings on the letters of credit as of June 30, 2022.

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.

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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.

Cannabis businesses are legal under the laws of these States and now in New Jersey, although it is not legal under federal law.

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

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

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.

At June 30, 2022 and December 31, 2021, deposit balances from cannabis customers were approximately $ 275.8 million and $ 375.2 million, or 17.1 % and 21.2 % of total deposits, respectively, with two customers accounting for 42.2 % and 19.3 % of the total at June 30, 2022 and December 31, 2021.

At June 30, 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 $ 59 thousand and $ 336 thousand of interest income in the six months ended June 30, 2022 and year ended December 31, 2021, respectively, related to these loans.

The fee income for the six months ended June 30, 2022 and year ended December 31, 2021, from the commercial deposit accounts of depositors who do business in the cannabis industry were $ 2.3 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 March 31, 2022 and December 31, 2021, the Company and Bank were both considered “well capitalized".

At June 30, 2022 and December 31, 2021, the Company and Bank were both considered “well capitalized".

Prompt corrective action regulations provide five classifications:

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

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.

As of June 30, 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.

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.

Under final regulations adopted by the federal banking agencies under the Economic Growth, Regulatory Relief and Consumer Protection Act ( "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.

We have elected to use the CBLR framework and is presented as of June 30, 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.

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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 CBLR requirement.

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

The leverage ratios of the Company and the Bank at June 30, 2022 are as follows:

Regulatory Capital Compliance

As of March 31, 2022 Actual For Capital Adequacy

As of June 30, 2022 Actual For Capital Adequacy

(Dollars in thousands except ratios) Amount Ratio Amount Ratio

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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