What changed in this filing

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Item 1. Business

2024-03-13 compared with 2023-03-15 · 65 added, 52 removed, 404 unchanged (22% of the section changed)

12 unchanged sentences

Our headquarters is located at 601 Delsea Drive, Washington Township, New Jersey.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available for free of charge at www.parkebank.com as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission ("SEC").

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available free of charge at www.parkebank.com as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission ("SEC").

Investors are encouraged to access these reports and other information about our business on our website.

2 unchanged sentences

We have carefully expanded our lending footprint in other areas also.

Most of the Bank’s customers are individuals and small to medium-sized businesses which are dependent upon the regional economy.

the Bank’s customers are individuals and small to medium-sized businesses which are dependent upon the regional economy.

Adverse changes in economic and business conditions in the Bank’s markets could adversely affect the Bank’s borrowers, their ability to repay their loans and to borrow additional funds, and consequently the Bank’s financial condition and performance.

12 unchanged sentences

Cannabis Related Business

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.

In the State of New Jersey, cannabis is legal for recreational use.

Once enacted, the new law legalized and regulated cannabis use and possession for adults 21 years and older.

The law also clarified 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 under the laws of these States and now in New Jersey, although it is not legal under federal law.

Cannabis businesses are legal under the laws of these States, as well as 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 December 31, 2022 and 2021, deposit balances from cannabis customers were approximately $177.3 million and $375.2 million, or 11.3% and 21.2% of total deposits, respectively, with two customers accounting for 36.9% and 19.3% of the

total at December 31, 2022 and 2021.

At December 31, 2022 and 2021, there were cannabis-related loans in the amounts of $3.8 million and $5.4 million, respectively.

At December 31, 2023 and 2022, deposit balances from cannabis customers were approximately $96.7 million and $177.3 million, or 6.2% and 11.3% of total deposits, respectively, with two customers accounting for 60.6% and 36.9% of the total at December 31, 2023 and 2022.

At December 31, 2023 and 2022, the Bank had cannabis-related loans in the amounts of $27.1 million and $3.8 million, respectively.

Lending Activities

13 unchanged sentences

Residential - 1 to 4 family 2,189 43,718 89,886 313,889 449,682

Residential - 1 to 4 family investment — — 10,514 513,653 524,167

Residential - multifamily 1,951 17,158 84,215 — 103,324

21 unchanged sentences

Construction loans to provide interim financing on the property are based on acceptable percentages of the appraised value of the property securing the loan in each case.

Construction loan funds are disbursed periodically at pre-specified stages of completion.

Construction loan funds are disbursed periodically at pre-specified stages of

Interest rates on these loans are generally adjustable.

27 unchanged sentences

It is also the Bank’s general policy to obtain personal guarantees from the principals of the borrowers and assignments of all leases related to the collateral.

Our commercial real estate mortgage portfolio was $511.7 million at December 31, 2023.

Within the portfolio, we designate certain sectors of loans as high risk to monitor more closely, given the current economic conditions.

At December 31, 2023, the high risk sectors consisted of office, hotel, retail, and restaurant loans.

All of these sectors combined represent 11.5% of total loan receivable, with no individual sector higher than 3.6%.

Residential Real Estate Mortgage Loans.

5 unchanged sentences

These loans are typically secured by residential real estate or personal property, including automobiles.

Home equity loans (closed-end and lines of credit) are typically made up to 80% of the appraised or assessed value of the property securing the loan in each case, less the amount of any existing prior liens on the property, and generally have maximum terms of ten years.

on the property, and generally have maximum terms of ten years.

The interest rates on second mortgages are generally fixed, while interest rates on home equity lines of credit are variable.

17 unchanged sentences

Loans are returned to an accrual status when the borrower’s ability to make periodic principal and interest payments has returned to normal (i.e., brought current with respect to principal or interest or restructured) and the paying capacity of the borrower and/or the underlying collateral is deemed sufficient to cover principal and interest.

A loan is considered impaired when it has been modified in a troubled debt restructuring or when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Impaired loans are measured based on the present value of expected future discounted cash flows, the market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent.

The recognition of interest income on impaired loans is the same as for non-accrual loans discussed above.

Total impaired loans, which include non-accrual loans and performing troubled debt restructurings (“TDRs”), were $21.7 million and $10.3 million at December 31, 2022 and 2021, respectively.

Included in impaired loans at December 31, 2022 and 2021 were $5.5 million and $6.0 million, respectively, of loans classified as TDRs as defined within accounting guidance and regulatory literature.

As of December 31, 2022, there was $3.0 million in loans which were not then on non-accrual status or a TDR but where there is a potential weakness or pose unwarranted financial risk to the Bank, even though the asset value is not currently impaired.

A loan is considered individually evaluated when it has been modified for a borrower in financial distress or when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Individually evaluated loans that have been modified are measured based on the present value of expected future discounted cash flows, the market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent.

The recognition of interest income on individually evaluated loans is the same as for non-accrual loans discussed above.

Total non-performing loans, which include non-accrual loans, were $7.2 million and $21.7 million at December 31, 2023 and 2022, respectively.

Included in individually evaluated loans at December 31, 2023 and 2022 were zero and $5.5 million, respectively, of loans modified to borrowers in financial distress.

As of December 31, 2023, there was $15.4 million in loans which were not then on non-accrual status or modified but where there is a potential weakness or pose unwarranted financial risk to the Bank, even though the asset value is not currently impaired.

These loans require an increased degree of monitoring and servicing by Management as a result of internal or external conditions.

8 unchanged sentences

Real estate acquired by the Bank as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until such time as it is sold.

When real estate owned is acquired, it is recorded at its fair value less disposal costs.

When real estate owned is acquired, it is recorded at its fair value less

disposal costs.

Management also periodically performs valuations of real estate owned and establishes allowances to reduce book values of the properties to their net realizable values when necessary.

Any write-down of real estate owned is charged to

Real estate owned at December 31, 2022 was $1.6 million.

Any write-down of real estate owned is charged to operations.

Real estate owned at December 31, 2023 and December 31, 2022, was $1.6 million.

Real estate owned consisted of two commercial owner occupied properties as of December 31, 2023.

Allowance for Losses on Loans.

Allowance for Credit Losses.

It is the policy of management to estimate for possible losses on all loans in its portfolio, whether classified or not.

A provision for loan losses is charged to operations based on management’s evaluation of the inherent losses estimated to have occurred in the Bank’s loan portfolio.

A provision for credit losses is charged to operations based on management’s evaluation of the inherent losses estimated to have occurred in the Bank’s loan portfolio.

Management’s judgment as to the level of probable losses on existing loans is based on its internal review of the loan portfolio, including an analysis of the borrower's current financial position;

the level and trends in delinquencies, non-accruals and impaired loans;

the level and trends in delinquencies, non-accruals and individually evaluated loans;

the consideration of national and local economic conditions and trends;

5 unchanged sentences

However, management’s determination of the appropriate allowance level, which is based upon the factors outlined above, which are believed to be reasonable, may or may not prove to be valid.

Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required.

Allocation of Allowance for Loan Losses.

The following table sets forth the allocation of the Bank’s allowance for loan losses by loan category at the dates indicated and the related percentage of the loans in the portfolio.

Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for credit losses or that additional increases in the allowance for credit losses will not be required.

Allocation of Allowance for Credit Losses on Loans.

The following table sets forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated and the related percentage of the loans in the portfolio.

The portion of the loan loss allowance allocated to each loan category does not represent the total available for future losses that may occur within the loan category as the total loan loss allowance is a valuation reserve applicable to the entire loan portfolio.

10 unchanged sentences

Residential – 1 to 4 Family 9,061 25.2 — — % 6,076 25.3 (68) — %

Residential - 1 to 4 Family Investment 8,783 29.3 9,381 27.2

Residential – Multifamily 1,049 5.8 — — % 1,347 5.5 — — %

Consumer 62 0.3 — — % 63 0.4 — — %

Total allowance for loan losses $ 31,845 100.0 % $ (200) (0.01) % $ 29,845 100.0 % $ 353 0.02 %

Total allowance for credit losses $ 32,131 100.0 % $ (18) — % $ 31,845 100.0 % $ (200) (0.01) %

Period-end loans outstanding (net of deferred costs/fees) $ 1,787,340 $ 1,751,459

29 unchanged sentences

Securities Available for Sale :

Corporate debt obligations $ — $ 500 $ — $ — $ 500 $ 500

Yield — % 4.38 % — % — % 4.38 %

Residential mortgage-backed securities — 2,996 1,008 3,635 7,639 7,095

4 unchanged sentences

Total Weighted Average Yield — % 2.93 % 2.29 % 2.17 % 2.39 %

As of December 31, 2022, Parke does not have any tax-exempt securities within the investment portfolio.

Yields are calculated on a weighted average basis using the investments amortized cost and respective average yields for each investment category.

7 unchanged sentences

Deposits are obtained primarily from communities that the Bank serves, however, the Bank held brokered deposits of $223.4 million and $140.8 million at December 31, 2023, and 2022, respectively.

At December 31, 2023, the Bank held brokered deposit balances in NOW, money market, and time deposit categories.

Brokered deposits are a more volatile source of funding than core deposits and do not increase the deposit franchise of the Bank.

2 unchanged sentences

To mitigate the potential negative impact associated with brokered deposits, the Bank joined the IntraFi network ("IntraFi") to secure an additional alternative funding source.

IntraFi provides the Bank an additional source of external funds through their weekly CDARS ™ settlement process.

The rates are comparable to brokered deposits and can be obtained within a shorter period of time than brokered deposits.

The Bank’s CDARS ™ deposits included within the brokered deposit total amounted to $106.6 million and $4.5 million at December 31, 2022 and 2021, respectively.

IntraFi provides the Bank an additional source of external funds through their weekly CDARS ™ settlement process and their overnight ICS ™ money market product.

The Bank’s CDARS ™ and ICS ™ deposits included within the brokered deposit total amounted to $216.9 million and $106.6 million at December 31, 2023 and 2022, respectively.

Balance Yield/Rate Percent of

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Banks that are less than well capitalized or are not in one of the two highest examination rating categories may not accept brokered deposits absent a waiver from the FDIC and may not pay interest on brokered deposits that they are permitted to accept at a rate that is more than 75 basis points greater than the average national rate paid on deposits of similar size and maturity.

Pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) enacted in May 2018, the FDIC has amended its brokered deposit rule to exempt reciprocal deposits such as CDARs in an amount not exceeding the lesser of $5 billion or 20% of a bank’s total liabilities from the definition of brokered deposits.

Pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), the FDIC has amended its brokered deposit rule to exempt reciprocal deposits in an amount not exceeding the lesser of $5 billion or 20% of a bank’s total liabilities from the definition of brokered deposits.

A bank that was well-capitalized and highly rated may continue to accept reciprocal deposits after it becomes less than well-capitalized or is no longer highly rated provided that reciprocal deposits do not exceed the average amount of reciprocal deposits as the preceding four quarter ends.

Subsidiary Activities

The largest subsidiary of the Company is the Bank.

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

The Company had a 51% ownership interest in the joint venture, and Bridgestone Capital LLC made a $1.2 million capital contribution to PDL.

In 2021, PDL LLC was fully liquidated and all earnings were distributed to the Company and Bridgestone Capital, LLC.

The Company's only significant subsidiary is the Bank.

At December 31, 2023, the Bank had 101 full-time and 5 part-time employees.

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Furthermore, under amendments to the BHC Act and regulations of the Federal Reserve, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of credit or providing any property or services.

Generally, this provision provides that a bank may not extend credit, lease or

sell property, or furnish any service to a customer on the condition that the customer obtain additional credit or service from the bank, the bank holding company, or any other subsidiary of the bank holding company or on the condition that the customer not obtain other credit or service from a competitor of the bank, the bank holding company, or any subsidiary of the bank.

Generally, this provision provides that a bank may not extend credit, lease or sell property, or furnish any service to a customer on the condition that the customer obtain additional credit or service from the bank, the bank holding company, or any other subsidiary of the bank holding company or on the condition that the customer not obtain other credit or service from a competitor of the bank, the bank holding company, or any subsidiary of the bank.

Source of Strength Doctrine.

A bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.

In addition, it is the policy of the Federal Reserve that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks.

In addition, it is the policy

of the Federal Reserve that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks.

A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve regulations, or both.

14 unchanged sentences

The Federal Reserve may apply the regulatory capital standards at its discretion to any bank holding company, regardless of asset size, if such action is warranted for supervisory purposes.

Restrictions on Dividends .

The Company is subject to various restrictions relating to the payment of dividends.

1 unchanged sentence

The Federal Reserve’s guidance also states that a bank holding company should inform and consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure.

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition.

The Federal Reserve also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

In addition, the Federal Reserve’s guidance states that a bank holding company should consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure.

Finally, under the federal prompt corrective action regulations, the Federal Reserve may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

As a majority of the Company’s revenues result from dividends paid to the Company by the Bank, the Company’s ability to pay dividends to our shareholders largely depends on the receipt of such dividends from the Bank.

2 unchanged sentences

In addition, no dividend may be paid unless the Bank would, after payment of the dividend, have a surplus of at least 50% of its capital stock (or if the payment of dividend would not reduce surplus).

Finally, if the Bank does not maintain the capital conservation buffer required by applicable regulatory capital rules, its ability to pay dividends or other capital distributions to the Company will be limited.

Finally, if the Bank does not maintain the capital conservation buffer required by applicable regulatory capital rules,

its ability to pay dividends or other capital distributions to the Company will be limited.

See “- Regulation of the Bank - Regulatory Capital Requirements.”

11 unchanged sentences

The regulatory authorities have substantial discretion to impose enforcement action on an institution that fails to comply with applicable regulatory requirements.

Under the New Jersey Banking Act of 1948, a bank may declare and pay dividends only if after payment of the dividend the capital stock of the bank will be unimpaired and either the bank will have a surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce the bank's surplus.

Federal Deposit Insurance.

22 unchanged sentences

An institution’s risk-based capital requirements are measured against risk-weighted assets, which equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight.

Risk weightings range

from 0% for cash to 100% for property acquired through foreclosure, commercial loans, and certain other assets to 150% for exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property.

Risk weightings range from 0% for cash to 100% for property acquired through foreclosure, commercial loans, and certain other assets to 150% for exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property.

In addition to the above minimum requirements, the Basel III Capital Rules require banks and covered financial institution holding companies to maintain a capital conservation buffer of at least 2.5% of risk-weighted assets over and above the minimum risk-based capital requirements.

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In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions.

Privacy Regulations and Cybersecurity.

Federal regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of

establishing the customer relationship and annually thereafter.

In addition, the Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes.

The Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

In November 2021, the federal bank regulatory agencies issued a final rule requiring banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that rises to the level of a “notification incident,” as those terms are defined in the final rule, has occurred.

A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector.

The final rule also requires bank service providers to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for four or more hours.

Transactions with Related Parties.

3 unchanged sentences

The Bank is also subject to certain restrictions under Sections 22(g) and 22(h) of the Federal Reserve Act on extensions of credit to the executive officers, directors, principal shareholders of the Bank and the Company, as well as to entities controlled by such persons.

including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.

Among other things and subject to certain exceptions, these provisions generally require that the Bank’s extensions of credit to the insiders of the Bank and the Company must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.

Federal Home Loan Bank System.

10 unchanged sentences

An unsatisfactory Community Reinvestment Act examination rating may be used as the basis for the denial of an application.

The Bank received a “satisfactory” rating in its most recent Community Reinvestment Act examination.

The Bank received a “needs to improve” rating in its most recent Community Reinvestment Act examination.

In May 2022, the FDIC and the other federal bank regulatory agencies issued a joint proposal to modernize the regulations implementing the CRA, which would change both the process and substantive tests that the regulators use to assess the record of each bank in fulfilling its obligation to the community.

1 unchanged sentence

(i) expand access to credit, investment and basic banking services in low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions.

The Company will evaluate the impact of the proposal’s potential changes to the regulations implementing the CRA and their impact to our financial condition and/or results of operations, which cannot be predicted at this time.

The Company will evaluate the impact of the

proposal’s potential changes to the regulations implementing the CRA and their impact to our financial condition and/or results of operations, which cannot be predicted at this time.

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes.

10 unchanged sentences

These proposed rules have not been finalized.

In October 2022, the SEC adopted a final rule directing national securities exchanges, including Nasdaq, to establish listing standards requiring listed companies to adopt policies providing for the recovery or “clawback” of excess incentive-based compensation earned by current or former executive officers during the three fiscal years preceding the date the listed company determines an accounting restatement is required.

The SEC final rule will require us to adopt a clawback policy within 60 days after the Nasdaq listing standard becomes effective.

In October 2023, the Nasdaq adopted listing standards requiring listed companies to adopt policies providing for the recovery or “clawback” of excess incentive-based compensation earned by current or former executive officers during the three fiscal years preceding the date the listed company determines an accounting restatement is required.

The Company adopted a clawback policy compliant with the new Nasdaq listing standard, effective October 2 ,2023.

Risk Factors.

Not applicable

Unresolved Staff Comments.

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-K

Item 1. Business