What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-13 compared with 2023-03-15 · 363 added, 430 removed, 1033 unchanged (43% of the section changed)

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March 13, 2024

Pantilione /s/ John S.

Pantilione John S.

Pantilione /s/ Jonathan D.

Pantilione Jonathan D.

President and Chief Executive Officer Senior Vice President and Chief Financial Officer

3 unchanged sentences

We have audited the accompanying consolidated balance sheet of Parke Bancorp, Inc.

and subsidiaries (the “Company”) as of December 31, 2022;

the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended;

and subsidiaries (the “Company”) as of December 31, 2023 and 2022;

the related consolidated statements of income, comprehensive income, equity, and cash flows for the years then ended;

and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for credit losses effective January 1, 2023, due to the adoption of Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses.

Basis for Opinion

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The communication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Loan Losses (ALL) – Qualitative Factors

Description of the Matter

The Company’s loan portfolio totaled $1.8 billion as of December 31, 2022, and the associated ALL was $31.8 million.

As discussed in Notes 1 and 4 to the consolidated financial statements, the historical loss experience is measured by type of credit and internal risk grade, loss severity, and specific homogeneous risk pools.

A historical loss ratio and valuation allowance are established for each pool of similar loans and updated periodically based on actual charge-off experience and current events, which are then adjusted for other qualitative risk factors both internal and external to the Company.

It is generally determined by evaluating, among other things:

(i) the experience, ability, and effectiveness of the Bank's lending management and staff;

(ii) the effectiveness of the Bank's loan policies, procedures, and internal controls;

(iii) changes in asset quality;

(iv) changes in loan portfolio volume;

(v) the composition and concentrations of credit;

(vi) the impact of competition on loan structuring and pricing;

(vii) the effectiveness of the internal loan review function;

(viii) the impact of environmental risks on portfolio risks;

and (ix) national and local economic trends and conditions, and industry conditions.

Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis.

Each component is determined to have either a high, high-moderate, moderate, low-moderate, or low degree of risk.

We identified these qualitative adjustments within the ALL as critical audit matters because they involve a high degree of subjectivity.

In turn, auditing management’s judgments regarding the qualitative factors applied in the ALL calculation involved a high degree of subjectivity.

How We Addressed the Matter in Our Audit

We gained an understanding of the Company’s process for establishing the ALL, including the qualitative adjustments made to the ALL and the anchoring calculation completed to support the magnitude of the adjustments.

We evaluated the design and tested the operating effectiveness of controls over the Company’s ALL process, which included, among others, management’s review and approval controls designed to assess the need and level of qualitative adjustments to the ALL, as well as the reliability of the data utilized to support management’s assessment.

Regarding the measurement of the qualitative adjustments, we evaluated the completeness, accuracy, and relevance of the data and inputs utilized in management’s estimate.

We tested management’s anchoring calculations to ensure that the magnitude of the adjustments was supportable.

Furthermore, we analyzed the changes in the components of the qualitative reserves relative to changes in external market factors and internal data points supporting management’s assessment of each factor to test the directional consistency and the overall magnitude of the qualitative factor adjustments.

We also utilized internal credit review specialists with knowledge to evaluate the appropriateness of management’s risk-rating processes, to ensure that the risk ratings applied to the commercial loan portfolio were reasonable.

Allowance for Credit Losses (ACL) – Qualitative Adjustments

The Company’s loan portfolio totaled $1.8 billion as of December 31, 2023, and the associated ACL was $32.1 million.

As discussed in Notes 1 and 4 to the financial statements, determining the amount of the ACL requires significant judgment about the expected future losses, which is based on a base loss projection determined through a historical vintage loss rate analysis, which is then adjusted for current qualitative conditions and reasonable and supportable forecasts.

Management applies these qualitative adjustments to the base loss projection to reflect changes in the current and forecasted environment, both internal and external, that are different from the conditions that existed during the historical loss calculation period.

The qualitative adjustments include analysis of items related to economic conditions, credit quality indicators within the loan portfolio, and other internal and external factors.

We identified these qualitative adjustments within the ACL as critical audit matters because they involve a high degree of subjectivity.

While the determination of these qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality and magnitude of adjustments is highly subjective.

Auditing these complex judgments and assumptions involved especially challenging auditor judgment due to the nature of audit evidence and the nature and extent of effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

- Testing the design, implementation, and operating effectiveness of internal controls over the

calculation of the allowance for credit losses, including the qualitative factor adjustments.

- Testing the completeness and accuracy of the significant data points that management uses in

their evaluation of the qualitative adjustments.

- Testing the anchoring calculation that management completes to properly align the magnitude

of the adjustments with the Company's historical loss data.

- Evaluating the directional consistency and reasonableness of management's conclusions

regarding basis points applied (whether positive or negative) based on the trends identified in

the underlying data.

- Testing the mathematical accuracy of the application of the qualitative adjustments to the loan

segments within the ACL calculation.

We have served as the Company’s auditor since 2022.

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March 13, 2024

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Parke Bancorp, Inc.

and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Parke Bancorp, Inc.

and Subsidiaries (the Company) as of December 31, 2021, the related consolidated statements of income, comprehensive income, equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below are matter arising from the audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Allowance for Loan Losses—Qualitative Factors

The allowance for loan losses as of December 31, 2021 was $29.9 million.

As described in Notes 1 and 4 to the consolidated financial statements, the allowance for loan losses is established through a provision for loan losses and represents an amount which, in management’s judgement, will be adequate to absorb losses on existing loans.

The allowance consists of specific and general components in the amounts of $0.6 million and $29.3 million, respectively.

The specific component relates to loans that are classified as impaired.

The Company measures impairment and the related asset specific allowance for impaired loans based on the difference between the recorded investment of the loan and the present value of the expected future cash flows, discounted at the original effective interest rate of the loan.

If the loan is collateral dependent, the Company measures impairment based upon the fair value of the underlying collateral, which the Company determines based on the current fair value of the collateral less estimated selling costs, instead of discounted cash flows.

Loans are identified as collateral dependent if the Company believes that collateral is the sole source of repayment.

The general component is based on historical losses, general economic conditions, and other qualitative risk factors both internal and external to the Company.

The historical loss ratio and valuation allowance are established for each pool of similar loans and updated periodically based on actual charge-off experience and current events.

The qualitative risk factors are generally determined by evaluating, among other things:

(i) lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices;

(ii) national and local economic trends and conditions;

(iii) nature and volume of the portfolio and terms of loans;

(iv) experience, ability, and depth of lending management and staff;

(v) volume and severity of past due, classified and nonaccrual loans as well as other loan modifications;

(vi) quality of the Company’s loan

review system;

and (vii) existence and effect of any concentrations of credit and changes in the level of such concentrations.

The evaluation of the qualitative factor adjustments requires a significant amount of judgement by management and involves a high degree of subjectivity.

We identified the qualitative factor portion of the general reserve component of the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.

Our audit procedures related to the qualitative factors included the following, among others:

• We obtained an understanding of the relevant controls related to management’s establishment of the factor, assessment, and review of the qualitative factors, and tested such controls for design and operating effectiveness, including controls over management’s establishment, review and approval of the qualitative factors and the data used in determining the qualitative factors.

• We obtained an understanding of how management developed the estimates and related assumptions, including:

◦ Testing completeness and accuracy of key data inputs used in forming assumptions or calculations and testing the reliability of the underlying data on which these factors are based by comparing information to source documents and external information sources as well as evaluating the estimated correlation to potential loss.

◦ Evaluating the reasonableness of the qualitative factors established by management as compared to the underlying internal or external information sources.

/s/ RSM US LLP

We served as the Company's auditor from 2000 to May 2022.

Blue Bell, Pennsylvania

March 21, 2022

Parke Bancorp, Inc.

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December 31, 2023 and 2022

( Dollars in thousands except share and per share data)

( Dollars in thousands except per share data)

December 31, December 31,

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Investment securities available for sale, at fair value 7,095 9,366

Investment securities held to maturity (fair value of $ 7,805 at December 31,

Investment securities held to maturity, net of allowance for credit losses of $ 0 at December 31, 2023 (fair value of $ 7,892 at December 31,

2023 and $ 7,805 at December 31, 2022)

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Loans, net of unearned income 1,787,340 1,751,459

Allowance for loan losses

( 31,845 ) ( 29,845 )

Allowance for credit losses ( 32,131 ) ( 31,845 )

1,755,209 1,719,614

4 unchanged sentences

Deferred tax asset 9,262 9,184

Other real estate owned (OREO) 1,550 1,550

Other 10,531 5,363

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Retained earnings 149,437 131,706

Accumulated other comprehensive (loss) income ( 526 ) 245

Accumulated other comprehensive loss ( 404 ) ( 526 )

Treasury stock, 284,522 shares at December 31, 2023 and 2022, at cost

8 unchanged sentences

( Dollars in thousands except per share data)

December 31, 2023 December 31, 2022

Interest income:

8 unchanged sentences

Net interest income 64,214 73,327

Provision for loan losses 1,800 500

Net interest income after provision for loan losses 71,527 68,616

(Recovery of) provision for credit losses ( 2,051 ) 1,800

Net interest income after (recovery of) provision for credit losses 66,265 71,527

Non-interest income

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Income tax expense 9,228 14,253

Net income attributable to Company and noncontrolling interest 41,823 40,975

Net income attributable to noncontrolling interest — ( 215 )

Net income attributable to Company 28,462 41,823

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Net income $ 28,462 $ 41,823

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

Unrealized losses on available for sale securities ( 1,039 ) ( 294 )

Tax impact on unrealized loss 268 76

Total other comprehensive loss ( 771 ) ( 218 )

Comprehensive income 41,052 40,757

Comprehensive income attributable to noncontrolling interests — ( 215 )

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

Unrealized gains (losses) on available for sale securities 165 ( 1,039 )

Tax impact on unrealized (loss) gain ( 43 ) 268

Total other comprehensive gain (loss) 122 ( 771 )

Comprehensive income attributable to the Company $ 28,584 $ 41,052

5 unchanged sentences

(Dollars in thousands except share data)

Shares of Preferred Stock Outstanding Preferred

Stock Shares of Common Stock issued Common

1 unchanged sentence

Earnings Accumulated Other Comprehensive Income (Loss) Treasury

Shareholders’ Equity Non-Controlling Interest Total

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

Earnings distribution to non-controlling interest — — — — — — — — ( 1,887 ) ( 1,887 )

Net income — — — — — 41,823 — — 41,823

Stock compensation issued/exercised — — 43,016 5 401 — — — 406

Preferred stock shares conversion ( 35 ) 4,813 — 35 — — — — — —

Other comprehensive loss — — — — — — ( 771 ) — ( 771 )

Stock compensation expense — — — — 349 — — — 349

Dividend on preferred stock — — — — ( 28 ) — — ( 28 ) — ( 28 )

Dividend on common stock — — — — ( 9,509 ) — — ( 9,509 ) — ( 9,509 )

Dividend on preferred stock ($ 60.00 per share)

— — — — — ( 27 ) — — ( 27 )

Dividend on common stock ($ 0.68 per share)

— — — — — ( 8,107 ) — — ( 8,107 )

Balance, December 31, 2022 445 $ 445 12,225,097 $ 1,223 $ 136,201 $ 131,706 $ ( 526 ) $ ( 3,015 ) $ 266,034

Cumulative effect of adoption of ASU 2016-13 — — — — — ( 2,102 ) — — ( 2,102 )

Net income — — — — — 28,462 — — 28,462

Stock compensation issued/exercised — — 6,096 — 33 — — — 33

Other comprehensive loss — — — — — ( 771 ) — ( 771 ) — ( 771 )

Preferred stock shares conversion ( 70 ) ( 70 ) 9,628 1 69 — — — —

Other comprehensive gain — — — — — — 122 — 122

Stock compensation expense — — — — 397 — — — 397

Dividend on preferred stock — — — — ( 27 ) — — ( 27 ) — ( 27 )

Dividend on common stock — — — — ( 8,107 ) — — ( 8,107 ) — ( 8,107 )

Dividend on preferred stock ($ 60.00 per share)

— — — — — ( 26 ) — — ( 26 )

Dividend on common stock ($ 0.72 per share)

— — — — — ( 8,603 ) — — ( 8,603 )

Balance, December 31, 2023 375 $ 375 12,240,821 $ 1,224 $ 136,700 $ 149,437 $ ( 404 ) $ ( 3,015 ) $ 284,317

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Depreciation and amortization 464 646

Provision for loan losses 1,800 500

(Recovery of) provision for credit losses ( 2,051 ) 1,800

Increase in value of bank-owned life insurance ( 736 ) ( 568 )

5 unchanged sentences

Stock based compensation 397 349

(Increase) decrease in deferred income tax ( 1,325 ) 1,079

Decrease (increase) in deferred income tax 595 ( 1,325 )

Net changes in:

Increase in accrued interest receivable and other assets ( 4,955 ) ( 727 )

Increase (decrease) in accrued interest payable and other accrued liabilities 1,789 ( 3,176 )

Increase in accrued interest payable and other accrued liabilities 917 1,789

Net cash provided by operating activities 23,018 43,450

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Repayments and maturities of investment securities held to maturity 147 590

Purchases of investment securities held to maturity — ( 8,693 )

Net (increase) decrease in loans ( 268,420 ) 78,996

Purchases of bank premises and equipment ( 150 ) ( 64 )

Net increase in loans ( 35,986 ) ( 268,420 )

Sales (purchases) of bank premises and equipment 105 ( 150 )

Proceeds from sale of OREO, net 161 2,426

Proceeds from bank owned life insurance policy 466 —

Redemptions of restricted stock 10,819 912

Purchases of restricted stock ( 13,016 ) ( 1,207 )

Net cash (used in) provided by investing activities ( 262,944 ) 79,189

Net cash used in investing activities ( 34,892 ) ( 262,944 )

Cash Flows from Financing Activities

1 unchanged sentence

Proceeds from exercise of stock options 33 406

Net proceeds from issuance of subordinate debt — —

Earnings distribution from non-controlling interest — —

Decrease in FHLBNY and short-term borrowings ( 20,000 ) ( 56,500 )

Increase in FHLBNY and short-term borrowings 25,000 —

(Decrease) increase in FHLBNY short-term borrowings ( 53,150 ) 63,150

Increase (decrease) in FHLBNY long-term borrowings 95,000 ( 58,150 )

Net decrease in other borrowed funds — —

Net (decrease) increase in noninterest-bearing deposits ( 201,264 ) 124,950

Net decrease in noninterest-bearing deposits ( 120,357 ) ( 201,264 )

Net increase in interest-bearing deposits 97,203 8,835

Net cash (used in) provided by financing activities ( 194,909 ) 20,122

(Decrease) increase in cash and cash equivalents ( 414,403 ) 137,952

Net cash provided by (used in) financing activities 10,100 ( 194,909 )

Decrease in cash and cash equivalents ( 1,774 ) ( 414,403 )

Cash and Cash Equivalents, January 1, 182,150 596,553

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Loans transferred to OREO $ 123 $ 1,994

Accrued dividends payable $ 2,158 $ 2,156

See accompanying notes to consolidated financial statements

PARKE BANCORP, INC.

AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

Description of Business and Summary of Significant Accounting Policies

13 unchanged sentences

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank.

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 had a 51 % ownership interest in the joint venture.

The joint venture was liquidated in 2021.

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

13 unchanged sentences

These securities gains/(losses) are included in other noninterest income.

On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for Other Than Temporary Impairment ("OTTI").

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

If the present value of the cash flows expected to be collected, discounted at the security’s effective yield, is less than the security’s amortized cost, OTTI is considered to have occurred.

For a debt security for which there has been a decline in the fair value below the amortized cost basis, if we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, an OTTI write-down is recognized in earnings equal to the entire difference between the amortized cost basis and fair value of the security.

For debt securities that are considered OTTI and that we do not intend to sell and will not be required to sell prior to recovery of our amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors.

The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value

of its expected future cash flows discounted at the security’s effective yield.

The remaining difference between the security’s fair value and the present value of expected future cash flows is due to factors that are not credit-related and, therefore, is recognized in other comprehensive income.

Restricted Stock :

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The stocks have no quoted market value and are subject to redemption restrictions.

Management reviews these stocks for impairment based on the ultimate recoverability of the cost basis in the stock.

Management reviews these stocks for credit loss based on the ultimate recoverability of the cost basis in the stock.

The stocks’ values are determined by the ultimate recoverability of the par value rather than by recognizing temporary declines.

5 unchanged sentences

Loans classified as held for investment are reported at their amortized cost, which is the outstanding principal balance, adjusted for any unearned income, unamortized deferred fees and costs, unamortized premiums and discounts and charge-offs.

Interest income on the loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding.

Interest income on the loans is recognized as earned based on contractual interest rates

applied to daily principal amounts outstanding.

Loan origination fees, direct loan origination costs, and loan premiums and discounts are deferred and accreted or amortized into net interest income using the constant effective yield method, over the contractual life of the loan.

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Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.

Troubled Debt Restructurings :

Troubled debt restructurings (“TDRs”) are loans for which the Company, for legal or economic reasons related to a debtor’s financial difficulties, has granted a concession to the debtor that it otherwise would not have considered in the normal course of business.

Concessions that result in the categorization of a loan as a TDR include but are not limited to:

• Reduction (absolute or contingent) of the stated interest rate;

• Extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk;

• Reduction (absolute or contingent) of the face amount or maturity amount of the debt as stated in the instrument or other agreement;

• Reduction (absolute or contingent) of accrued interest.

TDRs are reported as impaired loans.

Interest income on TDR loans is recognized consistent with the Company’s non-accrual loan policy stated above.

Allowance for Loan and Lease Losses :

The allowance for loan and lease losses represents management’s estimate of probable losses inherent in the Company’s lending activities excluding loans accounted for under fair value.

The allowance for loan losses is maintained through charges to the provision for loan losses in the Consolidated Statements of Income as losses are estimated to have occurred.

Allowance for Credit Losses on Loans and Leases :

The allowance for credit losses represents management’s estimate of expected losses inherent in the Company’s lending activities excluding loans accounted for under fair value.

The allowance for credit losses is maintained through charges to the provision for credit losses in the Consolidated Statements of Income as expected losses are estimated.

Loans or portions thereof that are determined to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.

The Company performs periodic reviews of its loan and lease portfolios to identify credit risks and to assess the overall collectability of those portfolios.

The Company's allowance for loan losses includes a general based component and a specific component.

The specific component of the allowance relates to loans considered to be impaired, which includes performing TDRs as well as nonperforming loans.

To determine the specific component of the allowance, the loans are evaluated individually based on the borrower's ability to repay amounts owed, collateral, relative risk grade of the loans, and other factors given current events and conditions.

The Company generally measures the specific allowance as the difference between the fair value (net realizable value) and the recorded investment of a loan.

The general component of the allowance evaluates the impairments of pools of the loan and lease portfolio collectively.

It incorporates a historical valuation allowance and general valuation allowance.

The historical loss experience is measured by type of credit and internal risk grade, loss severity, specific homogeneous risk pools.

A historical loss ratio and valuation allowance are established for each pool of similar loans and updated periodically based on actual charge-off experience and current events.

The general valuation allowance is based on general economic conditions and other qualitative risk factors both internal and external to the Company.

The Company's allowance for credit losses includes a general component and an asset-specific component for collateral-dependent loans.

To determine the asset-specific component of the allowance, the loans are evaluated individually based on the fair value of the underlying collateral.

The Company generally measures the asset-specific allowance as the difference between the net realizable value of loan collateral and the recorded investment of a loan.

The general component of the allowance evaluates the impairments of pools of the loan portfolio collectively.

It incorporates a historical valuation allowance and qualitative allowance.

The historical valuation utilizes a vintage loss rate approach utilizing a third party software model.

The vintage loss rate approach creates pools of loans based on the segments defined by management, and consists of commercial and industrial, construction, commercial - owner occupied, commercial - non-owner occupied, residential - 1 to 4 family, residential - 1 to 4 family investment, residential - multifamily, and consumer.

The loan pools are aggregated by origination year.

Charge-offs, net of recoveries, are allocated by the year of charge-off to each loan pool.

An average life is prescribed to a pool of loans that were originated in a particular year.

The actual charge-offs as a percent of total loans are calculated for each historical year, and projected for future years for each year within the average life time horizon.

The sum of the actual charge-offs and projected charge-offs are divided by the average amortized origination amount for each respective year.

Those charge-off percentages are added together to obtain an aggregated vintage loss percentage which is then multiplied by the outstanding loan balances to obtain a reserve requirement.

The qualitative allowance component is based on general economic conditions and other qualitative risk factors both internal and external to the Company.

It is generally determined by evaluating, among other things:

(i) the experience, ability and effectiveness of the Bank's lending management and staff;

(ii) the effectiveness of the Bank's loan policies, procedures and internal controls;

(iii) changes in asset quality;

(iv) changes in loan portfolio volume;

(v) the composition and concentrations of credit;

(vi) the impact of competition on loan structuring and pricing;

(vii) the effectiveness of the internal loan review function;

(viii) the impact of environmental risks on portfolio risks;

and (ix) national and local economic trends and conditions, and industry conditions.

(ii) the effectiveness of the Bank's lending policies, procedures and internal controls;(iii) volume and severity of loan credit quality;

(iv) nature and volume of portfolio and term of loans (v) the composition and concentrations of credit;

(vi) the effectiveness of the internal loan review system;

and (vii) national and local economic trends and conditions, and industry conditions.

Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis.

1 unchanged sentence

The results are then input into a "general allocation matrix" to determine an appropriate general valuation allowance.

Impaired Loans :

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.

Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Factors considered by management when evaluating impaired loans include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Generally, we report loans as impaired based on the method for measuring impairment in accordance with applicable accounting guidance.

Loans held for sale are not reported as impaired, as these loans are recorded at lower of cost or fair value.

Loans classified as nonperforming and loans that have been modified in a troubled debt restructuring are reported as impaired.

Loans modified in a TDR continue to be reported as impaired.

The majority of impaired loans are evaluated for an asset-specific allowance.

We generally measure impairment and the related asset-specific allowance for impaired loans based on the difference between the recorded investment of the loan and the present value of the expected future cash flows, discounted at the original effective interest rate of the loan.

If the loan is collateral dependent, we measure impairment based upon the fair value of the underlying collateral, which we determine based on the current fair value of the collateral less estimated selling costs, instead of discounted cash flows.

Loans are identified as collateral dependent if we believe that collateral is the sole source of repayment.

The Company has elected to exclude accrued interest receivable from the measurement of the ACL.

When a loan is placed on non-accrual status, any outstanding accrued interest is generally reversed against interest income.

The process of determining the level of the allowance for credit losses requires a high degree of estimate and judgment.

It is reasonably possible that actual outcomes may differ from our estimates.

Allowance for Credit Losses on Lending-Related Commitments :

Parke estimates expected credit losses over the contractual period in which it is exposed to credit risk on contractual obligations to extend credit, unless the obligation is unconditionally cancellable by the Company.

The allowance for credit losses on lending-related commitments is recorded in other liabilities in the consolidated balance sheet and is recorded as a provision for credit losses in the consolidated income statement.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives.

The lifetime loss rates for off-balance sheet credit exposures are calculated in the same manner as on-balance sheet credit exposures, using the same model and economic forecasts, adjusted for the estimated likelihood that funding will occur.

Individually Assessed Loans and Leases :

ASC 326 provides that a loan or lease is measured individually if it does not share similar risk characteristics with other financial assets.

For Parke, loans and leases which are identified to be individually assessed under CECL typically are those that are on non-accrual at the reporting date, and include collateral dependent loans.

Collateral Dependent Loans

Parke considers a loan to be collateral dependent when foreclosure of the underlying collateral is probable.

Parke has also elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.

Allowance for Credit Losses on Held to Maturity Securities :

We follow Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost , to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company classifies the held-to-maturity debt securities into the following major security types:

residential mortgage backed, and state and political subdivisions.

These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security.

Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis.

Based on the credit ratings of our held-to-maturity securities and our historical experience including no losses, we have determined that an allowance for credit loss on the held-to-maturity portfolio is not required

Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition.

Allowance for Credit Losses on Available for Sale Securities :

We follow ASC 326-30, Financial Instruments - Credit Loss - Available-for-Sale Debt Securities , which provides guidance related to the recognition of and expanded disclosure requirements for expected credit losses on available-for-sale debt securities.

For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.

If either criteria is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to non-interest income in the Consolidated Statements of Income.

For debt securities available-for-sale which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, we evaluate whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating.

In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.

Charge-Offs :

We charge off loans as a reduction to the allowance for loan and lease losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as an increase to the allowance for loan and lease losses.

We charge off loans as a reduction to the allowance for credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as an increase to the allowance for credit losses.

Concentration of Credit Risk :

5 unchanged sentences

Real estate acquired through foreclosure or other proceedings is carried at the lower of cost or estimated fair value, less estimated costs to sell.

When a property is acquired, the excess of the loan balance over the estimated fair value is charged to the allowance for loan losses.

When a property is acquired, the excess of the loan balance over the estimated fair value is charged to the allowance for credit losses.

Costs of improving OREO are capitalized to the extent that the carrying value does not exceed its fair value less estimated selling costs.

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

Our most significant estimates pertain to our allowances for loan and lease losses, fair value measurements, impaired loans, the carrying value of OREO, and the valuation of deferred income taxes.

Our most significant estimates pertain to our allowances for loan and lease losses, fair value measurements, individually evaluated loans, the carrying value of OREO, and the valuation of deferred income taxes.

Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

4 unchanged sentences

Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under GAAP, are excluded from net income, including unrealized gains and losses on available for sale securities.

For year 2022 and 2021, we did not reclassify any amounts from accumulated other comprehensive (loss) income to income.

For year 2023 and 2022, we did not reclassify any amounts from accumulated other comprehensive income (loss) to income.

The following table provides the components of other comprehensive income, reclassifications to net income and the related tax effect for the year ended December 31, 2023 and 2022:

2 unchanged sentences

Investment securities:

Net unrealized (loss) gain $ ( 1,039 ) $ ( 294 )

Tax effect related to the unrealized loss (gain) 268 76

Net unrealized gain (loss) $ 165 $ ( 1,039 )

Tax effect related to the unrealized (gain) loss ( 43 ) 268

Accumulated other comprehensive income $ 122 $ ( 771 )

19 unchanged sentences

For 2023 and 2022, there were 330,536 and 125,938 weighted average option shares outstanding, respectively, that were not included in the computation of diluted EPS because these shares were anti-dilutive.

Contingent loss :

Included in other operating expense is the one-time recognition of a $ 9.5 million contingent loss related to cash that was stolen from a third-party armored car carrier facility that was used by the Company.

Statement of Cash Flows :

2 unchanged sentences

Recently Issued Accounting Pronouncements :

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

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

ASU 2016-13 (Topic 326) , replaces the incurred loss impairment methodology in current GAAP with an expected credit loss (CECL) methodology and requires consideration of a broader range of information to determine credit loss estimates.

Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation.

Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost.

The ASU was amended in some aspects by subsequent Accounting Standards Updates.

The guidance of the Financial Instruments-Credit Losses became effective for public entities except small reporting companies ("SRCs") for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

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 and interim periods within those years.

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 vintage loss rate calculation for all its loan portfolios, 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 results were consistent with management's expectations.

Upon adoption, management anticipates an increase of between $ 0 and $ 3.0 million to the total balance of the allowance for credit losses and an increase of $ 0 and $ 1 million related to the allowance for credit losses on off-balance sheet commitments.

All adjustments will be posted directly to retained earnings at adoption, net of tax.

ASU 2020-04, Reference Rate Reform (Topic 848):

6 unchanged sentences

The guidance also provides specific expedients for fair value hedges, cash flow hedges, and excluded components.

Further, the guidance provides a none-time election to sell or transfer held to maturity debt

securities that are affected by the reference rate change.

Further, the guidance provides a none-time election to sell or transfer held to maturity debt securities that are affected by the reference rate change.

The guidance is effective upon issuance through December 31, 2022.

4 unchanged sentences

The Company does not expect the application of this guidance to have a material impact on the Consolidated Financial Statements.

Accounting Pronouncements Adopted in 2023

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

ASU 2016-13 (Topic 326) , replaces the incurred loss impairment methodology in current GAAP with a CECL methodology and requires consideration of a broader range of information to determine credit loss estimates.

Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

The ASU was amended in some aspects by subsequent Accounting Standards Updates.

This guidance became effective on January 1, 2023 for the Company.

Results and disclosures for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity debt securities, and unfunded commitments.

On January 1, 2023, the Company recorded a cumulative effect decrease to retained earnings of $ 2.1 million, net of tax, of which $ 1.9 million related to loans, and $ 960.0 thousand related to unfunded commitments.

There were no such charges for securities held by the Company at the date of adoption.

The following table illustrates the impact of adopting ASC 326:

(Amounts in thousands) January 1, 2023

Assets Pre-adoption Adoption Impact As Reported

Commercial and Industrial $ 390 $ 168 $ 558

Construction 2,581 1,899 4,480

Commercial - Owner Occupied 2,298 ( 171 ) 2,127

Commercial - Non-owner Occupied 9,709 ( 951 ) 8,758

Residential - 1 to 4 Family 6,076 1,782 7,858

Residential - 1 to 4 Family Investment 9,381 ( 794 ) 8,587

Residential - Multifamily 1,347 ( 128 ) 1,219

Consumer 63 53 116

Total ACL on loans 31,845 1,858 33,703

Deferred Tax Assets 9,184 716 9,900

ACL for unfunded commitments — 960 960

Retained Earnings $ 131,706 $ ( 2,102 ) $ 129,604

Cash and Due from Banks

5 unchanged sentences

As of December 31, 2023 Amortized

losses Fair value

losses Fair value Credit Losses

( Dollars in thousands)

Available for sale:

Corporate debt obligations $ 500 $ — $ — $ 500

Residential mortgage-backed securities $ 7,639 $ 3 $ 547 $ 7,095 $ —

10 unchanged sentences

Residential mortgage-backed securities 9,575 3 712 8,866

Collateralized mortgage obligations 8 — — 8

Total available for sale $ 10,075 $ 3 $ 712 $ 9,366

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During the year ending December 31, 2023 and 2022, the Company did not sell any investment securities.

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 December 31, 2022 and December 31, 2021.

The following tables show the gross unrealized losses and fair value of the Company's available for sale securities which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023 and December 31, 2022.

As of December 31, 2023 Less Than 12 Months 12 Months or Greater Total

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Total available for sale $ 25 $ — $ 6,870 $ ( 547 ) $ 6,895 $ ( 547 )

Held to maturity:

States and political subdivisions $ — $ — $ 1,943 $ 533 $ 1,943 $ 533

Residential mortgage-backed securities — — 4,460 1,096 4,460 1,096

Total held to maturity $ — $ — $ 6,403 $ 1,629 $ 6,403 $ 1,629

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

11 unchanged sentences

Total held to maturity $ — $ — $ 6,403 $ 1,629 $ 6,403 $ 1,629

The Company’s unrealized loss for the debt securities is comprised of 17 securities in the less than 12 months loss position and 7 securities in the 12 months or greater loss position at December 31, 2022.

The Company’s unrealized loss for the available for sale securities is comprised of 3 securities in the less than 12 months loss position and 16 securities in the 12 months or greater loss position at December 31, 2023.

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

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

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

The states and political subdivisions securities shown in the 2022 table that had unrealized losses were issued by a school district, and therefore the loss is attributed to changes in interest rates and not due to credit losses.

Additionally, these securities are classified as held to maturity.

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 December 31, 2022.

Other Than Temporarily Impaired Debt Securities (OTTI)

On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for OTTI.

Impairment of Debt Securities

On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for a credit loss.

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, 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.

Please refer to Note 1 - Description of Business and Summary of Significant Accounting Policies for a detailed description of our accounting policy for OTTI.

Loans Receivable and Allowance for Loan and Lease Losses

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

For individual debt securities classified as available for sale, we determine whether a decline in fair value below the amortized cost has resulted from a credit loss or other factors.

If the decline in fair value is due to credit, we will record the portion of the impairment loss relating to credit through an allowance for credit losses.

Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.

Please refer to Note 1 - Description of Business and Summary of Significant Accounting Policies for a detailed description of our accounting policy for the impairment of securities.

Loans Receivable and Allowance for Credit Losses

Loans Receivable

As of December 31, 2023, the Company had $ 1.79 billion in loans receivable outstanding.

Outstanding balances include a total net increase of $ 1.9 million and $ 1.7 million at December 31, 2022 and 2021, respectively, for net deferred loan costs, and unamortized discounts.

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

Outstanding balances include $ 2.7 million and $ 1.9 million at December 31, 2023 and 2022, respectively, for net deferred loan costs, and unamortized discounts.

The portfolios of loans receivable at December 31, 2023, and December 31, 2022, consist of the following, by portfolio segment:

December 31, 2023 December 31, 2022

6 unchanged sentences

Residential – 1 to 4 Family 449,682 444,820

Residential - 1 to 4 Family Investment 524,167 476,210

Residential – Multifamily 103,324 95,556

Consumer 5,509 6,731

Total Loans $ 1,751,459 $ 1,484,847

Total Loan receivable 1,787,340 1,751,459

Allowance for credit losses on loans ( 32,131 ) ( 31,845 )

Total loan receivable, net of allowance for credit losses on loans $ 1,755,209 $ 1,719,614

An age analysis of past due loans by class at December 31, 2023 and December 31, 2022 as follows:

December 31, 2023 30-59

Accruing Total Past

Days Total Past

Due Current Total

Loans Loans >

(Dollars in thousands)

5 unchanged sentences

Residential – 1 to 4 Family 58 1,793 1,211 3,062 446,620 449,682

Residential - 1 to 4 Family Investment — 440 — 440 523,727 524,167

Residential – Multifamily — — — — 103,324 103,324

2 unchanged sentences

December 31, 2022 30-59

Accruing Total Past

Due Current Total Loans Loans >

Days Total Past

Due Current Total Loans

(Dollars in thousands)

5 unchanged sentences

Residential – 1 to 4 Family 58 — 162 220 444,600 444,820

Residential - 1 to 4 Family Investment — — — — 476,210 476,210

Residential – Multifamily — — — — 95,556 95,556

1 unchanged sentence

Total Loans $ 136 $ 89 $ 16,276 $ 16,501 $ 1,734,958 $ 1,751,459

Allowance For Loan and Lease Losses (ALLL)

We maintain the ALLL at a level that we believe to be appropriate to absorb estimated probable credit losses incurred in the loan portfolios as of the balance sheet date.

The Company’s accounting policy for ALLL is more fully described in Note 1 - Description of Business and Summary of Significant Accounting Policies.

The following tables present the information regarding the allowance for loan and lease losses and associated loan data:

The following table provides the amortized cost of loans on nonaccrual status:

December 31, 2023

(amounts in thousands) Nonaccrual with no ACL Nonaccrual with ACL Total Nonaccrual Loans Past Due Over 90 Days Still Accruing Total Nonperforming

Commercial and Industrial $ 277 $ 435 $ 712 $ — $ 712

Construction 1,091 — 1,091 — 1,091

Commercial - Owner Occupied 717 400 1,117 — 1,117

Commercial - Non-owner Occupied 3,107 — 3,107 — 3,107

Residential - 1 to 4 Family 1,211 — 1,211 — 1,211

Residential - 1 to 4 Family Investment — — — — —

Residential - Multifamily — — — — —

Consumer — — — — —

Total $ 6,403 $ 835 $ 7,238 $ — $ 7,238

December 31, 2022

(amounts in thousands) Total Nonaccrual Loans Past Due Over 90 Days Still Accruing

Commercial and Industrial $ — $ —

Construction 1,091 —

Commercial - Owner Occupied 587 —

Commercial - Non-owner Occupied 19,568 —

Residential - 1 to 4 Family 417 —

Residential - 1 to 4 Family Investment — —

Residential - Multifamily — —

Consumer 70 —

Total $ 21,733 $ —

Allowance For Credit Losses (ACL)

We maintain the ACL at a level that we believe to be appropriate to absorb estimated credit losses in the loan portfolios as of the balance sheet date.

We established our allowance in accordance with guidance provided in Accounting Standard Codification ("ASC") - Financial Instruments - Credit Losses ("ASC 326").

The following tables present the information regarding the allowance for credit losses and associated loan data by portfolio segment under the CECL model in accordance with ASC 326:

Twelve Months Ended December 31, 2023

As of December 31, 2023 Real Estate Mortgage

(Dollars in thousands) Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential Multifamily Consumer Total

(Dollars in thousands) Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential 1 to 4 Family Investment Residential Multifamily Consumer Total

December 31, 2022 $ 390 $ 2,581 $ 2,298 $ 9,709 $ 6,076 $ 9,381 $ 1,347 $ 63 $ 31,845

Impact of adoption ASC 326 168 1,899 ( 171 ) ( 951 ) 1,782 ( 794 ) ( 128 ) 53 1,858

Charge-offs — — — — — — — — —

Recoveries 15 — 3 — — — — — 18

Provisions (credit) ( 41 ) ( 181 ) ( 717 ) 2,233 419 132 ( 45 ) 1,800

Provisions (benefits) 353 ( 1,133 ) ( 335 ) ( 1,650 ) 1,203 196 ( 170 ) ( 54 ) ( 1,590 )

Ending Balance December 31 2023 $ 926 $ 3,347 $ 1,795 $ 7,108 $ 9,061 $ 8,783 $ 1,049 $ 62 $ 32,131

Allowance for loan losses

Individually evaluated for impairment $ — $ — $ 31 $ 500 $ 18 $ — $ — $ 549

Collectively evaluated for impairment 390 2,581 2,267 9,209 15,439 1,347 63 31,296

Balance at December 31, 2022 $ 390 $ 2,581 $ 2,298 $ 9,709 $ 15,457 $ 1,347 $ 63 $ 31,845

Individually evaluated for impairment $ — $ 1,091 $ 587 $ 19,568 $ 417 $ — $ 70 $ 21,733

Collectively evaluated for impairment 32,383 191,266 125,363 357,884 920,613 95,556 6,661 1,729,726

Balance at December 31, 2022 $ 32,383 $ 192,357 $ 125,950 $ 377,452 $ 921,030 $ 95,556 $ 6,731 $ 1,751,459

The decrease in allowance for loan losses for commercial owner occupied is due to improved delinquency metrics.

The increase in commercial non-owner occupied, residential 1-4 family, and multifamily is attributed to higher loan balances.

The increase in allowance for credit losses for construction is due to an increase in the vintage loss rate upon the implementation of CECL, partially offset by a decrease in loan balance during the year.

The increase in the allowance for credit losses for residential 1 to 4 family is due to an increase in the vintage loss rate upon the implementation of CECL, as well as an increase in loan balance during the year.

The decrease in allowance for credit losses for residential 1 to 4 family investment, and residential multifamily is due to lower vintage loss rates upon the implementation of CECL, partially offset by increases in loan balances during the year.

The decrease in allowance for credit losses for commercial non-owner occupied is due to lower vintage loss rates upon the implementation of CECL, a decrease in loan balance, and a decrease in loss rates due to a decrease in non-performing loans.

The following tables present the information regarding the allowance for loan losses and associated loan data by portfolio

segment under the incurred loss model:

Twelve Months Ended December 31, 2022

As of December 31, 2022 Real Estate Mortgage

(Dollars in thousands) Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential Multifamily Consumer Total

December 31, 2021 $ 417 $ 2,662 $ 2,997 $ 7,476 $ 7,045 $ 7,925 $ 1,215 $ 108 $ 29,845

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Balance at December 31, 2022 $ 32,383 $ 192,357 $ 125,950 $ 377,452 $ 444,820 $ 476,210 $ 95,556 $ 6,731 $ 1,751,459

Impaired Loans:

A loan is considered impaired when, based on the current information and events, it is probable that the Company will be unable to collect the payments of principal and interest as of the date such payments were due.

Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when a loan is 90 days past due, unless the loan is well secured and in the process of collection, as required by regulatory provisions.

When interest accrual is discontinued, all unpaid accrued interest is reversed.

Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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 December 31, 2022 and December 31, 2021:

December 31, 2022 Recorded

Investment Unpaid

Balance Related

(Dollars in thousands)

With no related allowance recorded:

Collateral-Dependent Loans

The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2023:

(amounts in thousands) Real Estate Business Assets Other

Commercial and Industrial $ 712 $ — $ —

Construction 1,091 — —

Real Estate Mortgage:

Commercial - Owner Occupied 1,117 — —

1 unchanged sentence

Residential - 1 to 4 Family 1,211 — —

Residential - 1 to 4 Family Investment — — —

Residential - Multifamily — — —

Consumer — — —

12,439 17,156 —

With an allowance recorded:

Total $ 7,238 $ — $ —

Credit Quality Indicators :

As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to the risk grades of loans, the level of classified loans, net charge-offs, nonperforming loans (see details above) and the general economic conditions in the region.

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans.

Loans are graded on a scale of 1 to 7.

Grades 1 through 4 are considered “Pass”.

A description of the general characteristics of the seven risk grades is as follows:

Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile.

Satisfactory (A) :

Borrower reflects a well-balanced financial condition, demonstrates a high level of creditworthiness and typically will have a strong banking relationship with the Bank.

Satisfactory (B) :

Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk.

Loans are considered fully collectable.

Borrower reflects a fair financial condition, but there exists an overall greater than average risk.

Risk is deemed acceptable by virtue of increased monitoring and control over borrowings.

Probability of timely repayment is present.

Other Assets Especially Mentioned (OAEM) :

Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently individually evaluated.

The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure.

Includes loans that require an increased degree of monitoring or servicing as a result of internal or external changes.

Substandard :

This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring.

Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral.

Asset has a well-defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value.

Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value;

accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable.

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

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2023 under the current expected credit loss model.

(Dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans at Amortized Cost Basis

As of December 31, 2023

2023 2022 2021 2020 2019 Prior Total

Commercial and Industrial

Construction — — —

Real Estate Mortgage:

Pass $ 4,724 $ 1,269 $ 87 $ 759 $ 598 $ 7,154 $ 20,148 $ 34,739

OAEM — — — — — — — —

Substandard — 435 — — — — 277 712

Doubtful — — — — — — — —

$ 4,724 $ 1,704 $ 87 $ 759 $ 598 $ 7,154 $ 20,425 $ 35,451

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Pass $ 323 $ 3,335 $ 4,499 $ 195 $ — $ — $ 148,113 $ 156,465

OAEM — — — — — — — —

Substandard — — — — — 1,091 — 1,091

Doubtful — — — — — — — —

$ 323 $ 3,335 $ 4,499 $ 195 $ — $ 1,091 $ 148,113 $ 157,556

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Commercial – Owner Occupied

Pass $ 19,842 $ 36,030 $ 21,536 $ 7,104 $ 8,346 $ 45,249 $ 2,518 $ 140,625

OAEM — — — — — — — —

Substandard — — — — — 1,117 — 1,117

Doubtful — — — — — — — —

$ 19,842 $ 36,030 $ 21,536 $ 7,104 $ 8,346 $ 46,366 $ 2,518 $ 141,742

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Commercial – Non-owner Occupied

Pass $ 19,123 $ 93,805 $ 37,002 $ 33,316 $ 54,484 $ 112,471 $ 1,180 $ 351,381

OAEM — — — — — 15,421 — 15,421

Substandard — — — 250 2,586 271 — 3,107

Doubtful — — — — — — — —

$ 19,123 $ 93,805 $ 37,002 $ 33,566 $ 57,070 $ 128,163 $ 1,180 $ 369,909

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Residential – 1 to 4 Family

Performing $ 58,358 $ 117,044 $ 61,580 $ 33,037 $ 25,623 $ 148,124 $ 4,705 $ 448,471

Nonperforming 155 — — 285 771 — — 1,211

$ 58,513 $ 117,044 $ 61,580 $ 33,322 $ 26,394 $ 148,124 $ 4,705 $ 449,682

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Residential – 1 to 4 Family Investment

Performing $ 87,734 $ 138,884 $ 116,487 $ 50,119 $ 54,576 $ 76,367 $ — $ 524,167

Nonperforming — — — — — — — —

$ 87,734 $ 138,884 $ 116,487 $ 50,119 $ 54,576 $ 76,367 $ — $ 524,167

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Residential – Multifamily

Consumer — — —

Pass $ 2,292 $ 23,030 $ 27,006 $ 12,159 $ 9,989 $ 28,848 $ — $ 103,324

OAEM — — — — — — — $ —

Substandard — — — — — — — $ —

Doubtful — — — — — — — —

$ 2,292 $ 23,030 $ 27,006 $ 12,159 $ 9,989 $ 28,848 $ — $ 103,324

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

Performing $ — $ — $ — $ — $ — $ 5,493 $ 16 $ 5,509

Nonperforming — — — — — — — —

$ — $ — $ — $ — $ — $ 5,493 $ 16 $ 5,509

Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ —

An analysis of the credit risk profile by internally assigned grades under the incurred loss model as of December 31, 2022 is as follows:

December 31, 2022 Pass OAEM Substandard Doubtful Total

(Dollars in thousands)

Commercial and Industrial $ 32,383 $ — $ — $ — $ 32,383

6 unchanged sentences

Consumer 6,661 — 70 — 6,731

$ 21,733 $ 26,450 $ 549

December 31, 2021 Recorded Investment Unpaid

Total $ 1,732,156 $ 3,027 $ 16,276 $ — $ 1,751,459

Modifications to Borrowers Experiencing Financial Difficulty

At December 31, 2023, the Company did not make any modifications to borrowers experiencing financial difficulty.

The following table provides detail on impaired loans and the associated ALLL at December 31, 2022:

December 31, 2022 Recorded

Investment Unpaid

Balance Related

13 unchanged sentences

Construction — — —

1,139 5,856 300

Real Estate Mortgage:

7 unchanged sentences

Construction 1,091 5,808 —

1,139 5,856 300

Real Estate Mortgage:

5 unchanged sentences

$ 21,733 $ 26,450 $ 549

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

Year Ended December 31,

Investment Interest

Recognized Average

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

Investment Interest

9 unchanged sentences

Total $ 14,706 $ 697

Troubled Debt Restructuring (TDRs)

We reported performing TDR loans (not reported as non-accrual loans) of $ 5.5 million and $ 6.0 million, respectively, at December 31, 2022 and December 31, 2021.

Non-performing TDRs were zero at December 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 year ended December 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.

TDRs result from our loss mitigation activities that include rate reductions, extension of maturity, or a combination of both, which are intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

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.

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.

At the time a loan is modified in a TDR, we consider the following factors to determine whether the loan should accrue interest:

• Whether there is a period of current payment history under the current terms, typically 6 months;

• Whether the loan is current at the time of restructuring;

• Whether we expect the loan to continue to perform under the restructured terms with a debt coverage ratio that complies with the Bank’s credit underwriting policy of 1.25 times debt service.

TDRs are generally included in nonaccrual loans and may return to performing status after a minimum of six consecutive monthly payments under restructured terms and also meeting other performance indicators.

We review the financial performance of the borrower over the past year to be reasonably assured of repayment and performance according to the modified terms.

This review consists of an analysis of the borrower’s historical results;

the borrower’s projected results over the next four quarters;

and current financial information of the borrower and any guarantors.

The projected repayment source needs to be reliable, verifiable, quantifiable and sustainable.

At the time of restructuring, the amount of the loan principal for which we are not reasonably assured of repayment is charged-off, but not forgiven.

All TDRs are also reviewed quarterly to determine the amount of any impairment.

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 the TDR loans, we had specific reserves of $ 151,000 and $ 254,000 in the allowance at December 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.

Credit Quality Indicators

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans.

Loans are graded on a scale of 1 to 7.

Grades 1 through 4 are considered “Pass”.

A description of the general characteristics of the seven risk grades is as follows:

Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile.

Satisfactory (A) :

Borrower reflects a well-balanced financial condition, demonstrates a high level of creditworthiness and typically will have a strong banking relationship with the Bank.

Satisfactory (B) :

Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk.

Loans are considered fully collectable.

Borrower reflects a fair financial condition, but there exists an overall greater than average risk.

Risk is deemed acceptable by virtue of increased monitoring and control over borrowings.

Probability of timely repayment is present.

Other Assets Especially Mentioned (OAEM) :

Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently impaired.

The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure.

Includes loans which require an increased degree of monitoring or servicing as a result of internal or external changes.

Substandard :

This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring.

Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral.

Asset has a well-defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value.

Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value;

accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable.

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 December 31, 2022 and 2021, is as follows:

At December 31, 2022 Pass OAEM Substandard Doubtful Total

(Dollars in thousands)

Commercial and Industrial $ 32,383 $ — $ — $ — $ 32,383

Construction 191,266 — 1,091 — 192,357

Real Estate Mortgage:

Commercial – Owner Occupied 122,523 3,027 400 — 125,950

Commercial – Non-owner Occupied 362,899 — 14,553 — 377,452

Residential – 1 to 4 Family 920,868 — 162 — 921,030

Residential – Multifamily 95,556 — — — 95,556

Consumer 6,661 — 70 — 6,731

Total $ 1,732,156 $ 3,027 $ 16,276 $ — $ 1,751,459

At December 31, 2021 Pass OAEM Substandard Doubtful Total

(Dollars in thousands)

Commercial and Industrial $ 56,927 $ — $ 224 $ — $ 57,151

Construction:

152,938 — 1,139 — 154,077

Real Estate Mortgage:

Commercial – Owner Occupied 118,473 3,029 2,170 — 123,672

Commercial – Non-owner Occupied 291,864 14,380 242 — 306,486

Residential – 1 to 4 Family 749,904 — 621 — 750,525

Residential – Multifamily 84,964 — — — 84,964

Consumer 7,972 — — — 7,972

Total $ 1,463,042 $ 17,409 $ 4,396 $ — $ 1,484,847

At December 31, 2022, we reported performing TDR loans (not reported as non-accrual loans) of $ 5.5 million.

Non-performing TDRs were zero at December 31, 2022.

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 year ended December 31, 2022.

Loans to Related Parties :

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Pledged Loans:

At December 31, 2022 and 2021, approximately $ 923.0 million and $ 751.1 million, respectively, of unpaid principal balance of loans were pledged to the FHLBNY on borrowings (Note 7).

At December 31, 2023 and 2022, approximately $ 1.3 billion and $ 923.0 million, respectively, of unpaid principal balance of loans were pledged to the FHLBNY on borrowings (Note 7).

This pledge consists of a blanket lien on residential mortgages and certain qualifying commercial real estate loans.

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Our loan portfolio consists of residential, commercial real estate loans, construction loans, commercial and industry loans as well as consumer loans.

Other real estate owned (OREO) at December 31, 2022 was $ 1.6 million, compared to $ 1.7 million at December 31, 2021, a decrease of $ 104,000 .

The OREO balances for 2022 and 2021 are included in the other assets in the balance sheets.

Other real estate owned (OREO) at December 31, 2023 was $ 1.6 million, compared to $ 1.6 million at December 31, 2022.

The real estate owned at December 31, 2023, consisted of two properties.

During 2022, the Company disposed of $ 2.4 million of OREO, recognizing a gain of $ 328,000 , compared to $ 356,000 of OREO sold in 2021, recognizing a gain of $ 60,000 .

During 2023, the Company disposed of $ 161.0 thousand of OREO, recognizing a gain of $ 38.0 thousand, compared to $ 2.4 million of OREO sold in 2022, recognizing a gain of $ 328.0 thousand.

The Company did no t write-down any OREO property during 2023 or 2022.

Operating expenses related to OREO, net of related income, for 2022 and 2021, were $ 493,000 and $ 287,000 , respectively.

Operating expenses related to OREO, net of related income, for 2023 and 2022, were $ 839.0 thousand and $ 493.0 thousand, respectively.

An analysis of OREO activity for the years ended December 31, 2023 and 2022 is as follows:

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On August 23, 2005, Parke Capital Trust I, a Delaware statutory business trust and a wholly-owned subsidiary of the Company, issued $ 5,000,000 of variable rate capital trust pass-through securities to investors.

The variable interest rate re-prices quarterly at the three-month LIBOR plus 1.66 % and was 6.35 % at December 31, 2022.

The variable interest rate re-prices quarterly at the three-month SOFR plus a spread adjustment of 0.26161 % plus 1.66 % and was 7.30 % at December 31, 2023.

Parke Capital Trust I purchased $ 5,155,000 of variable rate junior subordinated deferrable interest debentures from the Company.

8 unchanged sentences

Currently, the interest rate is variable at 7.30 %.

The variable interest rate re-prices quarterly at the three-month LIBOR plus 1.66 % beginning November 23, 2010.

The variable interest rate re-prices quarterly at the three-month SOFR plus a spread adjustment of 0.26161 % plus 1.66 % beginning November 23, 2010.

Parke Capital Trust II purchased $ 5,155,000 of variable rate junior subordinated deferrable interest debentures from the Company.

4 unchanged sentences

The capital securities must be redeemed upon final maturity of the subordinated debentures on November 23, 2035.

approximately $ 4.2 million were contributed to paid-in capital at the Bank.

Proceeds of approximately $ 4.2 million were contributed to paid-in capital at the Bank.

The remaining $ 955,000 was retained at the Company for future use.

On June 21, 2007, Parke Capital Trust III, a Delaware statutory business trust and a wholly-owned subsidiary of the Company, issued $ 3,000,000 of variable rate capital trust pass-through securities to investors.

The variable interest rate re-prices quarterly at the three-month LIBOR plus 1.50 % and was 6.27 % at December 31, 2022.

The variable interest rate re-prices quarterly at the three-month SOFR plus a spread adjustment of 0.26161 % plus 1.50 % and was 7.15 % at December 31, 2023.

Parke Capital Trust III purchased $ 3,093,000 of variable rate junior subordinated deferrable interest debentures from the Company.

7 unchanged sentences

On July 15, 2020, Parke Bancorp, Inc.

(the “Company”) issued and sold $ 30 million in aggregate principal amount of its 6.50 % Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) to certain qualified institutional buyers and accredited investors (the “Purchasers”).

(the “Company”) issued and sold $ 30 million in aggregate principal amount of its 6.50 % Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) to certain qualified

institutional buyers and accredited investors (the “Purchasers”).

The Notes were offered and sold by the Company to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and the provisions of Regulation D promulgated thereunder (the “Private Placement”).

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Depreciation and amortization expense was $ 401,000 and $ 457,000 in 2023 and 2022, respectively.

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

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 .

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

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

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

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The weighted average remaining lease term was 48.1 years and weighted average discount rate was 7.21 % at December 31, 2023, respectively.

Our operating lease expense is included in

occupancy expenses within non-interest expense in our consolidated statements of income.

Our operating lease expense is included in occupancy expenses within non-interest expense in our consolidated statements of income.

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.

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Common Stock Dividend :

The Company paid a $ 0.16 per share dividend for the first and second quarters of 2022.

The dividend was increased to $ 0.18 per share for the third and fourth quarters of 2022.

The Company paid a $ 0.18 per share dividend each quarter 2023.

During 2023, the Company paid a total of $ 8.6 million in common stock cash dividends.

The Company paid a $ 0.16 per share quarterly dividend each quarter of 2021.

The Company paid a $ 0.16 per share quarterly dividend for the first and second quarters, and a $ 0.18 per share quarterly dividend for the third and fourth quarters of 2022.

During 2022, the Company paid a total of $ 7.9 million in common stock cash dividends.

10 unchanged sentences

At December 31, 2023, there were 455,000 shares remaining for future option grants, and 48,482 shares remaining for future restricted stock awards under the plan.

The Company did no t grant any options in 2021.

During 2022, options to purchase 202,500 shares of common stock at $ 21.66 per share were awarded and will expire no later than ten years following the grant date.

8 unchanged sentences

The dividend yield was calculated using the previous four quarter payment history.

During 2022, compensation expense for stock options was $ 348.7 thousand.

The Company did not grant any options in 2023.

Compensation expense for stock options was $ 397.8 thousand, and $ 348.7 thousand at December 31, 2023 and 2022, respectively.

A summary of stock options at December 31, 2023 and 2022 was as follows:

December 31, 2022 Year Ended

December 31, 2023

Stock Options:

Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price

Shares Weighted Average Exercise Price

Outstanding at beginning of period 689,127 $ 15.93

3 unchanged sentences

Outstanding at end of period 681,345 $ 15.94

Non-vested at end of period 462,205 $ 17.21 282,700 $ 13.79

Exercisable at end of period 470,349 $ 14.90

2 unchanged sentences

At December 31, 2023, the intrinsic value of options exercisable and all options outstanding was approximately $ 2.7 million and $ 3.1 million, respectively.

The total amount of compensation cost remaining to be recognized relating to unvested option grants as of December 31, 2021 was $ 516,600 .

The aggregate intrinsic value of options exercised in 2023 was $ 45.0 thousand.

The total amount of compensation cost remaining to be recognized relating to unvested option grants as of December 31, 2022 was $ 1.3 million.

The weighted-average period over which the expense is expected to be recognized was 4.2 years.

At December 31, 2022, the intrinsic value of options exercisable and all options outstanding was approximately $ 1.7 million and $ 3.3 million, respectively.

The aggregate intrinsic value of options exercised in 2022 was $ 508.6 thousand.

Under the 2020 Plan, the Company was authorized to issue 55,000 shares of restricted stock upon the grant of awards.

3 unchanged sentences

Outstanding and unvested at December 31, 2022 5,691 19.69

Granted 3,312 21.13

Vested ( 2,022 ) 19.77

1 unchanged sentence

The Company recognized $ 40,006 and $ 46,007 compensation costs of the restricted shares during year 2023 and 2022.

The total amount of restricted stock expense remaining to be recognized is $ 72.0 thousand at December 31, 2023.

Preferred Stock:

5 unchanged sentences

The conversion rate and the total number of shares to be issued would be adjusted for future stock dividends, stock splits and other corporate actions.

The conversion rate was set using a conversion price for the common stock of $ 10.64 , which

was approximately 20 % over the closing price of the Common Stock on October 10, 2013, the day the Series B Preferred Stock was priced.

The conversion rate was set using a conversion price for the common stock of $ 10.64 , which was approximately 20 % over the closing price of the Common Stock on October 10, 2013, the day the Series B Preferred Stock was priced.

During 2023, preferred stockholders converted 70 shares of preferred shares into 9,628 shares of common stock, respectively.

8 unchanged sentences

State 2,336 2,865

15,561 12,858

Deferred tax (benefit)/expense ( 1,308 ) 1,079

Deferred tax expense/(benefit) 6 ( 1,308 )

Income tax expense $ 9,228 $ 14,253

2 unchanged sentences

Deferred tax assets:

Allowance for loan losses $ 7,758 $ 7,398

Allowance for credit losses $ 7,575 $ 7,758

Supplemental Executive Retirement Plan ("SERP") 1,636 1,537

5 unchanged sentences

PPP Deferred Loan Fees 1 4

11,398 11,200

Valuation allowance ( 138 ) ( 133 )

3 unchanged sentences

Partnership income ( 58 ) ( 55 )

Unrealized gain — ( 85 )

Deferred loan costs ( 1,869 ) ( 1,749 )

20 unchanged sentences

The Company has a Supplemental Executive Retirement Plan (“SERP”) covering certain members of management.

The net SERP pension cost was approximately $ 449,000 in 2022 and benefit was approximately $ 148,000 in 2021.

The net SERP pension cost was approximately $ 367.0 thousand in 2023 and $ 449.0 thousand in 2022.

The unfunded benefit obligation, which was included in other liabilities, was approximately $ 6.4 million at December 31, 2023 and $ 6.3 million at December 31, 2022.

8 unchanged sentences

(Dollars in thousands)

Service cost/(benefit) $ 121 $ ( 498 )

Service cost $ 27 $ 121

Interest cost 340 328

$ 449 $ ( 148 )

The service cost (benefit) for 2022 and 2021 are included in the compensation cost in the income statement.

The service cost for 2023 and 2022 are included in the compensation cost in the income statement.

The discount rate used in determining the actuarial present value of the projected benefit obligation was 5.5 % for 2023 and 2022.

Annual benefit payments are estimated at $ 512,046 for 2023, $ 785,046 for 2024, $ 785,046 for 2025, $ 785,046 for 2026, $ 785,046 for 2027 and $ 5.0 million thereafter.

Annual benefit

payments are estimated at $ 525,696 for 2024, $ 812,346 for 2025, $ 812,346 for 2026, $ 812,346 for 2027, $ 812,346 for 2028 and $ 4.9 million thereafter.

The Company has a 401(k) Plan covering substantially all employees.

Under the Plan, the Company is required to contribute 3 % of all qualifying employees’ eligible salary to the Plan.

The Plan expense in 2022 was $ 246,000 and $ 222,000 in 2021.

The Plan expense in 2023 was $ 243.0 thousand and $ 246.0 thousand in 2022.

Regulatory Matters

19 unchanged sentences

We have elected to use the CBLR framework and is presented as of December 31, 2023.

On April 6, 2020, federal banking regulators issued two interim final rules that make changes to the CBLR ratio framework and implement certain directives of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

The first of the April 2020 interim final rules reduced the minimum ratio from 9% to 8% as well as establishing a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall below the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio of 7% or greater.

The second interim final rule provides a transition from the temporary 8% CBLR requirement to a 9% requirement.

It establishes a minimum CBLR of 8% for the second through fourth quarters of 2020, an 8.5% minimum for 2021 and 9% thereafter, while maintaining a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR requirement.

The Company and Bank's regulatory capital as of December 31, 2023 and 2022, is presented in the following table.

16 unchanged sentences

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

Other Related Party Transactions

A member of the Board of Directors is a principal of an employee benefits insurance agency that provides all the medical, life and disability insurance coverage for the Company.

The cost of these employee benefits for the Company and its employees totaled $ 1.3 million in 2022 and $ 1.2 million in 2021.

Commitments and Contingencies

20 unchanged sentences

As of December 31, 2023 and 2022, standby letters of credit with customers were $ 1.5 million and $ 1.5 million, respectively.

On January 1, 2023, upon the adoption of ASU 2016-13, we recognized $ 1.0 million cumulative effect decrease to retained earnings for the allowance for credit losses of unfunded lending commitments.

At December 31, 2023 and December 31, 2022, the allowance for credit losses of unfunded lending commitments was $ 0.5 million and zero , respectively.

A provision recovery for unfunded lending commitments of $ 0.5 million was recognized during the year ended December 31, 2023, while there was no provision expense recognized in during the year ended December 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.

10 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 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, 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 three customers accounting for 60.6 % and 36.9 % of the total at December 31, 2023 and 2022.

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

Armored Car Matter

An armored car company used by the Bank to transport and store cash for the Bank’s cannabis-related customers, has informed the Company that some of the cash stored for the Bank is missing from its vault and is presumed to have been stolen.

The amount that the Bank had recorded as being held at the armored car company's facility on the last day that records were provided was $ 9.5 million.

There is not enough information to determine the exact amount of the potential loss, if any, as well as the amount that could be recovered.

The Bank is working with relevant state and federal law enforcement authorities to investigate this matter as well as pursuing judicial avenues of recovery.

The Bank is pursuing various avenues of recovery that it may have, including, among others, possible insurance claims.

If it is ultimately determined that a loss is probable and estimable, we will record the loss in the appropriate fiscal period.

If we are successful in making recoveries, we will record the recoveries in the period received, or when the receipt of such recoveries becomes certain.

Absecon Gardens Condominium Association v.

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The Company is vigorously defending this matter.

Mori Restaurant LLC v.

Parke Bank Matter

On May 20, 2014, Parke Bank (the "Bank") loaned Voorhees Diner Corporation ("VDC") the original principal sum of $ 1.0 million for purposes of tenant fit out, and operation, of the Voorhees Diner situated at 320 Route 73, Voorhees, New Jersey 08043.

VDC leased the Diner property under that certain Lease with Mori Restaurant LLC ("Mori") dated May 20, 2014.

In connection with the loan from the Bank and as security therefor, VDC pledged its leasehold interest to the Bank.

On March 6, 2015, the loan was modified, and the principal amount of the loan was increased to $ 1.4 million.

On January 8, 2020, the Bank declared VDC in default of its loan obligations.

Judgment was entered against VDC and in favor of the Bank, and the court appointed Alan I.

Gould, Esquire, as the Receiver for the Voorhees Diner Corporation.

Gould subsequently caused VDC's leasehold interest in the Diner property to be sold at sheriffs sale.

The Bank's REO subsidiary, 320 Route 73 LLC, was the successful bidder and took title thereto.

Mori Restaurant has filed counterclaims against 320 Route 73 LLC and the Bank for rent allegedly accruing due during the period that the Receiver was in possession of the premises.

As to all of Mori Restaurant’s claims, the Bank defendants’ primary, but not exclusive, defense in this matter is that, pursuant to that certain Fee Owner Consent executed by and between Mori Restaurant and the Bank, in November 2014, the lease between VDC and Mori Restaurant was terminated as a matter of law and neither the Bank nor 320 Route 73 LLC have liability to Mori Restaurant

under the lease or otherwise.

The Bank believes this suit is without merit, denies any and all liability and intends to vigorously defend against this matter.

In the normal course of business, there are outstanding various contingent liabilities such as claims and legal action, which are not reflected in the financial statements.

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(Dollars in thousands)

Investment securities and loans held for sale

Investment securities available for sale

As of December 31, 2023

Corporate debt obligations $ — $ 500 $ — $ 500

Residential mortgage-backed securities — 7,095 — 7,095

12 unchanged sentences

As of December 31, 2023

Collateral dependent impaired loans $ — $ — $ 1,091 $ 1,091

Collateral dependent loans $ — $ — $ 1,655 $ 1,655

OREO $ — $ — $ 1,550 $ 1,550

As of December 31, 2022

Collateral dependent impaired loans $ — $ — $ 4,087 $ 4,087

Collateral dependent loans $ — $ — $ 1,091 $ 1,091

OREO $ — $ — $ 1,550 $ 1,550

All collateral dependent impaired loans have an independent third-party full appraisal to determine the NRV based on the fair value of the underlying collateral, less cost to sell (a range of 5 % to 10 %) and other costs, such as unpaid real estate taxes, that have been identified.

All collateral dependent individually evaluated loans have an independent third-party full appraisal to determine the NRV based on the fair value of the underlying collateral, less cost to sell (a range of 5 % to 10 %) and other costs, such as unpaid real estate taxes, that have been identified.

The appraisal will be based on an "as-is" valuation and will follow a reasonable valuation method that addresses the direct sales comparison, income, and cost approaches to market value, reconciles those approaches, and explains the elimination of each approach not used.

2 unchanged sentences

All properties have an independent third-party full appraisal to determine the fair value, less cost to sell (a range of 5 % to 10 %) and other costs, such as unpaid real estate taxes, that have been identified.

the elimination of each approach not used.

Appraisals are updated every 12 months or sooner if we have identified possible further deterioration in value.

Fair Value of Financial Instruments

The Company discloses estimated fair values for its significant financial instruments in accordance with FASB ASC (Topic 825), Disclosures about Fair Value of Financial Instruments .

The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.

The methodologies for estimating the fair value of other financial assets and liabilities are discussed below.

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 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, 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 instrument measured at fair value, see the Note 1 - Description of Business and Summary of Significant Accounting Policies of the Consolidated Financial Statements.

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 December 31, 2023 and December 31, 2022:

35 unchanged sentences

Investments in subsidiaries 326,464 308,030

Other assets — —

Total assets $ 330,575 $ 312,089

38 unchanged sentences

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 8. Financial Statements and Supplementary Data