PARKE BANCORP, INC. 10-K

Item 8. Financial Statements and Supplementary Data. 29 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Parke Bancorp, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Parke Bancorp, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023; 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, 2024 and 2023, 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. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2025, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. 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 audits. 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 audits 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. Our audits 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 audits 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 audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period 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) involve our especially challenging, subjective, or complex judgments. 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 Credit Losses (ACL) – Qualitative Adjustments Description of the Matter The Company’s loan portfolio totaled $1.9 billion as of December 31, 2024, and the associated ACL was $32.6 million. As discussed in Notes 1 and 4 to the financial statements, the calculation 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. 34 How We Addressed the Matter in Our Audit 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. /s/ S.R. Snodgrass, P.C. Cranberry Township, Pennsylvania March 12, 2025 35 Parke Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2024 and 2023 ( Dollars in thousands except per share data) December 31, December 31, 2024 2023 Assets Cash and due from banks $ 4,624 $ 12,716 Interest earning deposits with banks 216,903 167,660 Cash and cash equivalents 221,527 180,376 Investment securities available for sale, at fair value 5,551 7,095 Investment securities held to maturity, net of allowance for credit losses of $ 0 at December 31, 2024 and 2023 (fair value of $ 7,492 at December 31, 2024 and $ 7,892 at December 31, 2023) 9,209 9,292 Total investment securities 14,760 16,387 Loans, net of unearned income 1,868,153 1,787,340 Less: Allowance for credit losses ( 32,573 ) ( 32,131 ) Net loans 1,835,580 1,755,209 Accrued interest receivable 9,659 8,555 Premises and equipment, net 5,316 5,579 Restricted stock 8,619 7,636 Bank owned life insurance (BOLI) 29,070 28,415 Deferred tax asset 9,113 9,262 Other real estate owned (OREO) 1,562 1,550 Other assets 7,030 10,531 Total Assets $ 2,142,236 $ 2,023,500 Liabilities and Shareholders' Equity Liabilities Deposits Noninterest-bearing deposits $ 184,037 $ 232,189 Interest-bearing deposits 1,447,013 1,320,638 Total deposits 1,631,050 1,552,827 FHLBNY borrowings 145,000 125,000 Subordinated debentures 43,300 43,111 Accrued interest payable 7,968 4,146 Accrued expenses and other liabilities 14,845 14,099 Total liabilities 1,842,163 1,739,183 Shareholders' Equity Preferred stock, 1,000,000 shares authorized, $ 1,000 liquidation value Series B non-cumulative convertible; 325 shares and 375 shares outstanding at December 31, 2024 and 2023, respectively 325 375 Common stock, $ 0.10 par value; authorized 15,000,000 shares; Issued: 12,313,489 shares and 12,240,821 shares at December 31, 2024 and 2023, respectively 1,231 1,224 Additional paid-in capital 137,784 136,700 Retained earnings 168,347 149,437 Accumulated other comprehensive loss ( 337 ) ( 404 ) Treasury stock, 484,522 shares and 284,522 shares at December 31, 2024 and 2023, respectively, at cost ( 7,277 ) ( 3,015 ) Total shareholders’ equity 300,073 284,317 Total liabilities and shareholders' equity $ 2,142,236 $ 2,023,500 See accompanying notes to consolidated financial statements 36 Parke Bancorp, Inc. and Subsidiaries Consolidated Statements of Income Years Ended December 31, 2024 and 2023 ( Dollars in thousands except per share data) December 31, 2024 December 31, 2023 Interest income: Interest and fees on loans $ 117,834 $ 106,061 Interest and dividends on investments 1,042 1,048 Interest on deposits with banks 6,237 5,595 Total interest income 125,113 112,704 Interest expense: Interest on deposits 57,312 41,259 Interest on borrowings 9,093 7,231 Total interest expense 66,405 48,490 Net interest income 58,708 64,214 Provision for (recovery of) credit losses 728 ( 2,051 ) Net interest income after provision for (recovery of) credit losses 57,980 66,265 Non-interest income Service fees on deposit accounts 1,387 3,872 Other loan fees 849 851 Bank owned life insurance income 655 737 Gain on sale of SBA loans 23 — Net gain on OREO — 38 Other 1,387 1,194 Total non-interest income 4,301 6,692 Non-interest expense Compensation and benefits 12,768 12,340 Professional services 2,730 2,328 Occupancy and equipment 2,598 2,604 Data processing 1,366 1,385 FDIC insurance and other assessments 1,306 1,292 OREO expense 835 839 Other operating expense 4,381 14,479 Total non-interest expense 25,984 35,267 Income before income tax expense 36,297 37,690 Income tax expense 8,785 9,228 Net income attributable to Company 27,512 28,462 Less: Preferred stock dividend ( 20 ) ( 26 ) Net income available to common shareholders $ 27,492 $ 28,436 Earnings per common share Basic $ 2.30 $ 2.38 Diluted $ 2.27 $ 2.35 Weighted average common shares outstanding Basic 11,954,483 11,945,740 Diluted 12,139,451 12,137,052 See accompanying notes to consolidated financial statements 37 Parke Bancorp, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income Years Ended December 31, 2024 and 2023 For the Year ended December 31 , 2024 2023 ( Dollars in thousands) Net income $ 27,512 $ 28,462 Unrealized gains on investment securities, net of reclassification into income: Unrealized gains on available for sale securities 90 165 Tax impact on unrealized gain ( 23 ) ( 43 ) Total other comprehensive gain 67 122 Comprehensive income attributable to the Company $ 27,579 $ 28,584 See accompanying notes to consolidated financial statements 38 Parke Bancorp, Inc. and Subsidiaries Consolidated Statements of Equity Years Ended December 31, 2024 and 2023 (Dollars in thousands except share data) Shares of Preferred Stock Outstanding Preferred Stock Shares of Common Stock issued Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Equity 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 Preferred stock shares conversion ( 70 ) ( 70 ) 9,628 1 69 — — — — Other comprehensive gain — — — — — — 122 — 122 Stock compensation expense — — — — 397 — — — 397 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 Net income — — — — — 27,512 — — 27,512 Stock compensation issued/exercised — — 65,791 7 699 — — — 706 Preferred stock shares conversion ( 50 ) ( 50 ) 6,877 — 49 — — — ( 1 ) Treasury stock purchase ( 200,000 shares) — — — — — — — ( 4,262 ) ( 4,262 ) Other comprehensive gain — — — — — — 67 — 67 Stock compensation expense — — — — 336 — — — 336 Dividend on preferred stock ($ 60.00 per share) — — — — — ( 20 ) — — ( 20 ) Dividend on common stock ($ 0.72 per share) — — — — — ( 8,582 ) — — ( 8,582 ) Balance, December 31, 2024 325 $ 325 12,313,489 $ 1,231 $ 137,784 $ 168,347 $ ( 337 ) $ ( 7,277 ) $ 300,073 See accompanying notes to consolidated financial statements 39 Parke Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows Years Ended December 31, 2024 and 2023 ( Dollars in thousands) 2024 2023 Cash Flows from Operating Activities Net income $ 27,512 $ 28,462 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 571 464 Provision for (recovery of) credit losses 728 ( 2,051 ) Increase in value of bank-owned life insurance ( 655 ) ( 736 ) Gain on sale of SBA loans ( 23 ) — SBA loans originated for sale ( 300 ) — Proceeds from sale of SBA loans originated for sale 323 — Net gain on OREO — ( 38 ) Net accretion of purchase premiums and discounts on securities ( 45 ) ( 37 ) Stock based compensation 336 397 Decrease in deferred income tax 126 595 Net changes in: Decrease (increase) in accrued interest receivable and other assets 2,385 ( 4,955 ) Increase in accrued interest payable and other accrued liabilities 4,200 917 Net cash provided by operating activities 35,158 23,018 Cash Flows from Investing Activities Repayments and maturities of investment securities available for sale 1,614 2,412 Repayments and maturities of investment securities held to maturity 148 147 Net increase in loans ( 80,731 ) ( 35,986 ) (Purchases) sales of bank premises and equipment ( 119 ) 105 Proceeds from sale of OREO, net — 161 Proceeds from bank owned life insurance policy — 466 Redemptions of restricted stock 7,213 10,819 Purchases of restricted stock ( 8,196 ) ( 13,016 ) Net cash used in investing activities ( 80,071 ) ( 34,892 ) Cash Flows from Financing Activities Cash dividends ( 8,602 ) ( 8,629 ) Proceeds from exercise of stock options 706 33 Treasury stock purchase ( 4,262 ) — Conversion of Series B preferred stock ( 1 ) — Increase (decrease) in FHLBNY short-term borrowings 95,000 ( 53,150 ) (Decrease) increase in FHLBNY long-term borrowings ( 75,000 ) 95,000 Net decrease in noninterest-bearing deposits ( 48,152 ) ( 120,357 ) Net increase in interest-bearing deposits 126,375 97,203 Net cash provided by financing activities 86,064 10,100 Increase (decrease) in cash and cash equivalents 41,151 ( 1,774 ) Cash and Cash Equivalents, January 1, 180,376 182,150 Cash and Cash Equivalents, December 31, $ 221,527 $ 180,376 Supplemental Disclosure of Cash Flow Information: Interest paid $ 62,583 $ 47,008 Income taxes paid $ 4,542 $ 14,677 Non-cash Investing and Financing Items Loans transferred to OREO $ — $ 123 Accrued dividends payable $ 2,141 $ 2,158 See accompanying notes to consolidated financial statements 40 Note 1. Description of Business and Summary of Significant Accounting Policies Business: Parke Bancorp, Inc. (the “Company, we, us, our”) is a bank holding company headquartered in Sewell, New Jersey. Through subsidiaries, the Company provides individuals, corporations and other businesses, and institutions with commercial and retail banking services, principally loans and deposits. The Company was incorporated in January 2005 under the laws of the State of New Jersey for the sole purpose of becoming the holding company of Parke Bank (the "Bank"). The Bank is a commercial bank, which was incorporated on August 25, 1998, and commenced operations on January 28, 1999 . The Bank is chartered by the New Jersey Department of Banking and Insurance and its deposits are insured by the Federal Deposit Insurance Corporation. The Bank maintains seven branch offices with its principal office at 601 Delsea Drive, Sewell, New Jersey, and additional branch office locations; 631 Tilton Road, Northfield, New Jersey, 567 Egg Harbor Road, Washington Township, New Jersey, 67 East Jimmie Leeds Road, Galloway Township, New Jersey, 1150 Haddon Avenue, Collingswood, New Jersey, 1610 Spruce Street, Philadelphia, Pennsylvania, and 1032 Arch Street, Philadelphia, Pennsylvania. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with GAAP. We have reclassified certain prior year amounts to conform to the 2024 presentation, which did not have a material impact on our consolidated financial condition or results of operations. The accounting policies that materially affect the determination of financial position, results of operations and cash flows are summarized below. Principles of Consolidation : The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank. 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. All material inter-company balances and transactions have been eliminated. Cash and cash equivalents : Consists of cash and due from banks, and interest-bearing deposits and other-short term investments, all of which, if applicable, have stated maturities of three months or less when acquired. Investment Securities : Debt securities are recorded on a trade-date basis. We classify debt securities as held to maturity if we have the positive intent and ability to hold the securities to maturity. We report securities held to maturity on our consolidated balance sheets at carrying value, which generally equals amortized cost. Amortized cost reflects historical cost adjusted for amortization of premiums, accretion of discounts and any previously recorded impairments. Debt securities not classified as held to maturity or trading are designated as securities available for sale ("AFS") and carried at fair value with unrealized gains and losses, net of income taxes, reflected in accumulated other comprehensive income (loss). We did not have any securities classified as trading securities during 2024 or 2023. Interest on debt securities, including amortization of premiums and accretion of discounts, is included in interest income. Premiums and discounts are amortized or accreted to interest income at a constant effective yield over the contractual lives of the securities. Realized gains and losses from the sales of debt securities are determined on a specific security basis. These securities gains/(losses) are included in other noninterest income. Restricted Stock : Restricted stock includes investments in the common stock of the FHLBNY and the Atlantic Central Bankers Bank for which no readily available market exists and, accordingly, is carried at cost. The stocks have no quoted market value and are subject to redemption restrictions. 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. Management considers such criteria as the significance of the decline in net assets, if any, the length of time this situation has persisted and the financial performance of the issuers. In addition, management considers any commitments by the FHLBNY to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLBNY and the liquidity position of the FHLBNY. Loans : We classify loans as held for investment or held for sale based on our investment strategy and management’s intent and ability with regard to the loans which may change over time. The accounting and measurement framework for loans differs depending on the loan classification. Loans that we have the ability and intent to hold for the foreseeable future or until maturity or pay-off are classified as held for investment. 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 41 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. Loans originated with the intent to sell or for which we do not have the ability and intent to hold for the foreseeable future are classified as held for sale. Interest on these loans is recognized on an accrual basis. These loans are recorded at the lower of cost or fair value. Our Small Business Administration ("SBA") loans that management has the intention to sell are designated as held for sale and are reported at fair value. Fair value represents the face value of the guaranteed portion of SBA loans pending settlement. Loan origination fees and direct loan origination costs are deferred until the loan is sold and are recognized as part of the total gain or loss on sale. We calculate the gross gain or loss on loan sales as the difference between the proceeds received and the carrying value of the loans sold. Loan Fees : Loan fees and direct costs associated with loan originations are netted and deferred. The deferred amount is recognized as an adjustment to loan interest over the term of the related loan using the interest method. Prepayment penalties on loans are recognized in loan interest. Loan brokerage fees represent commissions earned for facilitating loans between borrowers and other companies and is recorded as other loan fee income. Non-accrual Loans : Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet contractual 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. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. 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. 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 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 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;(vii) national and local economic trends and conditions, and industry conditions; and (viii) the valuation of loan collateral assessed by regional home valuation indexes. 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. The results are then input into a "general allocation matrix" to determine an appropriate general valuation allowance. 42 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. Accrued interest receivable, including loan and investment security, at December 31, 2024 and 2023 was $ 9.7 million and $ 8.6 million, respectively. 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 : 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 the Current Expected Credit Loss ("CECL") model 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 : Parke measures 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. At December 31, 2024 and 2023, accrued interest receivable on held-to-maturity debt securities was $ 12.7 thousand and $ 12.9 thousand, respectively. Allowance for Credit Losses on Available for Sale 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. Accrued interest receivable on available-for-sale securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition. At December 31, 2024 and 2023, accrued interest receivable on available-for-sale securities was $ 13.9 thousand and $ 17.5 thousand, respectively. 43 Charge-Offs : 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 : The Company’s loans are generally to customers in Southern New Jersey, the Philadelphia area of Pennsylvania, and New York, New York. Loans to general building contractors, general merchandise stores, restaurants, motels, warehouse space, and real estate ventures (including construction loans) constitute a majority of commercial loans. The concentrations of credit by type of loan are set forth in Note 4. Generally, loans are collateralized by assets of the borrower and are expected to be repaid from the borrower’s cash flow or proceeds from the sale of selected assets of the borrower. Other Real Estate Owned (“OREO”) : 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 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. Subsequent valuation adjustments, declines, if any, are recognized as a charge against current earnings. Holding costs are charged to expense. Gains and losses on sales are recognized in non-interest income as they occur. Bank-owned life insurance (“BOLI”): Policies insure the lives of officers and team members of the Company and name the Company as beneficiary. Non-interest income is generated tax free (subject to certain limitations) from the increase in value of the policies’ underlying investments made by the insurance company. Cash proceeds received from the settlement of the BOLI policies are generally tax-free and can be used to partially offset costs associated with employee compensation and benefit programs. Interest Rate Risk : The Company is principally engaged in the business of attracting deposits from the general public and using these deposits, together with other borrowed and brokered funds, to make commercial, commercial mortgage, residential mortgage, and consumer loans, and to invest in overnight and term investment securities. Inherent in such activities is interest rate risk that results from differences in the maturities and repricing characteristics of these assets and liabilities. For this reason, management regularly monitors the level of interest rate risk and the potential impact on net income. Bank Premises and Equipment : Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed and charged to expense using the straight-line method over the estimated useful lives of the assets, generally three years for computers and software, five to ten years for equipment and forty years for buildings. Leasehold improvements are amortized to expense over the shorter of the term of the respective lease or the estimated useful life of the improvements. Lease: Lease classification is determined at inception for all lease transactions with an initial term greater than one year. Operating leases are included as right-of-use (“ROU”) assets within other assets, and operating lease liabilities are classified as other liabilities on our consolidated balance sheets. Our operating lease expense is included in occupancy and equipment within non-interest expense in our consolidated statements of income. Stock-Based Compensation : Stock-based compensation expense is based on the grant date fair value, which is estimated using a Black-Scholes option pricing model. The fair value of stock-based compensation used in determining compensation expense generally equals the fair market value of our common stock on the date of grant. We generally recognize compensation expense on a straight-line basis over the award’s requisite service period based on the fair value of the award at grant date. Stock-based compensation expense is included in compensation and benefits in the consolidated statements of income. Revenue recognition : Our revenue includes net interest income on financial instruments and non-interest income. Interest income and fees on loans, investment securities, and other financial instruments are recognized based on the contractual provisions of the underlying arrangements according to applicable accounting guidance. Deposit-related-fee-based revenue within the scope of ASC Topic 606 - Revenue from Contracts with Customers (Topic 606) is included in non-interest income in our consolidated statements of income. Our deposit-related-fee-based revenues are recognized when or as those services are transferred to the customer and are generally recognized either immediately upon the completion of our service or over time as we perform services. Any services performed over time generally require that we render services each period and therefore we measure our progress in completing these services based upon the passage of time. Deposit-related fees are recognized over the period in which the related service is provided. Service charges on deposit accounts are earned on depository accounts for customers and include fees for account and overdraft services. Account services include fees for event-driven services and fees for periodic account maintenance activities. Our obligation for event-driven services is satisfied at the time of the event when the service is delivered, while our obligation 44 for maintenance services is satisfied over the course of each month. Our obligation for overdraft services is satisfied at the time of the overdraft. Income Taxes : We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded for the current period. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Thus, at the enactment date, deferred taxes are remeasured and the change is recognized in income tax expense. The recognition of deferred tax assets requires an assessment to determine the realization of such assets. Realization refers to the incremental benefit achieved through the reduction in future taxes payable or refunds receivable. We establish a valuation allowance for tax assets when it is more likely than not that they will not be realized, based upon all available evidence. Realization of deferred tax assets is dependent on generating sufficient taxable income in the future. When tax returns are filed, it is highly certain that some positions taken will be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits would be recognized in income tax expense on the income statement. The Company did no t recognize any interest or penalties related to income tax during the years ended December 31, 2024 and 2023, respectively. The Company does no t have an accrual for uncertain tax positions as of December 31, 2024 and 2023, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law. All years after 2020 are open under the original federal statute of limitations. For state tax returns, the Company is subject to income tax examinations by local tax authorities for years 2020 and after, except for the State of New Jersey which is still subject to income tax examinations for years 2019 and after. Fair value: Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. Fair value measurement of a financial asset or liability is assigned to a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The accounting guidance for fair value requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. Use of Estimates : 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 credit 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. Segment Reporting: The Company operates one reportable segment of business, “community banking”. Through its community banking segment, the Company provides a broad range of retail and community banking services. The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies. The Company's chief operating decision maker ("CODM") is the President, Chief Executive Officer and Director, who decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. 45 The following table presents segment profit and significant expenses. Community Banking Segment (Dollars in thousands) December 31, 2024 December 31, 2023 Total interest income $ 125,113 $ 112,704 Total interest expense 66,405 48,490 Provision for credit losses 728 - 2051 Net interest income after provision for credit losses 57,980 66,265 Total non-interest income 4,301 6,692 Total non-interest expense 25,984 35,267 Income before income tax expense 36,297 37,690 Income tax expense 8,785 9,228 Net income attributable to the Company $ 27,512 $ 28,462 Reconciliation of profit or loss Adjustments and reconciling items — — Consolidated net income $ 27,512 $ 28,462 Other Comprehensive Income : 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 the years ended December 31, 2024 and 2023, we did not reclassify any amounts from accumulated other comprehensive income to income. The following table provides the components of other comprehensive income, reclassifications to net income and the related tax effect for the years ended December 31, 2024 and 2023: Year ended December 31, 2024 2023 (Dollars in thousands) Investment securities: Net unrealized gain $ 90 $ 165 Tax effect related to the unrealized gain ( 23 ) ( 43 ) Accumulated other comprehensive income $ 67 $ 122 46 Earnings Per Common Share : Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share considers common stock equivalents (when dilutive) outstanding during the period such as options outstanding and convertible preferred stock. To the extent that stock equivalents are anti-dilutive, they have been excluded from the earnings per share calculation. Earnings per common share have been computed based on the following for the years ended December 31, 2024 and 2023: 2024 2023 (Dollars in thousands, except per share data) Basic earnings per common share Net income available to common shareholders $ 27,492 $ 28,436 Basic weighted-average common shares outstanding 11,954,483 11,945,740 Basic earnings per common share $ 2.30 $ 2.38 Diluted earnings per common share Net income available to common shareholders $ 27,492 $ 28,436 Dividend on Preferred Series B 20 26 Net income attributable to diluted common shares $ 27,512 $ 28,462 Basic weighted-average common shares outstanding 11,954,483 11,945,740 Dilutive potential common shares 184,968 191,312 Total diluted weighted-average common shares outstanding 12,139,451 12,137,052 Diluted earnings per common share $ 2.27 $ 2.35 For the years ended December 31, 2024 and 2023, there were 283,441 and 330,536 weighted average option shares outstanding, respectively, that were not included in the computation of diluted EPS because these shares were anti-dilutive. Statement of Cash Flows : Cash and cash equivalents include cash and due from financial institutions and federal funds sold. For the purposes of the statement of cash flows, changes in loans and deposits are shown on a net basis. Recently Issued Accounting Pronouncements : ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. Early adoption is permitted and should be applied either prospectively or retrospectively. The Company does not expect the application of this guidance to have a material impact on the Consolidated Financial Statements. Accounting Pronouncements Adopted in 2024 ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Adoption is required retrospectively to all prior periods presented in the financial statements. The implementation of this guidance did not have a material impact on the Consolidated Financial Statements. Note 2. Cash and Due from Banks The Company maintains various deposit accounts with other banks to meet normal funds transaction requirements, to satisfy deposit reserve requirements, and to compensate other banks for certain correspondent services. Management is responsible for assessing the credit risk of its correspondent banks. At December 31, 2024 and 2023, the vast majority of the Company's cash 47 deposits with other banks were due from the Federal Reserve Bank of Philadelphia and the Federal Home Loan Bank of New York. Note 3. Investment Securities The following is a summary of the Company's investments in available for sale and held to maturity securities as of December 31, 2024 and 2023: As of December 31, 2024 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Credit Losses ( Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 6,005 $ 2 $ 456 $ 5,551 $ — Total available for sale $ 6,005 $ 2 $ 456 $ 5,551 $ — Held to maturity: States and political subdivisions $ 3,953 $ 3 $ 515 $ 3,441 $ — Residential mortgage-backed securities 5,256 — 1,205 4,051 — Total held to maturity $ 9,209 $ 3 $ 1,720 $ 7,492 $ — As of December 31, 2023 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Credit Losses ( Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 7,639 $ 3 $ 547 $ 7,095 $ — Total available for sale $ 7,639 $ 3 $ 547 $ 7,095 $ — Held to maturity: States and political subdivisions $ 3,886 $ 38 $ 384 $ 3,540 $ — Residential mortgage-backed securities 5,406 — 1,054 4,352 — Total held to maturity $ 9,292 $ 38 $ 1,438 $ 7,892 $ — 48 The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of December 31, 2024, are as follows: Amortized Cost Fair Value ( Dollars in thousands) Available for sale: Due within one year $ — $ — Due after one year through five years 2,117 1,997 Due after five years through ten years 727 681 Due after ten years 3,161 2,873 Total available for sale $ 6,005 $ 5,551 Held to maturity: Due within one year $ — $ — Due after one year through five years 1,481 1,483 Due after five years through ten years 1,507 1,204 Due after ten years 6,221 4,805 Total held to maturity $ 9,209 $ 7,492 Expected maturities may differ from contractual maturities because the issuers of certain debt securities have the right to call or prepay their obligations without any penalty. During the year ended December 31, 2024 and 2023, the Company did not sell any investment securities. 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, 2024 and December 31, 2023. As of December 31, 2024 Less Than 12 Months 12 Months or Greater Total Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 80 $ 1 $ 4,973 $ 455 $ 5,053 $ 456 Total available for sale $ 80 $ 1 $ 4,973 $ 455 $ 5,053 $ 456 As of December 31, 2023 Less Than 12 Months 12 Months or Greater Total Description of Securities Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses (Dollars in thousands) Available for sale: Residential mortgage-backed securities $ 25 $ — $ 6,870 $ 547 $ 6,895 $ 547 Total available for sale $ 25 $ — $ 6,870 $ 547 $ 6,895 $ 547 The Company’s unrealized loss for the available for sale securities is comprised of 8 securities in the less than 12 months loss position and 14 securities in the 12 months or greater loss position at December 31, 2024. 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. government. 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 a credit loss at December 31, 2024. 49 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, 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. Note 4. Loans Receivable and Allowance for Credit Losses Loans Receivable As of December 31, 2024, the Company had $ 1.87 billion in loans receivable outstanding. Outstanding balances include $ 1.8 million and $ 2.7 million at December 31, 2024 and 2023, respectively, for net deferred loan costs, and unamortized discounts. The portfolios of loans receivable at December 31, 2024, and December 31, 2023, consist of the following, by portfolio segment: December 31, 2024 December 31, 2023 (Dollars in thousands) Commercial and Industrial $ 35,381 $ 35,451 Construction 149,346 157,556 Real Estate Mortgage: Commercial – Owner Occupied 160,441 141,742 Commercial – Non-owner Occupied 371,298 369,909 Residential – 1 to 4 Family 447,880 449,682 Residential - 1 to 4 Family Investment 524,167 524,167 Residential – Multifamily 174,756 103,324 Consumer 4,884 5,509 Total Loan receivable 1,868,153 1,787,340 Allowance for credit losses on loans ( 32,573 ) ( 32,131 ) Total loan receivable, net of allowance for credit losses on loans $ 1,835,580 $ 1,755,209 50 An age analysis of past due loans by class at December 31, 2024 and December 31, 2023 as follows: December 31, 2024 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans (Dollars in thousands) Commercial and Industrial $ — $ — $ 684 $ 684 $ 34,697 $ 35,381 Construction — — 1,091 1,091 148,255 149,346 Real Estate Mortgage: Commercial – Owner Occupied — — 400 400 160,041 160,441 Commercial – Non-owner Occupied — — 5,485 5,485 365,813 371,298 Residential – 1 to 4 Family 223 362 2,883 3,468 444,412 447,880 Residential - 1 to 4 Family Investment — 454 1,609 2,063 522,104 524,167 Residential – Multifamily — — — — 174,756 174,756 Consumer 34 — — 34 4,850 4,884 Total Loans $ 257 $ 816 $ 12,152 $ 13,225 $ 1,854,928 $ 1,868,153 December 31, 2023 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Total Past Due Current Total Loans (Dollars in thousands) Commercial and Industrial $ — $ — $ 712 $ 712 $ 34,739 $ 35,451 Construction — — 1,091 1,091 156,465 157,556 Real Estate Mortgage: Commercial – Owner Occupied — — 1,117 1,117 140,625 141,742 Commercial – Non-owner Occupied — 1,549 3,107 4,656 365,253 369,909 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 Consumer 66 — — 66 5,443 5,509 Total Loans $ 124 $ 3,782 $ 7,238 $ 11,144 $ 1,776,196 $ 1,787,340 The following table provides the amortized cost of loans on nonaccrual status: December 31, 2024 (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 $ — $ 684 $ 684 $ — $ 684 Construction 1,091 — 1,091 — 1,091 Commercial - Owner Occupied 400 — 400 — 400 Commercial - Non-owner Occupied 1,389 3,806 5,195 290 5,485 Residential - 1 to 4 Family 2,048 746 2,794 89 2,883 Residential - 1 to 4 Family Investment 1,609 — 1,609 — 1,609 Residential - Multifamily — — — — — Consumer — — — — — Total $ 6,537 $ 5,236 $ 11,773 $ 379 $ 12,152 51 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 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. The following tables present the information regarding the allowance for credit losses and associated loan data by portfolio segment under the CECL model: Twelve Months Ended December 31, 2024 As of December 31, 2024 Real Estate Mortgage (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, 2023 $ 926 $ 3,347 $ 1,795 $ 7,108 $ 9,061 $ 8,783 $ 1,049 $ 62 $ 32,131 Charge-offs — — — — — — — ( 21 ) ( 21 ) Recoveries 28 — 1 — — — — 74 103 Provisions (benefits) 143 ( 310 ) 75 ( 808 ) 105 49 1,154 ( 48 ) 360 Ending Balance December 31 2024 $ 1,097 $ 3,037 $ 1,871 $ 6,300 $ 9,166 $ 8,832 $ 2,203 $ 67 $ 32,573 The increase in allowance for credit losses for residential multifamily is primarily due to an increase in the loan balance during the year, as well as an increase in the qualitative factor due to the increased volume of the portfolio. The decrease in construction is due to a decrease in the loan balance during the year, as well as a decrease in the qualitative factor due to the decrease in volume, as well as a decrease in the vintage loss factor due to amortization of prior year losses. The decrease in commercial non-owner occupied is due to a decrease in the qualitative factor due to a reduction in the problem loan balance, and a decrease in the vintage loss factor due to the amortization of prior year losses. 52 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 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 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 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. Collateral-Dependent Loans The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2024: (amounts in thousands) Real Estate Business Assets Other Commercial and Industrial $ 684 $ — $ — Construction 1,091 — — Commercial - Owner Occupied 400 — — Commercial - Non-owner Occupied 5,195 — — Residential - 1 to 4 Family 2,794 — — Residential - 1 to 4 Family Investment 1,609 — — Residential - Multifamily — — — Consumer — — — Total $ 11,773 $ — $ — 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: 1. Good : Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile. 2. 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. 3. 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. 4. Watch List : 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. 53 5. 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. 6. 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. 7. Doubtful : 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, 2024 and 2023. (Dollars in thousands) Term Loans Amortized Cost Basis by Origination Year Revolving Loans at Amortized Cost Basis As of December 31, 2024 2024 2023 2022 2021 2020 Prior Total Commercial and Industrial Pass $ 1,351 $ 4,231 $ 654 $ 6 $ 658 $ 6,213 $ 21,584 $ 34,697 OAEM — — — — — — — — Substandard — — 407 — — — 277 684 Doubtful — — — — — — — — $ 1,351 $ 4,231 $ 1,061 $ 6 $ 658 $ 6,213 $ 21,861 $ 35,381 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Construction Pass $ — $ 315 $ 1,800 $ — $ 193 $ — $ 145,947 $ 148,255 OAEM — — — — — — — — Substandard — — — — — 1,091 — 1,091 Doubtful — — — — — — — — $ — $ 315 $ 1,800 $ — $ 193 $ 1,091 $ 145,947 $ 149,346 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial – Owner Occupied Pass $ 21,893 $ 33,293 $ 34,831 $ 11,942 $ 6,705 $ 48,946 $ 2,431 $ 160,041 OAEM — — — — — — — — Substandard — — — — — 400 — 400 Doubtful — — — — — — — — $ 21,893 $ 33,293 $ 34,831 $ 11,942 $ 6,705 $ 49,346 $ 2,431 $ 160,441 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Commercial – Non-owner Occupied Pass $ 38,697 $ 15,635 $ 75,261 $ 31,460 $ 23,780 $ 153,027 $ 16,494 $ 354,354 54 OAEM — — — — — 11,459 — 11,459 Substandard — — — — 249 4,946 290 5,485 Doubtful — — — — — — — — $ 38,697 $ 15,635 $ 75,261 $ 31,460 $ 24,029 $ 169,432 $ 16,784 $ 371,298 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – 1 to 4 Family Performing $ 48,704 $ 53,018 $ 108,691 $ 56,027 $ 29,580 $ 145,467 $ 3,510 $ 444,997 Nonperforming — 644 375 — 602 1,262 — 2,883 $ 48,704 $ 53,662 $ 109,066 $ 56,027 $ 30,182 $ 146,729 $ 3,510 $ 447,880 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – 1 to 4 Family Investment Performing $ 58,772 $ 79,266 $ 127,600 $ 103,343 $ 44,301 $ 109,276 $ — $ 522,558 Nonperforming — 995 614 — — — — $ 1,609 $ 58,772 $ 80,261 $ 128,214 $ 103,343 $ 44,301 $ 109,276 $ — $ 524,167 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Residential – Multifamily Pass $ 6,770 $ 4,942 $ 92,918 $ 25,410 $ 9,150 $ 35,566 $ — $ 174,756 OAEM — — — — — — — $ — Substandard — — — — — — — $ — Doubtful — — — — — — — — $ 6,770 $ 4,942 $ 92,918 $ 25,410 $ 9,150 $ 35,566 $ — $ 174,756 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Consumer Performing $ 246 $ — $ — $ — $ — $ 4,627 $ 11 $ 4,884 Nonperforming — — — — — — — — $ 246 $ — $ — $ — $ — $ 4,627 $ 11 $ 4,884 Current period gross charge-offs $ — $ — $ — $ — $ — $ 21 $ — $ 21 Total Loan Receivable $ 176,434 $ 192,338 $ 443,151 $ 228,189 $ 115,219 $ 522,571 $ 190,251 $ 1,868,153 (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 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 $ — $ — $ — $ — $ — $ — $ — $ — 55 Construction 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 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 $ — $ — $ — $ — $ — $ — $ — $ — Consumer 56 Performing $ — $ — $ — $ — $ — $ 5,493 $ 16 $ 5,509 Nonperforming — — — — — — — — $ — $ — $ — $ — $ — $ 5,493 $ 16 $ 5,509 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Total Loan Receivable $ 192,551 $ 413,832 $ 268,197 $ 137,224 $ 156,973 $ 441,606 $ 176,957 $ 1,787,340 Modifications to Borrowers Experiencing Financial Difficulty At December 31, 2024 and 2023, the Company did not make any modifications to borrowers experiencing financial difficulty. At December 31, 2024 and 2023, there was $ 4.9 million and $ 1.2 million, respectively, of residential real estate loans where the Company was actively pursuing foreclosure. Loans to Related Parties : In the normal course of business, the Company has granted loans to its executive officers, directors and their affiliates (related parties). All loans to related parties were made in the ordinary course of business. An analysis of the activity of such related party loans for 2024 is as follows: 2024 (Dollars in thousands) Balance, beginning of year $ 696 Advances 375 Less: repayments ( 510 ) Balance, end of year $ 561 Pledged Loans: At December 31, 2024 and 2023, approximately $ 740.5 million and $ 1.3 billion, 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. At December 31, 2024, approximately $ 361.0 million of unpaid principal balance of loans were pledged to the FRB on borrowings. There were no loans pledged as of December 31, 2023. Concentrations of Credit : Most of the Company's lending activity occurs within the areas of southern New Jersey and southeastern Pennsylvania, as well as other markets. We maintain discipline in our lending with a focus on portfolio diversification. In our underwriting process, we have limits on loans to one borrower, one industry as well as product concentrations. Our loan portfolio consists of residential, commercial real estate loans, construction loans, commercial and industry loans as well as consumer loans. Note 5. OREO Other real estate owned (OREO) at December 31, 2024 and 2023 was $ 1.6 million. The real estate owned at December 31, 2024, consisted of two properties. During the year ended December 31, 2024, the Company did not dispose of any OREO properties, compared to $ 161.0 thousand of OREO sold during the year ended December 31, 2023, recognizing a gain of $ 38.0 thousand. The Company did no t write-down any OREO property during 2024 or 2023. Operating expenses related to OREO, net of related income, for 2024 and 2023, were $ 835.0 thousand and $ 839.0 thousand, respectively. 57 An analysis of OREO activity for the years ended December 31, 2024 and 2023 is as follows: For the Year Ended December 31, 2024 2023 (Dollars in thousands) Balance at beginning of period $ 1,550 $ 1,550 Real estate acquired in settlement of loans — 123 Capital improvements to existing OREO properties 12 — Sales of OREO, net — ( 161 ) Valuation adjustments — 38 Balance at end of period $ 1,562 $ 1,550 Note 6. Deposits Deposits at December 31, 2024 and 2023, consisted of the following: 2024 2023 (Dollars in thousands) Noninterest-bearing demand $ 184,037 $ 232,189 NOWs 60,499 63,017 Money market deposits 615,444 567,080 Savings deposits 55,912 83,470 Time deposits over $250,000 136,360 93,696 Other time deposits 368,092 356,791 Brokered time deposits 210,706 156,584 Total deposits $ 1,631,050 $ 1,552,827 Scheduled maturities of certificates of deposit at December 31, 2024 are as follows: Years Ending December 31, (Dollars in thousands) 2025 $ 702,547 2026 8,693 2027 2,631 2028 357 2029 930 Total $ 715,158 58 The following table is a summary of interest expense on deposits by category: 2024 2023 (Dollars in thousands) NOWs $ 618 $ 1,377 Money market deposits 27,812 17,120 Savings deposits 750 1,486 Time deposits 19,099 15,232 Brokered time deposits 9,033 6,044 Total $ 57,312 $ 41,259 Note 7. Borrowings An analysis of borrowings at December 31, 2024 and 2023 is as follows: 2024 2023 Maturity Date or Range Amount Weighted Average Rate Amount Weighted Average Rate (Dollars in thousands) Borrowed funds: Federal Home Loan Bank advances Less than one year $ 125,000 4.83 % $ 30,000 5.61 % One to three years 20,000 4.67 % 95,000 4.93 % Total $ 145,000 $ 125,000 Subordinated debentures, capital trusts November 2035 $ 5,155 6.44 % $ 5,155 7.30 % November 2035 5,155 6.44 % 5,155 7.30 % September 2037 3,093 6.12 % 3,093 7.15 % Total $ 13,403 $ 13,403 Subordinated debentures notes, net July 15, 2030 $ 29,897 6.50 % $ 29,708 6.50 % At December 31, 2024, the Company had a $ 740.5 million line of credit from the FHLBNY, of which $ 145.0 million, as detailed above, was outstanding, $ 50.0 million was a letter of credit to secure public deposits, and $ 545.5 million was unused. At December 31, 2024, the Company had a $ 252.0 million line of credit from the FRB, with no balances outstanding. Subordinated Debentures – Capital Trusts : 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 SOFR plus a spread adjustment of 0.26161 % plus 1.66 % and was 6.44 % at December 31, 2024. Parke Capital Trust I purchased $ 5,155,000 of variable rate junior subordinated deferrable interest debentures from the Company. The debentures are the sole asset of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The Company has also fully and unconditionally guaranteed the obligations of the Trust under the capital securities. The capital securities are redeemable by the Company on or after November 23, 2010, at par. The capital securities must be redeemed upon final maturity of the subordinated debentures on November 23, 2035. 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 August 23, 2005, Parke Capital Trust II, a Delaware statutory business trust and a wholly-owned subsidiary of the Company, issued $ 5,000,000 of fixed/variable rate capital trust pass-through securities to investors. Currently, the interest rate is variable at 6.44 %. 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. The debentures are the sole asset of the Trust. The terms of the 59 junior subordinated debentures are the same as the terms of the capital securities. The Company has also fully and unconditionally guaranteed the obligations of the Trust under the capital securities. The capital securities are redeemable by the Company on or after November 23, 2010, at par. The capital securities must be redeemed upon final maturity of the subordinated debentures on November 23, 2035. 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 SOFR plus a spread adjustment of 0.26161 % plus 1.50 % and was 6.12 % at December 31, 2024. Parke Capital Trust III purchased $ 3,093,000 of variable rate junior subordinated deferrable interest debentures from the Company. The debentures are the sole asset of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The Company has also fully and unconditionally guaranteed the obligations of the Trust under the capital securities. The capital securities are redeemable by the Company on or after December 15, 2012, at par. The capital securities must be redeemed upon final maturity of the subordinated debentures on September 15, 2037. The proceeds were contributed to paid-in capital at the Bank. Subordinated Debentures – Notes : On July 15, 2020, 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”). The Company intends to use the net proceeds from the offering for general corporate purposes. The Notes have a ten-year term and, from and including the date of issuance to but excluding July 15, 2025, will bear interest at a fixed annual rate of 6.50 %, payable semi-annually in arrears. From and including July 15, 2025 to but excluding the maturity date or earlier redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then-current three-month SOFR (provided, that in the event the three-month SOFR is less than zero, the three-month SOFR will be deemed to be zero) plus 644 basis points, payable quarterly in arrears. The Notes are redeemable, in whole or in part, at the Company’s option, on any scheduled interest payment date on or after July 15, 2025, and at any time upon the occurrence of certain events. Any redemption of the Notes will be subject to prior regulatory approval to the extent required. There were approximately $ 948,000 in costs associated with the issuance of this debt, of which $ 102.7 thousand is unamortized as of December 31, 2024. Note 8. Premises and Equipment A summary of the cost and accumulated depreciation and amortization of Company premises and equipment as of December 31, 2024 and 2023 is as follows: 2024 2023 (Dollars in thousands) Land $ 1,044 $ 1,044 Building and improvements 7,284 7,275 Furniture and equipment 4,056 3,946 Total premises and equipment 12,384 12,265 Less: accumulated depreciation and amortization ( 7,068 ) ( 6,686 ) Premises and equipment, net $ 5,316 $ 5,579 Depreciation and amortization expense was $ 382,000 and $ 401,000 in 2024 and 2023, respectively. Note 9. Leases 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. The exercise of lease renewal is at our sole discretion. 60 Our right-of-use assets and lease liabilities for operating leases are included in other assets and other liabilities on our consolidated balance sheets. We use the interest rate implicit in the lease or incremental borrowing rate in determining the present value of lease payments. At December 31, 2024, we had future minimum lease payments of $ 26.9 million and imputed interest of $ 24.7 million and lease liability of $ 2.2 million. The weighted average remaining lease term was 51.3 years and weighted average discount rate was 7.27 % at December 31, 2024, respectively. 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. The components of the Company's ongoing operating lease cost were as follows: Twelve Months Ended (Dollars in thousands) 2024 2023 Lease Cost $ 409 $ 405 Sublease income ( 219 ) ( 217 ) Net lease cost $ 190 $ 188 The following table presents information about our operating leases during the year ended December 31, 2024. Dollars in thousands 2024 Lease right of use assets (ROU) $ 2,212 Lease liabilities $ 2,212 The following table presents future undiscounted cash flows on our operating leases: Years Ended December 31, (Dollars in thousands) 2025 $ 365 2026 283 2027 187 2028 192 2029 210 Thereafter 25,712 Total undiscounted lease payments $ 26,949 Impact of present value discount $ ( 24,737 ) Note 10. Shareholders’ Equity Common Stock Dividend : The Company paid a $ 0.18 per share dividend each quarter of 2024, and 2023, respectively. During the year ended December 31, 2024, the Company paid a total of $ 8.6 million in common stock cash dividends. During the year ended December 31, 2023, the Company paid a total of $ 8.6 million in common stock cash dividends. The timing and amount of future dividends will be within the discretion of the Board of Directors and will depend on the consolidated earnings, financial condition, liquidity, and capital requirements of the Company and its subsidiaries, applicable governmental regulations and policies, and other factors deemed relevant by the Board. Treasury Stock : During the year ended December 31, 2024, the Company repurchased 200,000 shares of its outstanding common stock for $ 4.3 million at an average price of $ 21.28 per share. No treasury stock was repurchased during the year ended December 31, 2023. 61 Stock Options : The 2020 Equity Incentive Plan (the “2020 Plan”) became effective after shareholder approval in 2020. In addition, the Company also has the 2015 Equity Incentive Plan (the “2015 Plan”). No future awards are being granted under the 2015 Plan. The 2020 Plan will terminate on the tenth anniversary of its effective date, after which no awards may be granted. Collectively, the 2015 Plan and the 2020 Plan are referred to as Stock Option Plans. Under the 2020 Plan, the Company may grant options to purchase up to 935,000 shares of Company's common stock and award up to 55,000 of restricted stock. At December 31, 2024, there were 458,750 shares remaining for future option grants, and 48,482 shares remaining for future restricted stock awards under the plan. During the year ended December 31, 2024, options to purchase 20,000 shares of commons stock at $ 19.03 per share were awarded and will expire no later than ten years following the grant date. The options granted vest over a five-year service period, with 20 % of the awards vesting on each anniversary of the date of grant. The fair value of the options granted, as computed using the Black-Sholes option-pricing model, was determined to be $ 4.34 per option based upon the following underlying assumptions: a risk-free interest rate, expected option life, expected stock price volatility, and dividend yield of 3.82 %, 6.5 years, 29.29 %, and 3.78 %, respectively. The risk-free interest rate was based on the U.S. Treasury yield at the option grant date for securities with a term matching the expected life of the options granted. The expected life was calculated using the "simplified" method provided for under Staff Accounting Bulletin No. 110. Expected volatility was calculated based upon the actual price history of the Company's common stock up until the date of the option grants. The dividend yield was calculated using the previous four quarter payment history. The Company did not grant any options during the year ended December 31, 2023. Compensation expense for stock options was $ 335.8 thousand, and $ 397.8 thousand at December 31, 2024 and 2023, respectively. A summary of stock options at December 31, 2024 was as follows: Year Ended December 31, 2024 Stock Options: Shares Weighted Average Exercise Price Outstanding at beginning of period 681,345 $ 15.94 Granted 20,000 $ 19.03 Exercised ( 63,769 ) $ 11.06 Forfeited ( 23,750 ) $ 21.66 Outstanding at end of period 613,826 $ 16.33 Exercisable at end of period 449,980 $ 15.93 The total amount of compensation cost remaining to be recognized relating to unvested employees and directors option grants as of December 31, 2024 was $ 0.5 million. The weighted-average period over which the expense is expected to be recognized is 2.7 years. At December 31, 2024, the intrinsic value of options exercisable and all options outstanding was approximately $ 2.1 million and $ 2.6 million, respectively. The aggregate intrinsic value of options exercised in 2024 was $ 675.1 thousand. The total amount of compensation cost remaining to be recognized relating to unvested option grants as of December 31, 2023 was $ 0.9 million. The weighted-average period over which the expense is expected to be recognized was 3.4 years. 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 aggregate intrinsic value of options exercised in 2023 was $ 45.0 thousand. Under the 2020 Plan, the Company was authorized to issue 55,000 shares of restricted stock upon the grant of awards. All restricted stocks vests over five years . The table below presents the status of the restricted stock units at December 31, 2024, and the changes during the year ended December 31, 2024. 62 Restricted Stock Units Weighted Average Grant-Date Fair Value Outstanding and unvested at December 31, 2023 3,669 19.64 Granted — Vested ( 1,701 ) 20.01 Outstanding and unvested at December 31, 2024 1,968 19.33 The Company recognized $ 34,005 and $ 40,006 compensation costs of the restricted shares during year 2024 and 2023. The total amount of restricted stock expense remaining to be recognized is $ 38.0 thousand at December 31, 2024. Preferred Stock: In December of 2013, the Company completed a private placement of newly designated 6 % Non-Cumulative Perpetual Convertible Preferred Stock, Series B, with a liquidation preference of $ 1,000 per share. The Company sold 20,000 shares in the placement for gross proceeds of $ 20.0 million. Each share of Series B Preferred Stock is convertible, at the option of the holder into approximately 137.6 shares of Common Stock at December 31, 2024. There were 325 shares of Series B Preferred Stock outstanding at December 31, 2024. Upon full conversion of the outstanding shares of the Series B Preferred Stock, the Company will issue approximately 44,720 shares of Common Stock assuming that the conversion rate does not change. 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. During 2024, preferred stockholders converted 50 shares of preferred shares into 6,877 shares of common stock, respectively. During 2023, preferred stockholders converted 70 shares of preferred shares into 9,628 shares of common stock, respectively. The Company has recorded dividends on preferred stock in the approximate amount of $ 20,250 and $ 26,000 for the years ended December 31, 2024 and 2023, respectively. The Company paid quarterly cash dividends of $ 15 per share on the preferred stock for year 2024 and 2023. The preferred stock qualifies for and is accounted for as equity securities and is included in the Company’s Tier I capital since issued. Note 11. Income Taxes Income tax expense for 2024 and 2023 consisted of the following: 2024 2023 (Dollars in thousands) Current tax expense: Federal $ 7,265 $ 6,886 State 1,394 2,336 8,659 9,222 Deferred tax expense/(benefit) 126 6 Income tax expense $ 8,785 $ 9,228 63 The components of the net deferred tax asset at December 31, 2024 and 2023 were as follows: 2024 2023 (Dollars in thousands) Deferred tax assets: Allowance for credit losses $ 7,197 $ 7,575 Supplemental Executive Retirement Plan ("SERP") 1,522 1,636 Deferred Loan Fees 1,411 1,322 Non-accrued interest 44 58 Non-qualified stock options and restricted stock 376 318 Write-down on partnership investment 130 138 Unrealized loss on securities 117 140 Lease liability 2,212 2,455 PPP Deferred Loan Fees — 1 Other 269 210 13,278 13,853 Valuation allowance ( 130 ) ( 138 ) Total gross deferred tax assets 13,148 13,715 Deferred tax liabilities: Depreciation ( 58 ) ( 71 ) Partnership income ( 54 ) ( 58 ) Right of use asset ( 2,212 ) ( 2,455 ) Deferred loan costs ( 1,711 ) ( 1,869 ) Total gross deferred tax liabilities ( 4,035 ) ( 4,453 ) Net deferred tax asset $ 9,113 $ 9,262 A reconciliation of the Company’s effective income tax rate with the statutory federal rate for 2024 and 2023 is as follows: 2024 2023 (Dollars in thousands) At Federal statutory rate $ 7,622 $ 7,915 Adjustments resulting from: State income taxes, net of Federal tax benefit 1,776 1,557 Tax exempt income ( 20 ) ( 20 ) BOLI ( 138 ) ( 155 ) Stock compensation ( 26 ) ( 8 ) Nondeductible expenses 2 1 Nondeductible executive compensation 32 84 Other ( 463 ) ( 146 ) $ 8,785 $ 9,228 Management has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustments to the financial statements. With few exceptions, the Company is no longer subject to income tax examinations by federal and local tax authorities for years before 2021, and by the State of New Jersey for years before 2020. The Company is still subject to examination for 2021 and after. The Company recorded income tax expense of $ 8.8 million on income before taxes of $ 36.3 million on for the year ended December 31, 2024, resulting in an effective tax rate of 24.2 %, compared to income tax expense of $ 9.2 million on income before taxes of $ 37.7 million for the same period of 2023, resulting in an effective tax rate of 24.5 %. 64 Note 12. Retirement Plans The Company has a Supplemental Executive Retirement Plan (“SERP”) covering certain members of management. The net SERP pension cost was approximately $ 197.0 thousand in 2024 and $ 367.0 thousand in 2023. The unfunded benefit obligation, which was included in other liabilities, was approximately $ 6.4 million at December 31, 2024 and $ 6.4 million at December 31, 2023. The benefit obligation at December 31, 2024 and December 31, 2023 was calculated as follows: 2024 2023 (Dollars in thousands) Benefit obligation, January 1 $ 6,439 $ 6,311 Service cost/(benefit) ( 146 ) 27 Interest cost 343 340 Benefits paid ( 239 ) ( 239 ) Accrued liability at December 31 $ 6,397 $ 6,439 The net SERP pension cost for 2024 and benefit for 2023 was calculated as follows: 2024 2023 (Dollars in thousands) Service cost $ ( 146 ) $ 27 Interest cost 343 340 $ 197 $ 367 The service cost for 2024 and 2023 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 2024 and 2023. Annual benefit payments are estimated at $ 525,696 for 2025, $ 812,346 for 2026, $ 812,346 for 2027, $ 812,346 for 2028, $ 812,346 for 2029 and $ 4.6 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 2024 was $ 250.2 thousand and $ 243.0 thousand in 2023. Note 13. Regulatory Matters Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is 2.50%. The Bank made a one-time election to opt-out the net unrealized gain or loss on available for sale securities in computing regulatory capital. At December 31, 2024, the Bank was considered “well capitalized" under the regulatory framework for prompt corrective action. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2024 and 2023 the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category. 65 Community Bank Leverage Ratio The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), enacted in May 2018, introduced an optional simplified measure of capital adequacy for qualifying community banking organizations with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of tangible equity capital divided by average consolidated assets (“CBLR”) of between 8 and 10 percent. Under the statute, any qualifying depository institution or holding company that maintains a leverage ratio exceeding the CBLR will be considered to satisfy the generally applicable leverage and risk-based regulatory capital requirements. Under final regulations adopted by the federal banking agencies under the EGRRCPA, a community banking organization may opt into the CBLR framework if it has a Tier 1 leverage ratio of at least 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework will not be required to report or calculate compliance with risk-based capital requirements and will also be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations. We have elected to use the CBLR framework and is presented as of December 31, 2024. The Company and Bank's regulatory capital as of December 31, 2024 and 2023, is presented in the following table. As of December 31, 2024 Actual For Capital Adequacy Purpose* Company Amount Ratio Amount Ratio (Dollars in thousands except ratios) Total risk-based capital $ 362,000 24.44 % $ 118,478 8.00 % Tier 1 risk-based capital 313,488 21.17 % 88,859 6.00 % Tier 1 leverage 313,488 15.00 % 83,604 4.00 % Tier 1 common equity 300,085 20.26 % 66,644 4.50 % Parke Bank Community Bank Leverage Ratio 342,282 16.38 % 188,072 9.00 % As of December 31, 2023 Actual For Capital Adequacy Purpose* Company Amount Ratio Amount Ratio (Dollars in thousands except ratios) Total risk-based capital $ 345,607 24.19 % $ 114,291 8.00 % Tier 1 risk-based capital 297,749 20.84 % 85,718 6.00 % Tier 1 leverage 297,749 15.04 % 79,207 4.00 % Tier 1 common equity 284,346 19.90 % 64,289 4.50 % Parke Bank Community Bank Leverage Ratio 326,465 16.49 % 178,233 9.00 % * Combination of both community bank leverage approach and the regular rule of capital adequacy. Note 14. Commitments and Contingencies The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of these instruments reflect the extent of the Company’s involvement in these particular classes of financial instruments. The Company’s exposure to the maximum possible credit risk in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. 66 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment and income-producing commercial properties. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments to fund fixed-rate loans were immaterial at December 31, 2024. Variable-rate commitments are generally issued for less than one year and carry market rates of interest. Such instruments are not likely to be affected by annual rate caps triggered by rising interest rates. Management believes that off-balance sheet risk is not material to the results of operations or financial condition. As of December 31, 2024 and 2023, unused commitments to extend credit amounted to approximately $ 122.5 million and $ 93.8 million, respectively. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of December 31, 2024 and 2023, standby letters of credit with customers were $ 0.6 million and $ 1.5 million, respectively. At December 31, 2024 and December 31, 2023, the allowance for credit losses of unfunded lending commitments was $ 0.9 million and $ 0.5 million, respectively. A provision expense for unfunded lending commitments of $ 0.4 million was recognized during the year ended December 31, 2024, while there was $ 0.5 million provision recovery recognized during the year ended December 31, 2023. The Company also has entered into an employment contract with the President of the Company, which provides for continued payment of certain employment salary and benefits prior to the expiration date of the agreement and in the event of a change in control, as defined. The Company has also entered into Change-in-Control Severance Agreements with certain officers which provide for the payment of severance in certain circumstances following a change in control. We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries. Cannabis businesses are legal in these States, although it is not legal at the federal level. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses. A financial institution that provides services to cannabis-related businesses can comply with Bank Secrecy Act (“BSA”) disclosure standards by following the FinCEN guidelines. We maintain stringent written policies and procedures related to the acceptance of such businesses and to the monitoring and maintenance of such business accounts. We conduct a significant due diligence review of the cannabis business before the business is accepted, including confirmation that the business is properly licensed by the applicable state. Throughout the relationship, we continue monitoring the business, including site visits, to ensure that the business continues to meet our stringent requirements, including maintenance of required licenses and periodic financial reviews of the business. While we believe we are operating in compliance with the FinCEN guidelines, there can be no assurance that federal enforcement guidelines will not change. Federal prosecutors have significant discretion and there can be no assurance that the federal prosecutors will not choose to strictly enforce the federal laws governing cannabis. 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, 2024 and 2023, deposit balances from cannabis customers were approximately $ 151.9 million and $ 96.7 million, or 9.3 % and 6.2 % of total deposits, respectively, with three customers accounting for 59.4 % and 60.6 % of the total at December 31, 2024 and 2023. At December 31, 2024 and 2023, there were cannabis-related loans in the amounts of $ 43.4 million and $ 27.1 million, respectively. Absecon Gardens Condominium Association v. Parke Bank Matter Absecon Gardens Condominium Association v. Parke Bank, One Mechanic Street, et al, Superior Court of New Jersey, Law Division, Atlantic County, Docket No. ATL-L-2321-21. The Company is the successor to the interests of the developer of the Absecon Gardens Condominium project in Absecon NJ. Some of the unit owners have suggested that the Company is responsible for contributions and/or repair for alleged damages purportedly relating to construction. The owners filed a Complaint, alleging that the damages total approximately $ 1.7 million. The matter is in discovery so it is difficult to determine whether that amount accurately reflects the claimed damages, or whether the Company is in any way culpable for the damages. At this time it is too early to predict whether an unfavorable outcome will result. The Company is vigorously defending this matter. See "Note 15. Commitments and Contingencies" in the Notes to the Consolidated Financial Statements. 67 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 $ 1,000,000.00 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 $ 1,400,000.00 . 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. Mr. 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. Other than the foregoing, neither the Company nor the Bank are involved in any other pending legal proceedings, other than routine legal matters occurring in the ordinary course of business, which in the aggregate involve amounts which are believed by management to be immaterial to the consolidated financial condition or results of operations of the Company. Note 15. Fair Value Fair Value Measurements The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures (Topic 820) of FASB Accounting Standards Codification, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Fair value is a market-based measurement, not an entity-specific measurement. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows: Level 1 Input: 1) Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Inputs: 1) Quoted prices for similar assets or liabilities in active markets. 2) Quoted prices for identical or similar assets or liabilities in markets that are not active. 3) Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.” 68 Level 3 Inputs: 1) Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities. 2) These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Fair Value on a Recurring Basis: The following is a description of the Company’s valuation methodologies for assets carried at fair value on a recurring basis. These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes that its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting measurement date. Investments in Available for Sale Securities: Where quoted prices are available in an active market, securities or other assets are classified in Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security, then fair values are provided by independent third-party valuation services. These valuation services estimate fair values using pricing models and other accepted valuation methodologies, such as quotes for similar securities and observable yield curves and spreads. As part of the Company’s overall valuation process, management evaluates these third-party methodologies to ensure that they are representative of exit prices in the Company’s principal markets. Securities in Level 2 include mortgage-backed securities, corporate debt obligations, and collateralized mortgage-backed securities. The table below presents the balances of assets and liabilities measured at fair value on a recurring basis at December 31, 2024 and 2023. F inancial Assets Level 1 Level 2 Level 3 Total (Dollars in thousands) Investment securities available for sale As of December 31, 2024 Residential mortgage-backed securities $ — $ 5,551 $ — $ 5,551 Total $ — $ 5,551 $ — $ 5,551 As of December 31, 2023 Residential mortgage-backed securities $ — $ 7,095 $ — $ 7,095 Total $ — $ 7,095 $ — $ 7,095 For the year ended December 31, 2024, there were no transfers between the levels within the fair value hierarchy. There were no level 3 assets or liabilities held for the year ended at December 31, 2024 and December 31, 2023. 69 Fair Value on a Non-Recurring Basis: Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial Assets Level 1 Level 2 Level 3 Total (Dollars in thousands) As of December 31, 2024 Collateral dependent loans $ — $ — $ 5,189 $ 5,189 OREO $ — $ — $ 1,562 $ 1,562 As of December 31, 2023 Collateral dependent loans $ — $ — $ 1,655 $ 1,655 OREO $ — $ — $ 1,550 $ 1,550 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. Appraisals are updated every 12 months or sooner if we have identified possible further deterioration in value. OREO consists of real estate properties which are recorded at fair value. 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 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. Appraisals are updated every 12 months or sooner if we have identified possible further deterioration in value. The following table summarizes the carrying amounts and fair values for financial instruments at December 31, 2024 and December 31, 2023: December 31, 2024 Carrying Amount Fair Value Total Level 1 Level 2 Level 3 (Dollars in thousands) Financial Assets: Cash and cash equivalents $ 221,527 $ 221,527 $ 221,527 $ — $ — Investment securities AFS 5,551 5,551 — 5,551 — Investment securities HTM 9,209 7,492 — 7,492 — Restricted stock 8,619 8,619 — — 8,619 Loans, net 1,835,580 1,834,007 — 1,822,203 11,804 Accrued interest receivable 9,659 9,659 — 9,659 — Financial Liabilities: Non-time deposits $ 915,892 $ 915,892 $ 915,892 $ — $ — Time deposits 715,158 716,904 — 716,904 — Borrowings 188,300 189,621 — 189,621 — Accrued interest payable 7,968 7,968 — 7,968 — 70 December 31, 2023 Carrying Amount Fair Value Total Level 1 Level 2 Level 3 (Dollars in thousands) Financial Assets: Cash and cash equivalents $ 180,376 $ 180,376 $ 180,376 $ — $ — Investment securities AFS 7,095 7,095 — 7,095 — Investment securities HTM 9,292 7,892 — 7,892 — Restricted stock 7,636 7,636 — — 7,636 Loans, net 1,755,209 1,727,842 — 1,718,866 8,976 Accrued interest receivable 8,555 8,555 — 8,555 — Financial Liabilities: Non-time deposits $ 945,756 $ 945,756 $ 945,756 $ — $ — Time deposits — 605,216 — 605,216 — Borrowings 168,111 172,985 — 172,985 — Accrued interest payable 4,146 4,146 — 4,146 — 71 Note 16. Parent Company Only Financial Statements Condensed financial information of the parent company only is presented in the following two tables: Balance Sheets December 31, 2024 2023 (Dollars in thousands) Assets: Cash $ 4,147 $ 4,111 Investments in subsidiaries 342,348 326,464 Total assets $ 346,495 $ 330,575 Liabilities and Equity: Subordinated debentures $ 43,300 $ 43,111 Other liabilities 3,122 3,147 Equity 300,073 284,317 Total liabilities and equity $ 346,495 $ 330,575 Statements of Income Years ended December 31, 2024 2023 (Dollars in thousands) Income: Dividends from bank subsidiary $ 15,389 $ 11,772 Total income 15,389 11,772 Expense: Interest on subordinated debentures $ 3,080 $ 3,048 Salary 160 160 Other expenses 118 118 Total expenses 3,358 3,326 Net Income 12,031 8,446 Equity in undistributed income of subsidiaries 15,481 20,016 Net income 27,512 28,462 Preferred stock dividend and discount accretion ( 20 ) ( 26 ) Net income available to common shareholders $ 27,492 $ 28,436 72 Statements of Cash Flows Years ended December 31, 2024 2023 (Dollars in thousands) Cash Flows from Operating Activities Net income $ 27,512 $ 28,462 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries ( 15,481 ) ( 20,016 ) Amortization of subordinate debt issuance costs 190 190 Changes in (Decrease) increase in accrued interest payable and other accrued liabilities ( 27 ) 12 Net cash provided by operating activities 12,194 8,648 Cash Flows from Financing Activities Purchase of treasury stock ( 4,262 ) — Proceeds from exercise of stock options 706 33 Payment of dividend on preferred stock and common stock ( 8,602 ) ( 8,629 ) Net cash used in financing activities ( 12,158 ) ( 8,596 ) Increase in cash and cash equivalents 36 52 Cash and Cash Equivalents, January 1, 4,111 4,059 Cash and Cash Equivalents, December 31, $ 4,147 $ 4,111 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None