PARKE BANCORP, INC. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements Throughout this report, "Parke Bancorp" and "the Company" refer to Parke Bancorp Inc., and its consolidated subsidiaries. The Company is collectively referred to as "we", "us" or "our". Parke Bank is referred to as the "Bank". The Company may from time to time make written or oral "forward-looking statements" including statements contained in this Report and in other communications by the Company which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, such as statements of the Company's plans, objectives, expectations, estimates and intentions, involve risks and uncertainties and are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of, and changes in, trade, tariff, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the "Federal Reserve"), inflation, interest rate, market and monetary fluctuations; the potential adverse effects of the Consent Orders and any additional regulatory restrictions that may be imposed by banking regulators; the timely development of, and acceptance of, new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and insurance); the effect of any change in federal government enforcement of federal laws affecting the cannabis industry; technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing. Financial institutions can be affected by changing conditions in the real estate and financial markets. The effects of geopolitical instability, including the conflicts between Russia and Ukraine and Israel and Hamas, foreign currency exchange volatility, volatility in global capital markets, inflationary pressures, higher tariffs, and higher interest rates may meaningfully impact loan production, income levels, and the measurement of certain significant estimates such as the allowance for credit losses. Moreover, in a period of economic contraction, we may experience elevated levels of credit losses, reduced interest income, impairment of financial assets, diminished access to capital markets and other funding sources, and reduced demand for our products and services. Volatility in the housing markets, real estate values and unemployment levels results in significant write-downs of asset values by financial institutions. Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing in and around southern New Jersey and Philadelphia, Pennsylvania. We focus our lending efforts primarily in three lending areas: residential mortgage loans, commercial mortgage loans, and construction loans. As a result of this geographic concentration, a significant broad-based deterioration in economic conditions in these areas could have a material adverse impact on the quality of our loan portfolio, results of operations and future growth potential. Our operations are subject to risks and uncertainties surrounding our exposure to changes in the interest rate environment. Earnings and liquidity depend to a great extent on our interest rates. Interest rates are highly sensitive to many factors beyond our control, including competition, general economic conditions, geopolitical tensions and monetary, trade, tariff, and fiscal policies of various governmental and regulatory authorities, including the Federal Reserve. Conditions such as inflation, deflation, recession, unemployment and other factors beyond our control may also affect interest rates. The nature and timing of any changes in interest rates or general economic conditions and their effect on us cannot be controlled and are difficult to predict. If the rate of interest we pay on our interest-bearing liabilities increases more than the rate of interest we receive on our interest-earning assets, our net interest income, and therefore our earnings, could contract and be materially adversely affected. Our earnings could also be materially adversely affected if the rates on interest-earning assets fall more quickly than those on our interest-bearing liabilities. Changes in interest rates could also create competitive pressures, which could impact our liquidity position. Changes in interest rates also can affect our ability to originate loans, our ability to obtain and retain deposits, and the value of interest-earning assets, and the ability to realize gains from the sale of such assets, which could all negatively impact shareholder's equity and regulatory capital. The Company cautions that the foregoing list of important factors is not exclusive. The Company also cautions readers not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date on which they are given. The Company is not obligated to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after any such date. 23 Table of Contents Overview The following discussion provides information about our results of operations, financial condition, liquidity and asset quality. We intend that this information facilitates your understanding and assessment of significant changes and trends related to our financial condition and results of operations. You should read this section in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We are a bank holding company and are headquartered in Washington Township, New Jersey. Through the Bank, we provide personal and business financial services to individuals and small to mid-sized businesses primarily in New Jersey and Pennsylvania. The Bank has branches in Galloway Township, Northfield, Washington Township, Collingswood, New Jersey and Philadelphia, Pennsylvania, and a loan office in Philadelphia, Pennsylvania. The vast majority of our revenue and income is currently generated through the Bank. We manage our Company for the long term. We are focused on the fundamentals of growing customers, loans, deposits and revenue and improving profitability, while investing for the future and managing risk, expenses and capital. We continue to invest in our products, markets and brand, and embrace our commitments to our customers, shareholders, employees and the communities where we do business. Our approach is concentrated on organically growing and deepening client relationships across our businesses that meet our risk/return measures. We focus on small to mid-sized business and retail customers and offer a range of loan products, deposits services, and other financial products through our retail branches and other channels. The Company's results of operations are dependent primarily on its net interest income, which is the difference between the interest income earned on its interest earning-assets and the interest expense paid on its interest-bearing liabilities. In our operations, we have three major lines of lending: residential real estate mortgage, commercial real estate mortgage, and construction lending. Our interest income is primarily generated from our lending and investment activities. Our deposit products include checking, savings, money market accounts, and certificates of deposit. The majority of our deposit accounts are obtained through our retail banking business, which provides us with low cost funding to grow our lending efforts. The Company also generates income from loan and deposit fees and other non-interest related activities. The Company's non-interest expense primarily consists of employee compensation, administration, and other operating expenses. At September 30, 2025, we had total assets of $2.17 billion, and total equity of $314.8 million. Net income available to common shareholders for the three and nine months ended September 30, 2025 was $10.6 million and $26.7 million, respectively. 24 Table of Contents Results of Operations Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 Net Income : Our net income available to common shareholders for the three months ended September, 30, 2025 increased $3.1 million, or 41.6%, to $10.6 million, compared to $7.5 million for the three months ended September 30, 2024. Earnings per share were $0.90 per basic common share and $0.89 per diluted common share for the three months ended September 30, 2025, compared to $0.63 per basic common share and $0.62 per diluted common share for the same period last year. The increase was primarily due to an increase in net interest income, partially offset by an increase in provision for credit losses, a decrease in non-interest income, and an increase in non-interest expense. Net Interest Income : Our net interest income was $20.2 million for the third quarter of 2025 compared to $14.7 million for the third quarter of 2024, an increase of $5.4 million, or 37.0%. Net interest income increased during the three months ended September 30, 2025, primarily due to an increase in interest and fees on loans, and a decrease in interest expense on borrowings, partially offset by a decrease in interest on deposits with banks, and by an increase in interest expense on deposits. Interest income increased $4.4 million, or 13.7%, during the three months ended September 30, 2025 as compared to the same period in the prior year. The increase in interest income was primarily due to an increase of $4.7 million in interest and fees on loans, due to higher loan balances and market interest rates. Interest from deposits with banks decreased $0.3 million during the three months ended September 30, 2025 as compared to the same period in the prior year, primarily due to lower average cash balances held at the Federal Reserve Bank ("FRB"). The increase in interest income was also due to a decrease in interest expense on borrowings during the three months ended September 30, 2025 of $1.5 million, or 60.3%, primarily due to the redemption of the Company's $30.0 million, 6.5% fixed to floating rate subordinated notes, as well as the repayment of $30.0 million of FHLBNY advances, during the three months ended September 30, 2025. This was partially offset by an increase in interest expense on deposits of $0.4 million during the three months ended September 30, 2025, as compared to the same period in the prior year, primarily due to an increase interest-bearing deposit balances during the three months ended September 30, 2025. Provision for credit losses : For the three months ended September 30, 2025, the provision for credit losses was $0.4 million, compared to a recovery of provision for credit losses of $0.1 million for the three months ended September 30, 2024, an increase of $0.5 million. The increase in the provision for credit losses for the three months ended September 30, 2025, was primarily due to an increase of $48.4 million in the construction loan portfolio balance and an increase of $15.6 million in the commercial non-owner occupied loan portfolio balance from June 30, 2025, partially offset by a decrease in the multi-family loan portfolio of $12.8 million, and a decrease in the loss rate for the residential - 1 to 4 family investment loan portfolio from June 30, 2025. Non-interest Income : Our non-interest income was $0.9 million for the three months ended September 30, 2025, a decrease of $0.05 million, compared to $0.9 million for the three months ended September 30, 2024. The decrease is primarily attributable to a decrease in loan fees, service fees on deposit accounts, and other income, compared to the same period in 2024. Non-interest Expense : Our non-interest expense increased $0.8 million, or 12.6%, for the three months ended September 30, 2025, from the three months ended September 30, 2024 , to $7.2 million. The increase was primarily driven by an increase in compensation and benefits of $0.1 million, an increase in professional services expense of $0.2 million, and an increase in other operating expense of $0.3 million, partially offset by a decrease in other real estate owned ("OREO") expense of $0.1 million, for the three months ended September 30, 2025 compared to the same period in 2024. Income Tax : Income tax expense was $2.9 million on income before taxes of $13.5 million for the three months ended September 30, 2025, resulting in an effective tax rate of 21.2%, compared to income tax expense of $1.9 million on income before taxes of $9.4 million for the same period of 2024, resulting in an effective tax rate of 20.1%. 25 Table of Contents Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024 Net Income : Our net income available to common shareholders for the nine months ended September 30, 2025 increased $6.6 million, or 32.7%, to $26.7 million, compared to $20.1 million for the nine months ended September 30, 2024. Earnings per share were $2.26 per basic common share and $2.23 per diluted common share for the nine months ended September 30, 2025, compared to $1.68 per basic common share and $1.66 per diluted common share for the nine months ended September 30, 2024. The increase was primarily due to an increase in net interest income, partially offset by an increase in provision for credit losses, a decrease in non-interest income, and an increase in non-interest expense. Net Interest Income : Our net interest income was $54.6 million for the nine months ended September 30, 2025 compared to $43.1 million for the nine months ended September 30, 2024, an increase of $11.6 million, or 26.8%. Net interest income increased during the nine months ended September 30, 2025, primarily due to an increase in interest and fees on loans, an increase in interest on deposits with banks, and a decrease in interest expense on borrowings, partially offset by an increase in interest expense on deposits. Interest income increased $13.6 million, or 14.8%, during the nine months ended September 30, 2025 as compared to the same period in the prior year. The increase in interest income was primarily due to an increase of $12.2 million in interest and fees on loans, due to higher loan balances and market interest rates. Interest from deposits with banks increased $1.4 million during the nine months ended September 30, 2025 as compared to the same period in the prior year, primarily due to higher average cash balances held at the FRB. The increase in interest income was partially offset by an increase in interest expense during the nine months ended September 30, 2025 of $2.0 million, or 4.2%, primarily due to an increase in interest-bearing deposit balances. The increase was partially offset by a decrease in interest expense on borrowings of $1.5 million during the nine months ended September 30, 2025, primarily due to the payoff of the Company's $30.0 million, 6.5% subordinated notes, and a $75.0 million decrease in advances from the FHLBNY. Provision for credit losses : For the nine months ended September 30, 2025, the provision for credit losses was $1.9 million, compared to $0.5 million for the nine months ended September 30, 2024, an increase of $1.4 million. The increase was primarily driven by an increase in the construction loan portfolio balance of $63.8 million, and an increase in the commercial non-owner occupied loan balance of $80.2 million, from the balance at December 31, 2024, partially offset by a decrease in the residential - 1 to 4 family investment loan portfolio balance of $28.0 million, and a decrease in the multi-family portfolio loan balance of $9.6 million. Non-interest Income : Our non-interest income was $2.5 million for the nine months ended September 30, 2025, a decrease of $0.7 million, compared to $3.2 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease in other income of $0.4 million, a decrease in service fees on deposit accounts of $0.1 million, and a decrease in loan fees of $0.1 million. Non-interest Expense : For the nine months ended September 30, 2025, non-interest expense increased $1.2 million, or 6.5%, to $20.4 million, compared to the same period in 2024. The increase in non-interest expense was primarily due to an increase in professional services of $0.6 million, an increase in compensation and benefits of $0.4 million, and an increase in data processing expense of $0.3 million, partially offset by a decrease in OREO expense of $0.5 million, compared to the nine months ended September 30, 2024. Income Tax : Income tax expense was $8.1 million on income before taxes of $34.8 million for the nine months ended September 30, 2025, resulting in an effective tax rate of 23.3%, compared to income tax expense of $6.5 million on income before taxes of $26.6 million for the same period of 2024, resulting in an effective tax rate of 24.3%. 26 Table of Contents Net Interest Income Net interest income is the interest earned on investment securities, loans and other interest-earning assets minus the interest paid on deposits, short-term borrowings and long-term debt. The net interest margin is the average yield of net interest income on average earning assets. Net interest income and the net interest margin in any one period can be significantly affected by a variety of factors including the mix and overall size of our earning assets portfolio and the cost of funding those assets. The following tables presents the average daily balances of assets, liabilities and equity and the respective interest earned or paid on interest-earning assets and interest-bearing liabilities, as well as average annualized rates, for the periods indicated. For the Three Months Ended September 30, 2025 2024 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost (Dollars in thousands) Assets Loans* $ 1,941,937 $ 34,910 7.13 % $ 1,819,719 $ 30,161 6.59 % Investment securities** 18,988 218 4.55 % 24,004 265 4.39 % Interest bearing deposits 128,496 1,381 4.26 % 128,758 1,696 5.24 % Total interest-earning assets 2,089,421 36,509 6.93 % 1,972,481 32,122 6.48 % Other assets 66,182 64,532 Allowance for credit losses (33,840 ) (32,524 ) Total assets $ 2,121,763 $ 2,004,489 Liabilities and Shareholders’ Equity Interest bearing deposits: Checking $ 50,144 $ 84 0.67 % $ 58,172 $ 113 0.77 % Money markets 845,767 9,095 4.27 % 592,412 7,284 4.89 % Savings 48,936 128 1.04 % 61,867 178 1.14 % Time deposits 492,628 5,100 4.11 % 438,836 5,009 4.54 % Brokered certificates of deposit 91,657 978 4.23 % 177,420 2,399 5.38 % Total interest-bearing deposits 1,529,132 15,385 3.99 % 1,328,707 14,983 4.49 % Borrowings 76,119 960 5.00 % 177,135 2,416 5.43 % Total interest-bearing liabilities 1,605,251 16,345 4.04 % 1,505,842 17,399 4.60 % Non-interest bearing deposits 182,116 184,082 Other liabilities 19,601 18,098 Total non-interest bearing liabilities 201,717 202,180 Equity 314,795 296,467 Total liabilities and shareholders’ equity $ 2,121,763 $ 2,004,489 Net interest income $ 20,164 $ 14,723 Interest rate spread 2.89 % 1.88 % Net interest margin 3.83 % 2.97 % * The average balance of loans includes loans on nonaccrual. ** Includes balances of FHLBNY and ACBB stock. 27 Table of Contents For the Nine Months Ended September 30, 2025 2024 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Cost Balance Expense Cost (Dollars in thousands) Assets Loans* $ 1,903,776 $ 99,142 6.96 % $ 1,798,061 $ 86,976 6.46 % Investment securities** 21,024 738 4.69 % 23,551 761 4.32 % Interest bearing deposits 169,864 5,499 4.33 % 103,302 4,050 5.24 % Total interest-earning assets 2,094,664 105,379 6.73 % 1,924,914 91,787 6.37 % Other assets 65,322 66,770 Allowance for credit losses (33,238 ) (32,267 ) Total assets $ 2,126,748 $ 1,959,417 Liabilities and Shareholders’ Equity Interest bearing deposits: Checking $ 56,500 $ 344 0.81 % $ 65,335 $ 504 1.03 % Money markets 764,632 25,060 4.38 % 585,959 21,412 4.88 % Savings 51,929 415 1.07 % 69,736 596 1.14 % Time deposits 492,384 15,917 4.32 % 428,670 13,455 4.19 % Brokered certificates of deposit 121,609 3,962 4.36 % 151,056 6,156 5.44 % Total interest-bearing deposits 1,487,054 45,698 4.11 % 1,300,756 42,123 4.33 % Borrowings 130,156 5,039 5.18 % 158,193 6,575 5.55 % Total interest-bearing liabilities 1,617,210 50,737 4.19 % 1,458,949 48,698 4.46 % Non-interest bearing deposits 179,924 190,684 Other liabilities 19,436 17,532 Total non-interest bearing liabilities 199,360 208,216 Equity 310,178 292,252 Total liabilities and shareholders’ equity $ 2,126,748 $ 1,959,417 Net interest income $ 54,642 $ 43,089 Interest rate spread 2.54 % 1.91 % Net interest margin 3.49 % 2.99 % * The average balance of loans includes loans on nonaccrual. ** Includes balances of FHLBNY and ACBB stock. 28 Table of Contents Financial Condition General At September 30, 2025, the Company’s total assets were $2.17 billion, an increase of $29.9 million, or 1.40%, from December 31, 2024. The increase in total assets was primarily attributable to an increase in net loans of $90.7 million, and an increase in the bank owned life insurance ("BOLI") balance of $3.9 million, partially offset by a decrease in cash and cash equivalents of $62.2 million, and a decrease in restricted stock balance of $3.3 million. Cash and cash equivalents decreased $62.2 million, or 28.1%, primarily due to the increase in loans, a decrease in FHLBNY borrowings of $75.0 million, and a decrease in subordinated debentures of $29.9 million, partially offset by an increase in deposits of $121.5 million. Loans increased $90.7 million, or 4.9%, primarily due to increases in the construction and commercial non-owner occupied loan portfolios' balances, partially offset by a decrease in the residential - 1 to 4 family investment loan portfolio balance. FHLBNY restricted stock decreased $3.3 million, or 37.7%, due to the repayment of $75.0 million of FHLBNY advances. BOLI increased $3.9 million, or 13.3%, primarily due to the funding of $3.37 million of additional policies. Total liabilities were $1.86 billion at September 30, 2025. This represented a $15.1 million, or 0.8%, increase, from $1.84 billion at December 31, 2024. The increase in total liabilities was primarily due to an increase in total deposits of $121.5 million, or 7.5%, to $1.75 billion at September 30, 2025, partially offset by a decrease in FHLBNY borrowings of $75.0 million, or 51.7%, to $70.0 million, and a decrease in subordinated debt of $29.9 million. The increase in deposits was due to an increase in money market balances of $273.3 million, partially offset by a decrease in brokered time deposits of $121.0 million, and non-brokered time deposit balances of $14.2 million, a decrease in non-interest checking deposits of $8.8 million, and a decrease in savings deposits of $8.5 million. Total equity was $314.8 million and $300.1 million at September 30, 2025 and December 31, 2024, respectively, an increase of $14.8 million from December 31, 2024. The increase was primarily due to the retention of earnings, partially offset by the payment of $6.4 million of cash dividends, and the repurchase of Company common stock of $6.5 million. The following table presents certain key condensed balance sheet data as of September 30, 2025 and December 31, 2024: September 30, December 31, 2025 2024 Change % Change (Dollars in thousands) Cash and cash equivalents $ 159,313 $ 221,527 $ (62,214 ) (28.1 )% Investment securities 13,859 14,760 (901 ) (6.1 )% Loans, net of unearned income 1,960,153 1,868,153 92,000 4.9 % Allowance for credit losses (33,904 ) (32,573 ) (1,331 ) 4.1 % Total assets 2,172,134 2,142,236 29,898 1.4 % Total deposits 1,752,581 1,631,050 121,531 7.5 % FHLBNY borrowings 70,000 145,000 (75,000 ) (51.7 )% Subordinated debt 13,403 43,300 (29,897 ) (69.0 )% Total liabilities 1,857,297 1,842,163 15,134 0.8 % Total equity 314,837 300,073 14,764 4.9 % Total liabilities and equity 2,172,134 2,142,236 29,898 1.4 % Cash and cash equivalents Cash and cash equivalents decreased $62.2 million to $159.3 million at September 30, 2025 from $221.5 million at December 31, 2024, a decrease of 28.1%. The decrease was primarily due to an increase in loans, and a decrease in FHLBNY and subordinated debt borrowings, partially offset by an increase in deposits. Investment securities Total investment securities decreased to $13.9 million at September 30, 2025, from $14.8 million at December 31, 2024, a decrease of $0.9 million or 6.1%. The decrease was attributed to normal pay downs of securities, partially offset by the purchase of a corporate security for $0.5 million. For detailed information on the composition and maturity distribution of our investment portfolio, see NOTE 3 - Investment Securities in the notes to the unaudited consolidated financial statements. 29 Table of Contents Loans Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing in and around Southern New Jersey and Philadelphia, Pennsylvania. We have also expanded our lending footprint in other areas, including New York and most recently South Carolina. We focus our lending efforts primarily in three lending areas: residential mortgage loans, commercial mortgage loans, and construction loans. We originate residential mortgage loans with adjustable and fixed-rates that are secured by 1- 4 family and multifamily residential properties. These loans are generally underwritten under terms, conditions and documentation acceptable to the secondary mortgage market. A substantial majority of such loans can be pledged for potential borrowings. We originate commercial real estate loans that are secured by commercial real estate properties that are owner and non-owner occupied real estate properties. These loans are typically larger in dollar size and are primarily secured by office buildings, retail buildings, warehouses and general purpose business space. The commercial mortgage loans generally have maturities of twenty years, but re-price within five years. The construction loans we originate provide real estate acquisition, development and construction funds to individuals and real estate developers. The loans are secured by the properties under development. The construction loan funds are disbursed periodically at pre-specified stages of completion. We also originate commercial and industrial loans, which provide liquidity to businesses in the form of lines of credit and may be secured by accounts receivable, inventory, equipment or other assets. In addition, we have a consumer loan portfolio which provides loans to individual borrowers. Loans receivable : Loans receivable increased to $1.96 billion at September 30, 2025, from $1.87 billion at December 31, 2024, an increase of $92.0 million, or 4.9%. The increase was primarily due to increases in the construction, and commercial non-owner occupied loan portfolios, partially offset by a decrease in the residential - 1 to 4 family investment loan portfolio, and the residential - multifamily loan portfolio's. Loans receivable as of September 30, 2025 and December 31, 2024, consisted of the following: September 30, 2025 December 31, 2024 Percentage of Percentage of Loans to total Loans to total Amount Loans Amount Loans $ Change % Change (Dollars in thousands) Commercial and Industrial $ 35,195 1.8 % $ 35,381 1.9 % $ (186 ) (0.5 )% Construction 211,379 10.8 % 149,346 8.0 % 62,033 41.5 % Real Estate Mortgage: Commercial – Owner Occupied 161,660 8.2 % 160,441 8.6 % 1,219 0.8 % Commercial – Non-owner Occupied 445,670 22.7 % 371,298 19.9 % 74,372 20.0 % Residential – 1 to 4 Family 441,108 22.5 % 447,880 24.0 % (6,772 ) (1.5 )% Residential – 1 to 4 Family Investment 495,879 25.3 % 524,167 28.1 % (28,288 ) (5.4 )% Residential – Multifamily 165,033 8.4 % 174,756 9.4 % (9,723 ) (5.6 )% Consumer 4,229 0.2 % 4,884 0.3 % (655 ) (13.4 )% Total Loans $ 1,960,153 100.0 % $ 1,868,153 100.0 % $ 92,000 4.9 % 30 Table of Contents Deposits At September 30, 2025, total deposits increased to $1.75 billion from $1.63 billion at December 31, 2024, an increase of $121.5 million, or 7.5%. The increase in deposits was primarily due to an increase in money market deposits of $273.3 million, partially offset by a decrease in brokered time deposits of $126.0 million. The increase in our money market deposits was primarily due to the increase of $218.3 million in our premier money market account balance, and an increase of $66.6 million in our municipal money market account balance. The decrease in the brokered time deposit balance is primarily attributable to $108.0 million in brokered CD maturities, and $13.0 million in CDARs brokered CD maturities, respectively. The increase in the estimated uninsured deposits balance is mainly due to an increase in our cannabis and municipal deposit balances. September 30, December 31, 2025 2024 $ Change % Change (Dollars in thousands) Noninterest-bearing $ 184,771 $ 184,037 $ 734 0.4 % Interest-bearing Checking 51,649 60,499 (8,850 ) (14.6 )% Savings 47,449 55,912 (8,463 ) (15.1 )% Money market 888,786 615,444 273,342 44.4 % Time deposits 579,926 715,158 (135,232 ) (18.9 )% Total deposits $ 1,752,581 $ 1,631,050 $ 121,531 7.5 % Estimated uninsured deposits $ 881,807 $ 642,730 $ 239,077 37.2 % Total brokered deposits $ 89,707 $ 215,722 $ (126,015 ) (58.4 )% Borrowings Total borrowings were $83.4 million at September 30, 2025 and $188.3 million at December 31, 2024. The decrease in borrowings is due to a decrease of $75.0 million in FHLBNY advances, and a decrease of $29.9 million of subordinated debt. At September 30, 2025, $70.0 million of the outstanding FHLBNY advances have short-term maturities. Equity Total equity increased to $314.8 million at September 30, 2025 from $300.1 million at December 31, 2024, an increase of $14.8 million, or 4.0%, primarily due to the retention of earnings from the period, partially offset by the payment of $6.4 million of cash dividends, and the repurchase of Company common stock of $6.5 million. 31 Table of Contents Liquidity and Capital Resources Liquidity is a measure of our ability to generate cash to support asset growth, meet deposit withdrawals, satisfy other contractual obligations, and otherwise operate on an ongoing basis. At September 30, 2025, our cash position was $159.3 million. We invest cash that is in excess of our immediate operating needs primarily in our interest-bearing account at the Federal Reserve. Our primary source of funding has been deposits. Funds from other operations, financing arrangements, investment securities available-for-sale also provide significant sources of funding. The Company seeks to rely primarily on core deposits from customers to provide stable and cost-effective sources of funding to support loan growth. We focus on customer service which we believe has resulted in a history of customer loyalty. Stability, low cost and customer loyalty comprise key characteristics of core deposits. We also use brokered deposits as a funding source. The Bank primarily utilizes brokered relationships with Wells Fargo, Piper Sandler, and Stonecastle. As of September 30, 2025, the Company had $89.7 million sourced from these relationships. For an additional source of brokered liquidity, the Bank joined the IntraFi Financial Network. IntraFi provides the Bank an additional source of external funds through their weekly CDARS ® settlement process, as well as their ICS ® money market product. As of September 30, 2025, the Company did not have any deposits sourced from IntraFi. While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY and the Federal Reserve Bank ("FRB"). As of September 30, 2025, the Company had lines of credit with the FHLBNY of $618.6 million, of which $70.0 million was outstanding, and an additional $75.0 million from a letter of credit for securing public funds, of which zero was outstanding as of September 30, 2025. The remaining borrowing capacity was $473.6 million at September 30, 2025. As of September 30, 2025, the Company had a borrowing capacity through the FRB discount window of $357.6 million. There were no balances outstanding with the FRB as of September 30, 2025. We had outstanding loan commitments of $173.4 million at September 30, 2025. Our loan commitments are normally originated with the full amount of collateral. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth. The following is a discussion of our cash flows for the nine months ended September 30, 2025 and 2024. Cash provided by operating activities was $25.1 million during the nine months ended September 30, 2025, compared to $26.6 million for the same period in the prior year. The decrease in operating cash flow was primarily due to the increase in accrued interest receivable and other assets, and the decrease in accrued interest payable and other accrued liabilities. Cash used in investing activities was $91.6 million during the nine months ended September 30, 2025, compared to cash used in investing activities of $52.3 million in the same period last year. The increase in cash used in the investing activities during the nine months ended September 30, 2025, was primarily due to the increase in cash outflow from the origination of loans, and the purchase of bank owned life insurance of $3.4 million. Cash provided by financing activities was $4.3 million during the nine months ended September 30, 2025, compared to cash used in financing activities of $17.7 million in the same period last year. The decrease in cash provided by financing activities during the nine months ended September 30, 2025, was primarily due to a decrease in FHLB borrowings, and a decrease in subordinated debt, partially offset by an increase in non-interest bearing deposits and an increase in interest bearing and noninterest-bearing deposits. 32 Table of Contents Capital Adequacy We utilize a comprehensive process for assessing the Company’s overall capital adequacy. We actively review our capital strategies in light of current and anticipated business risks, future growth opportunities, industry standards, and compliance with regulatory requirements. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, earnings stability, competitive forces, economic conditions, and strength of management. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations. We primarily manage our capital through the retention of earnings. We also use other means to manage our capital. Total equity increased $14.8 million at September 30, 2025, from December 31, 2024, primarily from the Company’s net income of $26.7 million for the period, net of common and preferred stock dividends of $6.4 million, and the repurchase of Company common stock of $6.5 million. Banks and bank holding companies are subject to various regulatory capital requirements administered by federal banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Company must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under the regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies. Failure to meet minimum capital requirements can result in regulatory actions. Under the capital rules issued by the Federal banking agencies, the Company and the Bank elected to exclude the effects of certain Accumulated Other Comprehensive Income (“AOCI”) items from its regulatory capital calculation. At September 30, 2025, the Bank and the Company were both considered “well capitalized”. The following table presents the tier 1 regulatory capital leverage ratios of the Company and the Bank at September 30, 2025: Amount Ratio Amount Ratio (Dollars in thousands except ratios) Company Parke Bank Tier 1 leverage $ 328,142 15.47 % $ 326,882 15.41 % Critical Accounting Policies The Company’s accounting policies are more fully described in Note 1 of the Consolidated Financial Statements included in the Company ’ s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. As disclosed in Note 1, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments. Allowance for Credit Losses : Our allowances for credit losses represents management's best estimate of probable losses inherent in our investment and loan portfolios, excluding those loans accounted for under fair value. Our process for determining the allowance for credit losses is discussed in Note 1 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Our determination of the allowance for credit losses is based on periodic evaluations of the loan and lease portfolios and other relevant factors, broken down into vintage based on year of origination. These critical estimates include significant use of our own historical data and other qualitative, and quantitative data. These evaluations are inherently subjective, as they require material estimates and may be susceptible to significant change. Our allowance for credit losses is comprised of two components, a specific allowance and a general calculation. A specific allowance is calculated for loans and leases that do not share similar risk characteristics with other financial assets, and include collateral dependent loans. A loan is considered to be collateral dependent when foreclosure of the underlying collateral is probable. Parke has 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. The general based component covers loans and leases on which there are expected credit losses that are not yet individually identifiable. The allowance calculation and determination process is dependent on the use of key assumptions. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower, projected industry outlook, and economic conditions. The process of determining the level of the allowance for credit losses requires a high degree of judgment. To the extent actual outcomes differ from our estimates, additional provision for loan and lease losses may be required that would reduce future earnings. 33 Table of Contents ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable