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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2020.
or
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File No. 000-51338

PARKE BANCORP, INC.
(Exact name of registrant as specified in its charter)
New Jersey65-1241959
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
601 Delsea Drive, Washington Township, New Jersey
08080
(Address of principal executive offices)(Zip Code)

856-256-2500
(Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes []                No []

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes []                No []

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer”, “accelerated filer", “smaller reporting company” and “emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer []       Accelerated filer []         Non-accelerated filer []        Smaller reporting company [] Emerging growth company [ ] 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ]                No []




Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of Each Exchange on Which Registered
Common Stock, par value $0.10 per sharePKBKThe Nasdaq Stock Market, LLC

As of November 2, 2020, there were 11,851,869 shares of the registrant's common stock ($0.10 par value) outstanding.





INDEX
  Page
Part IFINANCIAL INFORMATION 
   
Item 1.Financial Statements
Item 2.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
   
Part IIOTHER INFORMATION 
   
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
   
SIGNATURES
   
EXHIBITS and CERTIFICATIONS 




PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Parke Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
(Dollars in thousands except share and per share data)
 September 30,
2020
December 31,
2019
Assets  
Cash and due from banks$20,182 $10,082 
Interest bearing deposits with banks422,540 181,525 
Cash and cash equivalents
442,722 191,607 
Investment securities available for sale, at fair value22,102 26,613 
Investment securities held to maturity (fair value of $1,526 at September 30,
2020 and $1,430 at December 31, 2019)
1,209 1,167 
Total investment securities23,311 27,780 
Loans held for sale198 190 
Loans, net of unearned income1,574,611 1,420,749 
Less: Allowance for loan losses
(27,588)(21,811)
Net loans
1,547,023 1,398,938 
Accrued interest receivable10,304 6,069 
Premises and equipment, net6,815 6,946 
Other real estate owned ("OREO")567 4,727 
Restricted stock7,542 7,440 
Bank owned life insurance (BOLI)26,853 26,410 
Deferred tax asset6,140 6,285 
Other 4,824 4,768 
Total Assets
$2,076,299 $1,681,160 
Liabilities and Equity  
Liabilities  
Deposits
  
Noninterest-bearing deposits
$421,837 $259,269 
Interest-bearing deposits
1,174,664 1,079,950 
Total deposits
1,596,501 1,339,219 
FHLBNY borrowings
134,650 134,650 
Federal Reserve Bank ("FRB") advances93,801  
Subordinated debentures
42,495 13,403 
Accrued interest payable
2,079 2,260 
Other
12,362 12,204 
Total liabilities
1,881,888 1,501,736 
Equity  
Preferred stock, 1,000,000 shares authorized, $1,000 liquidation value Series B non-cumulative convertible; 480 and 500 shares outstanding at September 30, 2020 and December 31, 2019, respectively
480 500 
Common stock, $0.10 par value; authorized 15,000,000 shares; Issued: 12,136,391 shares and 12,132,855 shares at September 30, 2020 and Dec. 31, 2019, respectively
1,214 1,213 
  Additional paid-in capital134,919 134,706 
  Retained earnings58,726 44,143 
  Accumulated other comprehensive income503 58 
  Treasury stock, 284,522 shares at September 30, 2020 and Dec. 31, 2019, at cost
(3,015)(3,015)
   Total shareholders’ equity192,827 177,605 
  Noncontrolling interest in consolidated subsidiaries1,584 1,819 
   Total equity194,411 179,424 
   Total liabilities and equity$2,076,299 $1,681,160 
See accompanying notes to consolidated financial statements
1


Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
 For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
 2020201920202019
 (Dollars in thousands except share data)
Interest income:
Interest and fees on loans$20,521 $19,113 $60,988 $55,077 
Interest and dividends on investments260 284 797 889 
Interest on federal funds sold and deposits with banks92 1,021 1,088 2,633 
Total interest income20,873 20,418 62,873 58,599 
Interest expense:
Interest on deposits4,165 4,915 14,375 13,398 
Interest on borrowings1,268 1,012 2,968 2,987 
Total interest expense5,433 5,927 17,343 16,385 
Net interest income15,440 14,491 45,530 42,214 
Provision for loan losses2,400 900 5,796 2,050 
Net interest income after provision for loan losses13,040 13,591 39,734 40,164 
Non-interest income  
Gain on sale of SBA loans 76  116 
Other loan fees206 263 612 739 
Bank owned life insurance income150 153 443 450 
Service fees on deposit accounts520 529 1,602 1,397 
Net loss on sale and valuation adjustment of OREO(195)196 (348)(147)
Other60 73 346 420 
Total non-interest income741 1,290 2,655 2,975 
Non-interest expense  
Compensation and benefits2,440 2,235 7,674 6,695 
Professional services400 583 1,151 1,495 
Occupancy and equipment531 413 1,529 1,357 
Data processing344 262 969 730 
FDIC insurance and other assessments287 9 581 70 
OREO expense80 110 258 302 
Other operating expense750 853 2,401 2,493 
Total non-interest expense4,832 4,465 14,563 13,142 
Income before income tax expense8,949 10,416 27,826 29,997 
Income tax expense2,306 2,551 7,171 7,348 
Net income attributable to Company and noncontrolling interest6,643 7,865 20,655 22,649 
Less: Net income attributable to noncontrolling interest(100)(101)(359)(356)
Net income attributable to Company6,543 7,764 20,296 22,293 
Less: Preferred stock dividend (7)(8)(22)(16)
Net income available to common shareholders$6,536 $7,756 $20,274 $22,277 
Earnings per common share  
Basic$0.55 $0.65 $1.71 $1.88 
Diluted$0.55 $0.65 $1.69 $1.86 
Weighted average common shares outstanding  
Basic11,850,882 11,847,010 11,849,659 11,834,692 
Diluted11,975,094 12,013,670 11,986,964 12,009,302 
All share and per share information as of September 30, 2019 has been adjusted for the stock dividend effective on March 3, 2020.
See accompanying notes to consolidated financial statements
2


Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
 For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
 2020201920202019
 (Dollars in thousands)
Net income $6,643 $7,865 $20,655 $22,649 
Unrealized gains on investment securities, net of reclassification into income: 
Unrealized (losses) gains on non-OTTI securities(184)152 590 922 
Tax impact on unrealized gain (loss)45 (37)(145)(228)
Total unrealized (losses) gains on investment securities(139)115 445 694 
Comprehensive income6,504 7,980 21,100 23,343 
Less: Comprehensive income attributable to noncontrolling interests(100)(101)(359)(356)
Comprehensive income attributable to the Company$6,404 $7,879 $20,741 $22,987 
See accompanying notes to consolidated financial statements

3


Parke Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)

 Preferred
Stock
Shares of Common
Stock issued
Common
Stock
Additional
Paid-In
Capital
 
Retained
Earnings
Accumulated
Other Comprehensive Income
Treasury
Stock
Total Shareholders' EquityNon-Controlling InterestTotal Equity
(Dollars in thousands except share data)
Balance, June 30, 2020$500 12,133,640 $1,213 $134,830 $54,087 $642 $(3,015)$188,257 $1,484 $189,741 
Net income — — — — 6,543 — — 6,543 100 6,643 
Preferred stock shares conversion(20)2,751 1 19 — — — — —  
Other comprehensive loss— — — — — (139)— (139)— (139)
Stock compensation expense— — — 70 — 70 — 70 
Dividend on preferred stock — — — — (7)— — (7)— (7)
Dividend on common stock — — — — (1,897)— — (1,897)— (1,897)
Balance, September 30, 2020$480 12,136,391 $1,214 $134,919 $58,726 $503 $(3,015)$192,827 $1,584 $194,411 
Balance, December 31, 2019$500 12,132,855 $1,213 $134,706 $44,143 $58 $(3,015)$177,605 $1,819 $179,424 
Net income — — — — 20,296 — — 20,296 359 20,655 
Earnings distribution to non-controlling interest— — — — — — — — (594)(594)
Common stock options exercised — 845 — — — — — — —  
Preferred stock shares conversion(20)2,751 1 19 — — — — —  
Other comprehensive income — — — — — 445 — 445 — 445 
Stock compensation expense— — — 195 — — — 195 — 195 
Stock dividend*— (60)— (1)(2)— — (3)— (3)
Dividend on preferred stock — — — — (22)— — (22)— (22)
Dividend on common stock — — — — (5,689)— — (5,689)— (5,689)
Balance, September 30, 2020$480 12,136,391 $1,214 $134,919 $58,726 $503 $(3,015)$192,827 $1,584 $194,411 
* The Company retroactively adjusted the stock dividend declared in January 2020 into the December 2019 financial statements according to Generally Accepted Accounting Principles (GAAP). The actual
shares of the stock dividend issued subsequently were less than the shares assumed for December 31, 2019 due to the cash distribution for fraction shares to the common shareholders.
See accompanying notes to consolidated financial statements

4


 Preferred
Stock
Shares of Common Stock issuedCommon
Stock
Additional
Paid-In
Capital
 
Retained
Earnings
Accumulated
Other Comprehensive (Loss) Income
Treasury
Stock
Total Shareholders' EquityNon-Controlling InterestTotal Equity
(Dollars in thousands except share data)
Balance, June 30, 2019$550 11,049,230 $1,105 $113,613 $53,362 $(54)$(3,015)$165,561 $1,694 $167,255 
Net income — — — — 7,764 — — 7,764 101 7,865 
Preferred stock shares conversion(50)6,252 — 50 — — — — —  
Other comprehensive income — — — — — 115 — 115 — 115 
Stock compensation expense— — — 41 — — — 41 — 41 
Dividend on preferred stock — — — — (8)— — (8)— (8)
Dividend on common stock — — — — (1,724)— — (1,724)— (1,724)
Balance, September 30, 2019$500 11,055,482 $1,105 $113,704 $59,394 $61 $(3,015)$171,749 $1,795 $173,544 
Balance, December 31, 2018$1,224 10,953,081 $1,095 $112,807 $42,079 $(633)$(3,015)$153,557 $1,439 $154,996 
Net income— — — — 22,293 — — 22,293 356 22,649 
Common stock options exercised— 11,869 1 47 — — — 48 — 48 
Preferred stock shares conversion(724)90,532 9 715 — — — — —  
Other comprehensive income— — — — — 694 — 694 — 694 
Stock compensation expense— — — 135 — — — 135 — 135 
Dividend on preferred stock— — — — (16)— — (16)— (16)
Dividend on common stock— — — — (4,962)— — (4,962)— (4,962)
Balance, September 30, 2019$500 11,055,482 $1,105 $113,704 $59,394 $61 $(3,015)$171,749 $1,795 $173,544 

See accompanying notes to consolidated financial statements
5


Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 For the Nine Months Ended
September 30,
 20202019
 (Dollars in thousands)
Cash Flows from Operating Activities:  
Net income$20,655 $22,649 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization434 346 
Provision for loan losses5,796 2,050 
Increase in value of bank-owned life insurance(443)(450)
Gain on sale of SBA loans (116)
SBA loans originated for sale (898)
Proceeds from sale of SBA loans originated for sale 1,285 
Net loss on sale of OREO and valuation adjustments348 147 
Stock based compensation195 135 
Net changes in:  
Increase in accrued interest receivable and other assets(4,468)(468)
(Decrease) increase in accrued interest payable and other accrued liabilities(27)550 
Net cash provided by operating activities22,490 25,230 
Cash Flows from Investing Activities:  
Repayments and maturities of investment securities available for sale5,036 4,004 
Net increase in loans(153,881)(137,387)
Purchases of bank premises and equipment(240)(302)
Proceeds from sale of OREO, net3,812 1,450 
Purchases of restricted stock(102)(232)
Net cash used in investing activities(145,375)(132,467)
Cash Flows from Financing Activities:  
Cash dividends(5,541)(4,759)
Earnings distribution to non-controlling interest(594) 
Proceeds from exercise of stock options 48 
Increase in other borrowings93,801  
Net proceeds from issuing subordinated debt29,052  
Net increase (decrease) in noninterest-bearing deposits162,568 (30,973)
Net increase in interest-bearing deposits94,714 140,148 
Other (18)
Net cash provided by financing activities374,000 104,446 
Net increase in cash and cash equivalents251,115 (2,791)
Cash and Cash Equivalents, January 1,191,607 154,471 
Cash and Cash Equivalents, September 30$442,722 $151,680 
Supplemental Disclosure of Cash Flow Information:  
Interest paid$17,524 $15,734 
Income taxes paid$7,460 $7,608 
Non-cash Investing and Financing Items  
Loans transferred to OREO$ $2,323 
Establishment of lease liability and right-of-use asset$ $2,785 
See accompanying notes to consolidated financial statements
6


Notes to Consolidated Financial Statements (Unaudited)

NOTE 1. ORGANIZATION

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 its principal office at 601 Delsea Drive, Sewell, New Jersey, and seven additional branch office locations; 501 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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation: We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary the Bank (including certain partnership interests). Also included are the accounts of Parke Direct Lending LLC ("PDL"), a joint venture formed in 2018 to originate short-term alternative real estate loan products. Parke Bank has a 51% ownership interest in the joint venture. 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. We have eliminated inter-company balances and transactions. We have also reclassified certain prior year amounts to conform to the current year presentation, which did not have a material impact on our consolidated financial condition or results of operations.

The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The accompanying interim financial statements for the three and nine months ended September 30, 2020 and 2019 are unaudited. The balance sheet as of December 31, 2019, was derived from the audited financial statements. In the opinion of management, these financial statements include all normal and recurring adjustments necessary for a fair statement of the results for such interim periods. Results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results for the full year.

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. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the allowance for loan losses, the valuation of deferred income taxes, and the carrying value of other real estate owned ("OREO").

Recently Issued Accounting Pronouncements:

During June 2016, the Financial Accounting Standard Board (FASB) issued accounting standards update ("ASU") 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 (Topic 326), replaces the incurred loss impairment methodology in current GAAP with an expected credit loss (CECL) methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. The ASU was amended in some aspects by subsequent Accounting Standards Updates. The guidance of the Financial Instruments-Credit Losses became effective for public entities except small reporting companies ("SRCs") for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all entities, early adoption will continue to be allowed. As a small reporting company, CECL is effective for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement-Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 (Topic 820) requires public entities to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements
7


for instruments held at the end of the reporting period, and also disclose the range and weighted average used to develop significant inputs for Level 3 fair value measurements. This ASU is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted this guidance in the first quarter of 2020. The adoption of the guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General-Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 (Subtopic 715) requires entities to disclose weighted-average interest crediting rates for plans with promised interest crediting rates and reasons for significant gains and losses related to changes in the benefit obligation for reporting period. It also clarifies some disclosure requirements. This ASU is effective for fiscal years ending after December 15, 2020, for public business entities. The Company does not expect the amendments will have any material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain tax exceptions to the general principles in Topic 740. The ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for public business entities for fiscal years ending after December 15, 2020. Early adoption of the ASU is permitted. The Company is currently evaluating the impact of this new guidance and doesn't expect the adoption of the ASU will have a material impact to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-3, Codification Improvements to Financial Instruments. ASU 2020-3 improves various financial instruments Topics in the Accounting Standard Codification, such as: fair value option, applicability of portfolio exception in Topic 820 to nonfinancial items, disclosures for depository and lending institutions, etc. The confirming amendments are effective upon issuance of this Update for public entities. The amendments related to other issues are effective on various dates depending on the affects the guidance in the amendments in Accounting Standards Updates. The Company has adopted certain items in the guidance and is currently evaluating the impact of the other areas of the guidance and doesn't expect the adoption of the ASU have or will have a material impact to our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-4 (Topic 848) provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of this new guidance on its consolidated financial statements.

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 September 30, 2020 and December 31, 2019: 
As of September 30, 2020Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
(Dollars in thousands)
Available for sale:    
Corporate debt obligations$500 $ $ $500 
Residential mortgage-backed securities20,899 693 17 21,575 
Collateralized mortgage obligations26 1  27 
Total available for sale$21,425 $694 $17 $22,102 
     
Held to maturity:    
States and political subdivisions$1,209 $317 $ $1,526 
8


As of December 31, 2019Amortized
cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
(Dollars in thousands)
Available for sale:    
Corporate debt obligations$500 $ $ $500 
Residential mortgage-backed securities25,989 282 196 26,075 
Collateralized mortgage obligations37 1  38 
Total available for sale$26,526 $283 $196 $26,613 
     
Held to maturity:    
States and political subdivisions$1,167 $263 $ $1,430 

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of September 30, 2020 are as follows:
 Amortized
Cost
Fair
Value
 (Dollars in thousands)
Available for sale: 
Due within one year$ $ 
Due after one year through five years584 582 
Due after five years through ten years