PARKE BANCORP, INC. - Quarter Report: 2011 June (Form 10-Q)

f10q_063011-0343.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2011.

[ ] 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 Jersey 65-1241959

(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 [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes [ ] No [ ]

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

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

Yes [ ] No [X]

As of August 15, 2011, there were issued and outstanding 4,886,178 shares of the registrant's common stock.

PARKE BANCORP, INC.

FORM 10-Q

FOR THE QUARTER ENDED June 30, 2011

INDEX

Page

Part I FINANCIAL INFORMATION

Item 1.

Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

Part II OTHER 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.

Reserved

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)
	June 30,			December 31,
	2011			2010
	(in thousands except share data)
ASSETS
Cash and due from financial institutions	$	54,685		$	57,628
Investment securities available for sale, at fair value		25,184			27,730
Investment securities held to maturity (fair value of $2,001 at June 30, 2011 and $2,048 at December 31, 2010)		2,015			1,999
Total investment securities		27,199			29,729
Loans held for sale		1,228			11,454
Loans, net of unearned income		630,293			626,739
Less: Allowance for loan losses		16,540			14,789
Net loans and leases		613,753			611,950
Accrued interest receivable		3,055			3,273
Premises and equipment, net		4,191			4,279
Other real estate owned (OREO)		18,682			16,701
Restricted stock, at cost		3,119			3,040
Bank owned life insurance (BOLI)		5,450			5,362
Other assets		14,163			13,437
Total Assets	$	745,525		$	756,853

LIABILITIES AND EQUITY
Liabilities
Deposits
Noninterest-bearing deposits	$	25,036		$	23,168
Interest-bearing deposits		576,843			581,554
Total deposits		601,879			604,722
FHLB borrowings		40,684			40,759
Other borrowed funds		10,000			21,454
Subordinated debentures		13,403			13,403
Accrued interest payable		640			828
Other liabilities		3,939			4,955
Total liabilities		670,545			686,121
Equity
Preferred stock, $1,000 liquidation value per share; authorized 1,000,000 shares; Issued: 16,288 shares at June 30, 2011 and December 31, 2010		15,774			15,683
Common stock, $.10 par value; authorized 10,000,000 shares; Issued: 5,097,078 shares at June 30, 2011 and 4,653,133 shares at December 31, 2010		510			465
Additional paid-in capital		45,844			41,931
Retained earnings		15,472			15,494
Accumulated other comprehensive loss		(569	)		(693	)
Treasury stock, 210,900 shares at June 30, 2011 and December 31, 2010, at cost		(2,180	)		(2,180	)
Total shareholders’ equity		74,851			70,700
Noncontrolling (minority) interest in consolidated subsidiaries		129			32
Total equity		74,980			70,732
Total liabilities and equity	$	745,525		$	756,853

See accompanying notes to consolidated financial statements

Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	For the six months ended June 30,							For the three months ended June 30,
	2011				2010			2011			2010

Interest income:
Interest and fees on loans		$	19,890		$	19,577		$	10,074		$	9,927
Interest and dividends on investments			704			863			330			436
Total interest income			20,594			20,440			10,404			10,363
Interest expense:
Interest on deposits			4,005			4,866			1,950			2,362
Interest on borrowings			714			886			362			436
Total interest expense			4,719			5,752			2,312			2,798
Net interest income			15,875			14,688			8,092			7,565
Provision for loan losses			4,500			4,301			2,100			2,200
Net interest income after provision for loan losses			11,375			10,387			5,992			5,365
Noninterest income (loss):
Loan fees			164			81			101			32
Net income from BOLI			88			89			44			45
Service fees on deposit accounts			108			129			53			67
Gain on sale of SBA loans			3,142			676			899			676
Other than temporary impairment losses			(84	)		(44	)		(37	)		—
Portion of loss recognized in other comprehensive income (OCI) (before taxes)			27			26			—			—
Net impairment losses recognized in earnings			(57	)		(18	)		(37	)		—
Gain on sale of real estate owned			52			46			—			46
Other			161			60			87			37
Total noninterest income			3,658			1,063			1,147			903
Noninterest expense:
Compensation and benefits			2,822			2,478			1,408			1,285
Professional services			645			581			389			321
Occupancy and equipment			503			438			242			226
Data processing			224			161			114			89
FDIC insurance			685			437			343			212
Other operating expense			1,578			882			766			542
Total noninterest expense			6,457			4,977			3,262			2,675
Income before income tax expense			8,576			6,473			3,877			3,593
Income tax expense			3,444			2,621			1,564			1,470
Net income attributable to Company and noncontrolling (minority) interest			5,132			3,852			2,313			2,123
Net income attributable to noncontrolling (minority) interest			(696	)		(55	)		(169	)		(119	)
Net income attributable to Company			4,436			3,797			2,144			2,004
Preferred stock dividend and discount accretion			499			493			250			247
Net income available to common shareholders		$	3,937		$	3,304		$	1,894		$	1,757

Earnings per common share
Basic		$	0.81		$	0.68		$	0.39		$	0.36
Diluted		$	0.79		$	0.67		$	0.38		$	0.35
Weighted average shares outstanding
Basic			4,886,178			4,850,458			4,866,178			4,859,608
Diluted			5,009,515			4,967,981			4,987,195			5,005,078
See accompanying notes to consolidated financial statements

Parke Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGE IN TOTAL EQUITY

(unaudited)

	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders' Equity			Non-Controlling (Minority) Interest			Total Equity
	(in thousands)
Balance, December 31, 2009	$	15,508	$	421	$	37,020	$	14,071		$	(2,867	)	$	(2,180	)	$	61,973		$	—		$	61,973
Stock options exercised						8											8						8
Capital contribution by noncontrolling (minority) interest 10% common stock dividend				44		4,879		(4,929	)								(6	)		196			196 (6	)
Comprehensive income:																							196
Net income								3,797									3,797			55			3,852
Non-credit unrealized losses on debt securities with OTTI, net of taxes											47						47						47
Net unrealized gains on available for sale securities without OTTI, net of taxes											1,987						1,987						1,987
Pension liability adjustments, net of tax											22						22						22
Total comprehensive income																	5,853			55			5,908
Dividend on preferred stock (5% annually)								(407	)								(407	)					(407	)
Accretion of discount on preferred stock		86						(86	)								—						—
Balance, June 30, 2010	$	15,594	$	465	$	41,907	$	12,446		$	(811	)	$	(2,180	)	$	67,421		$	251		$	67,672



Balance, December 31, 2010	$	15,683	$	465	$	41,931	$	15,494		$	(693	)	$	(2,180	)	$	70,700		$	32		$	70,732
Capital withdrawals by noncontrolling (minority) interest 10% common stock dividend				45		3,913		(3,959	)								(1	)		(599	)		(599 (1	) )
Comprehensive income:
Net income								4,436									4,436			696			5,132
Non-credit unrealized gain on debt securities with OTTI, net of taxes											34						34						34
Net unrealized gains on available for sale securities without OTTI, net of taxes											70						70						70
Pension liability adjustments, net of taxes											20						20						20
Total comprehensive income																	4,560			696			5,256
Dividend on preferred stock (5% annually)								(408	)								(408	)					(408	)
Accretion of discount on preferred stock		91						(91	)								—						—
Balance, June 30, 2011	$	15,774	$	510	$	45,844	$	15,472		$	(569	)	$	(2,180	)	$	74,851		$	129		$	74,980

See accompanying notes to consolidated financial statements

Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
	For the six months ended June 30,
	2011			2010
	(in thousands)
Cash Flows from Operating Activities
Net income	$	5,132		$	3,852
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		182			157
Provision for loan losses		4,500			4,301
Bank owned life insurance income		(88	)		(89	)
Supplemental executive retirement plan expense		225			222
Gain on sale of SBA loans		(3,142	)		(676	)
SBA loans originated for sale		(14,629	)		(6,903	)
Proceeds from sale of SBA loans originated for sale		16,277			7,525
Gain on sale of other real estate owned		(52	)		(46	)
Other than temporary impairment of investments		57			18
Net accretion of purchase premiums and discounts on securities		(39	)		(45	)
Changes in operating assets and liabilities:
Increase in accrued interest receivable and other assets		(670	)		(649	)
(Decrease) increase in accrued interest payable and other accrued liabilities		(1,056	)		983
Net cash provided by operating activities		6,697			8,650
Cash Flows from Investing Activities
Purchases of investment securities available for sale		—			(1,796	)
Purchases (redemptions) of restricted stock		(79	)		6
Proceeds from sale of securities available for sale		500			—
Proceeds from maturities and principal payments on mortgage-backed securities		2,192			3,212
Proceeds from the sale of REO property		2,483			—
Advances for other real estate owned		(3,730	)		375
Net (increase) in loans		(6,985	)		(30,508	)
Purchases of bank premises and equipment		(94	)		(1,680	)
Net cash provided by (used in) investing activities		(5,713	)		(30,391	)
Cash Flows from Financing Activities
Payment of dividend on preferred stock		408			(407	)
Cash payment of fractional shares on 10% stock dividend		(2	)		(6	)
Proceeds from exercise of stock options and warrants		—			8
Net decrease in other borrowed funds		—			—
Net decrease in Federal Home Loan Bank short term borrowings		—			(2,525	)
Minority interest capital withdrawal		(599	)
Payments of Federal Home Loan Bank advances		(75	)		(71	)
Net increase/(decrease) in noninterest-bearing deposits		1,868			(441	)
Net increase/(decrease) increase in interest-bearing deposits		(4,711	)		41,335
Net cash (used in) provided by financing activities		(3,927	)		37,893
(Decrease) increase in cash and cash equivalents		(2,943	)		16,152
Cash and Cash Equivalents, beginning of period		57,628			4,154
Cash and Cash Equivalents, end of period	$	54,685		$	20,306
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest on deposits and borrowed funds	$	4,907		$	5,788
Income taxes	$	3,444		$	4,150
Supplemental Schedule of Noncash Activities:
Real estate acquired in settlement of loans	$	682		$	10,712
Transfer of loans in settlement of secured borrowings	$	11,454		$	—

See accompanying notes to consolidated financial statements

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1. ORGANIZATION

Parke Bancorp, Inc. ("Parke Bancorp” or the "Company") is a bank holding company incorporated under the laws of the State of New Jersey in January 2005 for the sole purpose of becoming the holding company of Parke Bank (the "Bank").

The Bank is a commercial bank which commenced operations on January 28, 1999. The Bank is chartered by the New Jersey Department of Banking and insured by the Federal Deposit Insurance Corporation ("FDIC"). Parke Bancorp and the Bank maintain their principal offices at 601 Delsea Drive, Washington Township, New Jersey. The Bank also conducts business through branches in Galloway Township, Northfield and Washington Township, New Jersey and Philadelphia, Pennsylvania.

The Bank competes with other banking and financial institutions in its primary market areas. Commercial banks, savings banks, savings and loan associations, credit unions and money market funds actively compete for savings and time certificates of deposit and all types of loans. Such institutions, as well as consumer financial and insurance companies, may be considered competitors of the Bank with respect to one or more of the services it renders.

The Bank is subject to the regulations of certain state and federal agencies, and accordingly, the Bank is periodically examined by such regulatory authorities. As a consequence of the regulation of commercial banking activities, the Bank’s business is particularly susceptible to future state and federal legislation and regulations.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation: The accounting and reporting policies of the Bank conform to accounting principles generally accepted in the United States of America (“GAAP”) and predominant practices within the banking industry.

The accompanying consolidated financial statements include the accounts of Parke Bancorp, Inc. and its wholly-owned subsidiaries Parke Bank, Parke Capital Markets, Farm Folly, Inc. and Taylors Glen LLC. Also included are the accounts of 44 Business Capital Partners LLC, a joint venture formed in 2009 to originate and service SBA loans. 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. All significant inter-company balances and transactions have been eliminated.

The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in Parke Bancorp Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 since they do not include all of the information and footnotes required by GAAP. The accompanying interim financial statements for the three and six months ended June 30, 2011 and 2010 are unaudited. The balance sheet as of December 31, 2010, 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 months and six months ended June 30, 2011 are not necessarily indicative of the results for the full year.

Use of Estimates: In preparing the interim financial statements, management makes estimates and assumptions based on available information that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet and reported amounts of expenses and revenues. Actual results could differ from such estimates. The allowance for loan losses, deferred taxes, evaluation of investment securities for other-than-temporary impairment and fair values of financial instruments and other real estate owned (“OREO”) are significant estimates and particularly subject to change.

Recently Issued Accounting Pronouncements:

On July 1, 2009, the Accounting Standards Codification (“ASC”) became the Financial Accounting Standards Board’s (“FASB”) officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities, superseding existing FASB, AICPA, EITF and related literature. Rules and interpretive releases of the SEC under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The switch to the ASC affects the way companies refer to GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure.

FASB ASC Topic 310, “Receivables.”

New authoritative accounting guidance (Accounting Standards Update No. 2011-01) under ASC Topic 310, "Receivables", temporarily delayed the effective date of the disclosures about troubled debt restructurings in Update 2010-20. The delay was intended to allow the Board time to complete its deliberations on what constituted a troubled debt restructuring. In April 2011, new authoritative guidance (Accounting Standards Update No. 2011-02) under ASC Topic 310 was released to assist creditors in determining whether a restructuring is a troubled debt restructuring. This update clarifies the guidance on a whether a creditor has made a concession and whether a debtor is experiencing financial difficulties. In addition, the disclosures that were deferred under ASU 2011-01 will now be required. ASU 2011-02 is effective for the first interim or annual period beginning after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. Early adoption is permitted. The Company will evaluate this new disclosure guidance, but does not expect it to have any effect on the Company's reported financial condition or results of operations.

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 June 30, 2011 and December 31, 2010:

As of June 30, 2011	Amortized cost			Gross unrealized gains		Gross unrealized losses		Other-than- temporary impairments in OCI		Fair value
Available-for-sale:	(amounts in thousands)

U.S. Government sponsored entities	$	3,006		$	12	$	20	$	—	$	2,998
Corporate debt obligations		1,500			55		—		—		1,555
Residential mortgage-backed securities	14,031			747		5		—		14,773
Collateralized mortgage obligations	1,729			96		—		—		1,825
Collateralized debt obligations	5,562			—		1,014		515		4,033
Total available-for-sale	$	25,828		$	910	$	1,039	$	515	$		25,184

Held to maturity:
States and political subdivisions	$		2,015	$	31	$	45	$	—	$	2,001

As of December 31, 2010	Amortized cost			Gross unrealized gains		Gross unrealized losses		Other-than- temporary impairments in OCI		Fair value
Available-for-sale:	(amounts in thousands)

U.S. Government sponsored entities	$	3,006		$	14	$	95	$	—	$	2,925
Corporate debt obligations		2,000			94		—		—		2,094
Residential mortgage-backed securities	15,938			645		24		—		16,559
Collateralized mortgage obligations	2,045			107		—		—		2,152
Collateralized debt obligations	5,562			—		1,014		548		4,000
Total available-for-sale	$	28,551		$	860	$	1,133	$	548	$		27,730

Held to maturity:
States and political subdivisions	$		1,999	$	60	$	11	$	—	$	2,048

The amortized cost and fair value of debt securities classified as available-for-sale and held-to-maturity, by contractual maturity as of June 30, 2011 are as follows:

	Amortized Cost		Fair Value
	(amounts in thousands)
Available-for-sale:
Due within one year	$	—	$	—
Due after one year through five years		1,000		1,012
Due after five years through ten years		2,000		1,980
Due after ten years		7,066		5,594
Residential mortgage-backed securities and collateralized mortgage obligations		15,762		16,598
Total available-for-sale	$	25,828	$	25,184

Held-to-maturity:
Due within one year	$	—	$	—
Due after one year through five years		—		—
Due after five years through ten years		—		—
Due after ten years		2,015		2,001
Total held-to-maturity	$	2,015	$	2,001

Expected maturities will differ from contractual maturities for mortgage related securities because the issuers of certain debt securities do have the right to call or prepay their obligations without any penalty.

As of June 30, 2011, securities with a carrying value of $10.4 million, and fair value of $10.8 million, are pledged as collateral for borrowed funds. In addition, securities with carrying value of $9.3 million and fair value of $9.7 million were pledged to secure public deposits.

The following tables show the gross unrealized losses and fair value of the Company's investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2011:

As of June 30, 2011	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(amounts in thousands)
Available-for-sale:
U.S. Government sponsored entities	$	1,980	$	20	$	—	$	—	$	1,980	$	20
Residential mortgage-backed securities and collateralized mortgage obligations		2,523		5		—		—		2,523		5
Collateralized debt obligations		—		—		3,736		1,014		3,736		1,014
Total available-for-sale	$	4,503	$	25	$	3,736	$	1,014	$	8,239	$	1,039

Held-to-maturity:
States and political subdivisions	$	733	$	45	$	—	$	—	$	733	$	45

U.S. Government Sponsored Entities: The unrealized losses on the Company’s investment in U.S. Government sponsored entities relates to two securities. The losses were caused by movement in interest rates. Because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, it does not consider the investment in these securities to be other-than-temporarily impaired at June 30, 2011 or December 31, 2010.

Residential Mortgage-Backed Securities and Collateralized Mortgage Obligations: The unrealized losses on the Company’s investment in mortgage-backed securities relates to two securities. The losses were caused by movement in interest rates. The securities were issued by FNMA and FHLMC, government sponsored entities. It is expected that the U.S. government will guarantee all contractual cash flows. Because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, it does not consider the investment in these securities to be other-than-temporarily impaired at June 30, 2011 or December 31, 2010.

Collateralized Debt Obligations: The Company’s unrealized loss on investments in collateralized debt obligations (“CDOs”) relates to three securities issued by financial institutions, totaling $3.7 million. CDOs are pooled securities primarily secured by trust preferred securities (“TruPS”), subordinated debt and surplus notes issued by small and mid-sized banks and insurance companies. These securities are generally floating rate instruments with 30-year maturities, and are callable at par by the issuer after five years. The current economic downturn has had a significant adverse impact on the financial services industry, consequently, TruPS CDOs do not have an active trading market. With the assistance of

competent third-party valuation specialists, the Company utilized the following methodology to determine the fair value:

Cash flows were developed based on the estimated speeds at which the trust preferred securities are expected to prepay, the estimated rates at which the trust preferred securities are expected to defer payments, the estimated rates at which the trust preferred securities are expected to default, and the severity of the losses on securities which default. Trust preferred securities generally allow for prepayment by the issuer without a prepayment penalty any time after five years. Due to the lack of new trust preferred issuances and the relatively poor conditions of the financial institution industry, a relatively modest rate of prepayment was assumed going forward. Estimates for conditional default rates (“CDR”) are based on the payment characteristics of the trust preferred securities themselves (e.g. current, deferred, or defaulted) as well as the financial condition of the trust preferred issuers in the pool. Estimates for the near-term rates of deferral and CDR are based on key financial ratios relating to the financial institutions’ capitalization, asset quality, profitability and liquidity. Finally, we consider whether or not the financial institution has received TARP funding, and if it has, the amount. Longer-term rates of deferral and defaults on based on historical averages. The fair value of each bond was assessed by discounting their projected cash flows by a discount rate. The discount rates were based on the yields of publicly traded TruPS and preferred stock issued by comparably rated banks. The fair value for previous reporting periods was based on indicative market bids and resulted in much lower values due to the inactive trading market.

The underlying issuers have been analyzed, and projections have been made regarding the future performance, considering factors including defaults and interest deferrals. The analysis indicates that the Company should expect to receive all contractual cash flows. Because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, it does not consider these investments to be other-than-temporarily impaired at June 30, 2011 or December 31, 2010.

Other-Than-Temporarily Impaired Debt Securities

We assess whether we intend to sell or it is more likely than not that we will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered other-than-temporarily impaired (“OTTI”) and that we do not intend to sell and will not be required to sell prior to recovery of our amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s fair value and the present value of future expected cash flows is due to factors that are not credit related and is recognized in other comprehensive income.

The present value of expected future cash flows is determined using the best estimate of cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity.

We have a process in place to identify debt securities that could potentially have a credit impairment that is other than temporary. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. On a quarterly basis, we review all securities to determine whether an other-than-temporary decline in value exists and whether losses should be recognized. We consider relevant facts and circumstances in evaluating whether a credit or interest rate-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events and (4) for fixed maturity securities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value.

The following table presents a roll-forward of the credit loss component of the amortized cost of debt securities that we have written down for OTTI and the credit component of the loss that is recognized in earnings. OTTI recognized in earnings for credit-impaired debt securities is presented as additions in two components based upon whether the current period is the first time the debt security was credit-impaired (initial credit impairment) or is not the first time the debt security was credit impaired (subsequent credit impairments). The credit loss component is reduced if we sell, intend to sell or believe we will be required to sell previously credit-impaired debt securities. Additionally, the credit loss component is reduced if we receive cash flows in excess of what we expected to receive over the remaining life of the credit-impaired debt security, the security matures or is fully written down. Changes in the credit loss component of credit-impaired debt securities were as follows for the periods ended June 30, 2011 and 2010.

	For the Six Months Ended June 30,
	2011		2010

	(amounts in thousands)
Beginning balance	$	2,657	$	4,008
Initial credit impairment		—		—
Subsequent credit impairments		57		18
Reductions for amounts recognized in earnings due to intent or requirement to sell		—		—
Reductions for securities sold		—		—
Reductions for securities deemed worthless		316		1,218
Reductions for increases in cash flows expected to be collected		—		—
Ending balance	$	2,398	$	2,808

	For the Three Months Ended June 30,
	2011		2010

	(amounts in thousands)
Beginning balance	$	2,596	$	2,957
Initial credit impairment		—		—
Subsequent credit impairments		37		—
Reductions for amounts recognized in earnings due to intent or requirement to sell		—		—
Reductions for securities sold		—		—
Reductions for securities deemed worthless		235		149
Reductions for increases in cash flows expected to be collected		—		—
Ending balance	$	2,398	$	2,808

A summary of investment gains and losses recognized in income during the six month and three month periods ended June 30, 2011 and 2010 are as follows:

	For the Six Months Ended June 30,
	2011			2010

	(amounts in thousands)
Available-for-sale securities:
Realized gains	$	—		$	—
Realized (losses)		—			—
Other than temporary impairment		(57	)		(18	)
Total available-for-sale securities	$	(57	)	$	(18	)

Held-to-maturity securities:
Realized gains	$	—		$	—
Realized (losses)		—			—
Other than temporary impairment		—			—
Total held-to-maturity securities	$	—		$	—

	For the Three Months Ended June 30,
	2011			2010

	(amounts in thousands)
Available-for-sale securities:
Realized gains	$	—		$	—
Realized (losses)		—			—
Other than temporary impairment		(37	)		—
Total available-for-sale securities	$	(37	)	$	—

Held-to-maturity securities:
Realized gains	$	—		$	—
Realized (losses)		—			—
Other than temporary impairment		—			—
Total held-to-maturity securities	$	—		$	—

During the first six months of 2011, the Company recognized $57,000 of other-than-temporary impairment losses on available-for-sale securities, attributable to impairment charges recognized on a

privately issued CMO.

The impairment charges for the CMO were recognized in light of significant deterioration of housing values in the residential real estate market, the significant rise in delinquencies and charge-offs of underlying mortgage loans and resulting decline in market value of the securities.

With the assistance of competent third-party valuation specialists, the Company utilized the following methodologies to quantify the OTTI. The underlying mortgage collateral was analyzed in order to project future cash flows and to calculate the credit component of the OTTI. Four major assumptions were utilized; prepayment (CPR), conditional default rate (CDR), loss severity and risk adjusted discount rate. The methodologies for the four assumptions are:

CPR assumptions were based on evaluation of the lifetime conditional prepayment rates; 3 month CPR over the most recent period, past 6 months and past 12 months; estimated prepayment rates provided by the Securities Industry & Financial Markets Association (SIFMA), forecasts from other industry experts, and judgment given recent deterioration in credit conditions and declines in property values. The CRP assumption utilized ranged from 7.73% to 8.51%.

CDR estimates were based on the status of the loans – current, 30-59 days delinquent, 60-89 days delinquent, 90+ days delinquent, foreclosure or REO – and proprietary loss migration models (i.e. percentage of 30 day delinquents that will ultimately migrate to default, percentage of 60 day delinquents that will ultimately migrate to default, etc.). The model assumes that the 60 day plus population will move to repossession inventory subject to the loss migration assumptions and liquidate over the next 36 months. Defaults vector from month 37 to month 48 to the month 49 CDR value and ultimately vector to zero over an extended period of time of at least 15 years. The CDR assumption utilized started at a range of 5.58% to 6.23%, and ramped down to a range of 1.80% to 4.14% by month 49.

Loss severity estimates are based on the initial loan to value ratio, the loan’s lien position, private mortgage insurance proceeds available (if any), and the estimated change in the price of the property since origination. The loss severity assumption is static for twelve months at 50.9% then decreases monthly based on future market appreciation to a floor of 23%.

The risk adjusted discount rate of 15% was derived based on the spread from the most recent active market indication for either the instrument in question or a proxy of the instrument. The resulting spread was then used in conjunction with the swap curve to discount the expected cash flow stream.

NOTE 4. LOANS

The portfolio of the loans outstanding consists of:

	June 30, 2011					December 31, 2010
	Amount		Percentage of Total Loans			Amount		Percentage of Total Loans
	(amounts in thousands)
Commercial and industrial	$	24,310		3.9	%	$	24,782		4.0	%
Real estate construction:
Residential		24,415		3.9			38,810		6.2
Commercial		57,917		9.2			57,086		9.1
Real estate mortgage:
Commercial – owner occupied		139,983		22.2			141,035		22.5
Commercial – non owner occupied		196,296		31.1			178,755		28.6
Residential – 1 to 4 family		146,421		23.2			141,315		22.5
Residential - Multifamily		23,126		3.7			27,841		4.4
Consumer		17,825		2.8			17,115		2.7
Total Loans	$	630,293		100.0	%	$	626,739		100.0	%

The Company maintains interest reserves for the purpose of making periodic and timely interest payments for borrowers that qualify. Total loans with interest reserves were $36.5 million and $65.6 million at June 30, 2011 and December 31, 2010 respectively. On a monthly basis management reviews loans with interest reserves to assess current and projected performance.

Loan Origination/Risk Management: The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Once it is determined that the borrower's management possesses sound ethics and solid business acumen, the Company's management examines current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and

almost always will incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

With respect to construction loans to developers and builders that are secured by non-owner occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the complete project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type and geographic location within our market area. This diversity helps reduce the Company's exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. The Company also monitors economic conditions and trends affecting market areas it serves. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. At June 30, 2011, approximately 41.6% of the outstanding principal balance of the Company’s commercial real estate loans were secured by owner-occupied properties.

To monitor and manage consumer loan risk, policies and procedures are developed and modified as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Additionally, trend and outlook reports are reviewed by management on a regular basis. Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage of 80%, collection remedies, the number of such loans a borrower can have at one time and documentation requirements.

The Company maintains an outsourced independent loan review program that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company's policies and procedures.

Nonaccrual and Past Due Loans: Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when 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. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

An age analysis of past due loans by class follows:

As of June 30, 2011	30-59 Days Past Due			60-89 Days Past Due		Greater than 90 Days and Accruing		Greater than 90 Days and Not Accruing		Total Past Due			Current		Total Loans
	(Amounts in thousands)
Commercial and industrial	$	594	$	—	$	—	$	—	$	594	$	23,716		$	24,310
Real estate construction:
Residential		327		—		—		4,609		4,936		19,479			24,415
Commercial		3		—		—		7,888		7,891		50,026			57,917
Real estate mortgage:
Commercial – owner occupied		158		—		—		4,795		4,953		135,030			139,983
Commercial – non owner occupied		1,510		—		—		5,343		6,853		189,443			196,296
Residential – 1 to 4 family		680		71		—		11,398		12,149		134,272			146,421
Residential - Multifamily		—		—		—		587		587		22,539			23,126
Consumer		—		—		—		—		—		17,825			17,825
Total Loans	$	3,272	$	71	$	—	$	34,620	$	37,963	$	592,330		$	630,293

As of December 31, 2010	30-59 Days Past Due			60-89 Days Past Due		Greater than 90 Days and Accruing		Greater than 90 Days and Not Accruing		Total Past Due			Current		Total Loans
	(Amounts in thousands)
Commercial and industrial	$	21	$	98	$	—	$	—	$	119	$	24,663		$	24,782
Real estate construction:
Residential		1,657		—		—		8,546		10,203		28,607			38,810
Commercial		266		—		—		6,701		6,967		50,119			57,086
Real estate mortgage:
Commercial – owner occupied		4,157		—		—		546		4,703		136,332			141,035
Commercial – non owner occupied		406		5,670		—		826		6,902		171,853			178,755
Residential – 1 to 4 family		1,334		2,161		—		9,415		12,910		128,405			141,315
Residential - Multifamily		75		—		—		1,350		1,425		26,416			27,841
Consumer		—		—		—		61		61		17,054			17,115
Total Loans	$	7,916	$	7,929	$	—	$	27,445	$	43,290	$	583,449		$	626,739

Impaired Loans: Loans with a risk rating of substandard or worse are deemed impaired. In addition, Troubled Debt Restructurings are also deemed impaired.

All impaired loans have an independent third-party full appraisal to determine the net realizable value (“NRV”) based on the fair value of the underlying collateral, less cost to sell and other costs, such as unpaid real estate taxes, that have been identified, or the present value of discounted cash flows in the case of certain impaired loans that are not collateral dependent. 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. Prior to receiving the updated appraisal, we will establish a specific reserve for any estimated deterioration, based upon our assessment of market conditions, adjusted for estimated costs to sell and other identified costs. If the NRV is greater than the loan amount, then no impairment loss exists. If the NRV is less than the loan amount, the shortfall is recognized by a specific reserve. If the borrower fails to pledge additional collateral in the ninety day period, a charge-off equal to the difference between the loan carrying value and NRV will occur. In certain circumstances, however, a direct charge-off may be taken at the time that the NRV calculation reveals a shortfall. All impaired loans are evaluated based on the criteria stated above on a quarterly basis and any change in the reserve requirements are recorded in the period identified. All partially charged-off loans remain on nonaccrual status until they are brought current as to both principal and interest and have at least six months of payment history and future collectability of principal and interest is assured.

Impaired loans are set forth in the following tables.

As of June 30, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized1
	(Amounts in thousands)
With no related allowance recorded:
Commercial and industrial	$	594	$	594	$	—	$	594	$	10
Real estate construction:
Residential		4,756		4,947		—		5,082		42
Commercial		16,146		16,146		—		15,846		263
Real estate mortgage:
Commercial – owner occupied		5,171		5,171		—		5,209		28
Commercial – non owner occupied		25,039		25,038		—		28,213		744
Residential – 1 to 4 family		6,231		6,231		—		6,203		82
Residential - Multifamily		587		659		—		627		22
Consumer		—		—		—		—		—
		58,524		58,786		—		61,774		1,191

With an allowance recorded:
Commercial and industrial		—		—		—		—		—
Real estate construction:
Residential		6,427		7,628		1,449		7,129		146
Commercial		1,659		2,248		344		1,954		—
Real estate mortgage:
Commercial – owner occupied		2,397		2,397		36		2,397		80
Commercial – non owner occupied		15,730		15,850		210		15,798		490
Residential – 1 to 4 family		8,711		9,401		1,055		9,319		67
Residential - Multifamily		3,909		3,909		22		4,377		142
Consumer		—		—		—		—		—
		38,833		41,433		3,116		40,974		925

Total:
Commercial and industrial		594		594		—		594		10
Real estate construction:
Residential		11,183		12,575		1,449		12,211		188
Commercial		17,805		18,394		344		17,800		263
Real estate mortgage:
Commercial – owner occupied		7,568		7,568		36		7,606		108
Commercial – non owner occupied		40,769		40,888		210		44,011		1,234
Residential – 1 to 4 family		14,942		15,632		1,055		15,522		149
Residential - Multifamily		4,496		4,568		22		5,004		164
Consumer		—		—		—		—		—
Total	$	97,357	$	100,219	$	3,116	$	102,748	$	2,116

1Reflects the interest income recognized on impaired loans, which includes troubled debt restructurings accruing interest, during the six month period ending June 30, 2011. Interest income recognized on a cash basis subsequent to a loan being placed on nonaccrual was $149,000 during the period.

As of December 31, 2010	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized1
	(Amounts in thousands)
With no related allowance recorded:
Commercial and industrial	$	785	$	785	$	—	$	509	$	11
Real estate construction:
Residential		13,180		14,147		—		12,789		106
Commercial		18,181		18,770		—		7,845		214
Real estate mortgage:
Commercial – owner occupied		9,022		9,022		—		5,209		395
Commercial – non owner occupied		33,281		33,282		—		10,994		1,167
Residential – 1 to 4 family		6,185		6,211		—		6,203		153
Residential - Multifamily		2,355		2,425		—		1,676		77
Consumer		61		61		—		31		—
		83,050		84,703		—		45,256		2,123

With an allowance recorded:
Commercial and industrial		—		—		—		—		—
Real estate construction:
Residential		6,599		7,820		2,091		6,576		70
Commercial		—		—		—		—		—
Real estate mortgage:
Commercial – owner occupied		124		124		5		325
Commercial – non owner occupied		9,304		9,424		192		5,137		525
Residential – 1 to 4 family		8,100		8,267		490		2,065		68
Residential - Multifamily		4,846		4,846		73		1,999		321
Consumer		—		—		—		—		—
		28,973		30,481		2,851		16,102		984

Total:
Commercial and industrial		785		785		—		509		11
Real estate construction:
Residential		19,779		21,967		2,091		19,365		176
Commercial		18,181		18,770		—		7,845		214
Real estate mortgage:
Commercial – owner occupied		9,146		9,146		5		5,534		395
Commercial – non owner occupied		42,585		42,706		192		16,131		1,692
Residential – 1 to 4 family		14,285		14,478		490		8,268		221
Residential - Multifamily		7,201		7,271		73		3,675		398
Consumer		61		61		—		31		—
Total	$	112,023	$	115,184	$	2,851	$	61,358	$	3,107

1Reflects the interest income recognized on impaired loans, which includes troubled debt restructurings, during 2010. Interest income recognized on a cash basis subsequent to a loan being placed on nonaccrual was $45,000 during 2010.

Troubled debt restructurings (“TDR”): It is our policy not to renegotiate the terms of a commercial loan simply because of a delinquency status. However, we will use our Troubled Debt Restructuring Program to work with delinquent borrowers when the delinquency is temporary. We consider all loans modified in a troubled debt restructuring to be impaired.

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

·	Whether there is a minimum of six months of current payment history under the current terms;

·	Whether the loan is current at the time of restructuring; and

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

We also review the financial performance of the borrower over the past year to be reasonably assured of repayment and performance according to the modified terms. This review consists of an analysis of the borrower’s historical results; the borrower’s projected results over the next four quarters; current financial information of the borrower and any guarantors. The projected repayment source needs to be reliable, verifiable, quantifiable and sustainable. In addition, all troubled debt restructurings are reviewed quarterly to determine the amount of any impairment.

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

A borrower with a restructured loan must make a minimum of six consecutive monthly payments at the restructured level and be current as to both interest and principal to be on accrual status.

The following is an analysis of loans modified in a troubled debt restructuring by type of concession as of June 30, 2011. There were no modifications that involved forgiveness of debt.

	TDRs in compliance with their modified terms and accruing interest			TDRs that are not accruing interest			Total
	(amounts in thousands)
Reduction in interest rate		$	19,985		$	7,392	$	27,377
A period of interest only payments			17,634			9,513		27,147
Total		$	37,619		$	16,905	$	54,524

The following is an analysis of performing and nonperforming loans modified in a troubled debt restructuring as of June 30, 2011.

	TDRs in compliance with their modified terms and accruing interest				TDRs that are not accruing interest				Total
	Balance		Count		Balance		Count		Balance		Count
	(loan balances in thousands)
Commercial	$	594		1	$	—		—	$	594		1
Residential Real Estate Construction		—		—		958		1		958		1
Commercial Real Estate Mortgage - Owner Occupied		2,397		4		4,446		6		6,843		10
Commercial Real Estate Mortgage - Non-owner Occupied		28,060		9		4,123		3		32,183		12
Commercial Real Estate Mortgage - Multifamily		3,909		1		506		2		4,415		3
Residential Real Estate Mortgage		2,659		5		6,872		4		9,531		9
Total	$	37,619		20	$	16,905		16	$	54,524		36

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, non-performing 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. Grade 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 Parke 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.

Other Assets Especially Mentioned (OAEM): Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently impaired. Asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure. Includes loans which require an increased degree of monitoring or servicing as a result of internal or external changes.

Substandard: This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring. Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral. Asset has a well defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value.

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.

An analysis of the credit risk profile by internally assigned grades is as follows:

At June 30, 2011	Pass		OAEM		Substandard		Doubtful		Total
	(Amounts in thousands)
Commercial and industrial	$	23,216	$	500	$	594	$	—	$	24,310
Real estate construction:
Residential		12,905		327		11,183		—		24,415
Commercial		39,271		900		17,746		—		57,917
Real estate mortgage:
Commercial – owner occupied		129,166		5,646		5,171		—		139,983
Commercial – non owner occupied		152,765		30,023		13,508		—		196,296
Residential – 1 to 4 family		131,439		2,774		12,208		—		146,421
Residential - Multifamily		18,630		3,909		587		—		23,126
Consumer		17,764		—		61		—		17,825
Total	$	525,156	$	44,079	$	61,058	$	—	$	630,293

At December 31, 2010	Pass		OAEM		Substandard		Doubtful		Total
	(Amounts in thousands)
Commercial and industrial	$	23,497	$	500	$	785	$	—	$	24,782
Real estate construction:
Residential		12,132		6,899		19,779		—		38,810
Commercial		38,005		900		18,181		—		57,086
Real estate mortgage:
Commercial – owner occupied		134,355		3,250		3,430		—		141,035
Commercial – non owner occupied		122,494		41,223		15,038		—		178,755
Residential – 1 to 4 family		126,270		4,290		10,755		—		141,315
Residential - Multifamily		26,491		—		1,350		—		27,841
Consumer		15,559		1,495		61		—		17,115
Total	$	498,803	$	58,557	$	69,379	$	—	$	626,739

NOTE 5. ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management's best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The Company's allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310, "Receivables" and allowance allocations calculated in accordance with ASC Topic 450, "Contingencies." Accordingly, the methodology is based on historical loss experience by type of credit and internal risk grade, specific homogeneous risk pools and specific loss allocations, with adjustments for current events and conditions. The Company's process for determining the appropriate level of the allowance for loan losses is designed to account for credit deterioration as it occurs. The provision for loan losses reflects loan quality trends, including the levels of and trends related to non-accrual loans, past due loans, potential problem loans, criticized loans and net charge-offs or recoveries, among other factors. The provision for possible loan losses also reflects the totality of actions taken on all loans for a particular period. In other words, the amount of the provision reflects not only the necessary increases in the allowance for loan losses related to newly identified criticized loans, but it also reflects actions taken related to other loans including, among other things, any necessary increases or decreases in required allowances for specific loans or loan pools.

The level of the allowance reflects management's continuing evaluation of industry concentrations, specific credit risks, loan loss experience, current loan portfolio quality, present economic, political and regulatory conditions and unidentified losses inherent in the current loan portfolio. Portions of the allowance may be allocated for specific credits; however, the entire allowance is available for any credit that, in management's judgment, should be charged off. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including, among other things, the performance of the Company's loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.

The Company's allowance for possible loan losses consists of three elements: (i) specific valuation allowances determined in accordance with ASC Topic 310 based on probable losses on specific loans; (ii) historical valuation allowances determined in accordance with ASC Topic 450 based on historical loan loss experience for similar loans with similar characteristics and trends, adjusted, as necessary, to reflect the impact of current conditions; and (iii) general valuation allowances determined in accordance with ASC Topic 450 based on general economic conditions and other qualitative risk factors both internal and external to the Company.

The allowances established for probable losses on specific loans are based on a regular analysis and evaluation of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the obligor's ability to repay; (ii) the underlying collateral, if any; and (iii) the economic environment and industry in which the borrower operates. This analysis is performed at the relationship manager level for all commercial loans. When a loan has a grade of 6 or higher, the loan is analyzed to determine whether the loan is impaired and, if impaired, the need to specifically allocate a portion of the allowance for loan losses to the loan. Specific valuation allowances are determined by

analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things.

Historical valuation allowances are calculated based on the historical loss experience of specific types of loans. The Company calculates historical loss ratios for pools of similar loans with similar characteristics based on the proportion of actual charge-offs experienced to the total population of loans in the pool. The historical loss ratios are periodically updated based on actual charge-off experience. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool. The Company's pools of similar loans include similarly risk-graded groups of commercial loans, commercial real estate loans, consumer real estate loans and consumer and other loans.

General valuation allowances are based on general economic conditions and other qualitative risk factors both internal and external to the Company. In general, such valuation allowances are determined by evaluating, among other things: (i) the experience, ability and effectiveness of the bank's lending management and staff; (ii) the effectiveness of the Bank's loan policies, procedures and internal controls; (iii) changes in asset quality; (iv) changes in loan portfolio volume; (v) the composition and concentrations of credit; (vi) the impact of competition on loan structuring and pricing; (vii) the effectiveness of the internal loan review function; (viii) the impact of environmental risks on portfolio risks; and (ix) the impact of rising interest rates on portfolio risk. 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.

During the six months ended June 30, 2011, management increased the ASC 450 loss factors related to trends in delinquent and impaired loans for commercial, residential real estate construction, commercial real estate construction and residential real estate mortgage. As a result of the aforementioned ASC 450 factor changes, the impact to the allowance for loan losses were increases in ASC 450 reserves of $52 thousand for commercial, $534 thousand for construction, $189 thousand for commercial real estate, $205 thousand for residential real estate and $8 thousand for consumer.

An analysis of the allowance for loan losses for six month and three month periods ended June 30, 2011 is as follows:

Allowance for loan Losses:	For the six month period ended June 30, 2011
	Balance at December 31, 2010		Charge-offs		Recoveries		Provisions		Balance at June 30, 2011
	(Amounts in thousands)
Commercial and industrial	$	448	$	22	$	—	$	70	$	496
Real estate construction:
Residential		2,980		2,727		—		2,241		2,494
Commercial		1,576		—		—		501		2,077
Real estate mortgage:
Commercial – owner occupied		2,508		—		—		—		2,508
Commercial – non owner occupied		3,792		—		—		660		4,452
Residential – 1 to 4 family		2,848		—		—		846		3,694
Residential - Multifamily		372		—		—		—		372
Consumer		130		—		—		13		143
Unallocated		135		—		—		169		304
Total	$	14,789	$	2,749	$	—	$	4,500	$	16,540

	For the six month period ended June 30, 2010
	Balance at December 31, 2009		Charge-offs		Recoveries		Provisions		Balance at June 30, 2010
	(Amounts in thousands)
Commercial and industrial	$	214	$	10	$	—	$	28	$	232
Real estate construction:
Residential		4,074		1,359		—		90		2,805
Commercial		498		443		—		642		697
Real estate mortgage:
Commercial – owner occupied		3,332		—		—		1,480		4,812
Commercial – non owner occupied		2,643		—		—		947		3,590
Residential – 1 to 4 family		1,220		—		—		603		1,823
Residential - Multifamily		231		—		—		261		492
Consumer		102		—		—		4		106
Unallocated		90		—		—		246		336
Total	$	12,404	$	1,812	$	—	$	4,301	$	14,893

	For the three month period ended June 30, 2011
	Balance at March 31, 2011		Charge-offs		Recoveries		Provisions		Balance at June 30, 2011
	(Amounts in thousands)
Commercial and industrial	$	453	$	—	$	—	$	43	$	496
Real estate construction:
Residential		2,315		31		—		210		2,494
Commercial		2,050		—		—		27		2,077
Real estate mortgage:
Commercial – owner occupied		2,495		—		—		13		2,508
Commercial – non owner occupied		3,827		—		—		625		4,452
Residential – 1 to 4 family		3,055		323		—		962		3,694
Residential - Multifamily		332		—		—		40		372
Consumer		132		—		—		11		143
Unallocated		135		—		—		169		304
Total	$	14,794	$	354	$	—	$	2,100	$	16,540

	For the three month period ended June 30, 2010
	Balance at March 31, 2010		Charge-offs		Recoveries		Provisions			Balance at June 30, 2010
	(Amounts in thousands)
Commercial and industrial	$	257	$	—	$	—	$	(25	)	$	232
Real estate construction:
Residential		3,240		443		—		(435	)		2,805
Commercial		530		—		—		610			697
Real estate mortgage:
Commercial – owner occupied		3,606		—		—		1,206			4,812
Commercial – non owner occupied		2,765		—		—		825			3,590
Residential – 1 to 4 family		1,887		—		—		(64	)		1,823
Residential - Multifamily		294		—		—		198			492
Consumer		102		—		—		4			106
Unallocated		455		—		—		(119	)		336
Total	$	13,136	$	443	$	—	$	2,200		$	14,893

Allowance for loan Losses, at June 30, 2011	Individually evaluated for impairment		Collectively evaluated for impairment		Total
	(Amounts in thousands)
Commercial and industrial	$	—	$	496	$	496
Real estate construction:
Residential		1,449		1,045		2,494
Commercial		344		1,733		2,077
Real estate mortgage:
Commercial – owner occupied		36		2,472		2,508
Commercial – non owner occupied		210		4,242		4,452
Residential – 1 to 4 family		1,055		2,639		3,694
Residential - Multifamily		22		350		372
Consumer		—		143		143
Unallocated		—		304		304
Total	$	3,116	$	13,424	$	16,540

Allowance for loan Losses, at December 31, 2010	Individually evaluated for impairment		Collectively evaluated for impairment		Total
	(Amounts in thousands)
Commercial and industrial	$	—	$	448	$	448
Real estate construction:
Residential		2,091		889		2,980
Commercial		—		1,576		1,576
Real estate mortgage:
Commercial – owner occupied		5		2,478		2,483
Commercial – non owner occupied		192		3,624		3,816
Residential – 1 to 4 family		490		2,359		2,849
Residential - Multifamily		73		299		372
Consumer		—		130		130
Unallocated		—		135		135
Total	$	2,851	$	11,938	$	14,789

Loans, at June 30, 2011:	Individually evaluated for impairment		Collectively evaluated for impairment		Total
	(Amounts in thousands)
Commercial and industrial	$	594	$	23,716	$	24,310
Real estate construction:
Residential		11,183		13,232		24,415
Commercial		17,805		40,112		57,917
Real estate mortgage:
Commercial – owner occupied		7,568		132,415		139,983
Commercial – non owner occupied		40,769		155,527		196,296
Residential – 1 to 4 family		14,942		131,479		146,421
Residential - Multifamily		4,496		18,630		23,126
Consumer		—		17,825		17,825
Total	$	97,357	$	532,936	$	630,293

Loans, at December 31, 2010:	Individually evaluated for impairment		Collectively evaluated for impairment		Total
	(Amounts in thousands)
Commercial and industrial	$	785	$	23,997	$	24,782
Real estate construction:
Residential		19,779		19,031		38,810
Commercial		18,181		38,905		57,086
Real estate mortgage:
Commercial – owner occupied		9,146		131,889		141,035
Commercial – non owner occupied		42,585		136,170		178,755
Residential – 1 to 4 family		14,285		127,030		141,315
Residential - Multifamily		7,201		20,640		27,841
Consumer		61		17,054		17,115
Total	$	112,023	$	514,716	$	626,739

NOTE 6. REGULATORY RESTRICTIONS

The Company and the Bank are subject to various regulatory capital requirements of federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company and the Bank's 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.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).

	Actual					For Capital Adequacy Purposes					To be Well- Capitalized Under Prompt Corrective Action Provisions
Parke Bancorp, Inc.	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of June 30, 2011
(amounts in thousands except ratios)

Total Risk Based Capital	$	96,610		14.94	%	$	51,743		8	%		N/A		N/A
(to Risk Weighted Assets)

Tier 1 Capital	$	88,421		13.67	%	$	25,871		4	%		N/A		N/A
(to Risk Weighted Assets)

Tier 1 Capital	$	88,421		12.04	%	$	30,056		4	%		N/A		N/A
(to Average Assets)

	Actual					For Capital Adequacy Purposes					To be Well- Capitalized Under Prompt Corrective Action Provisions
Parke Bancorp, Inc.	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of December 31, 2010
(amounts in thousands except ratios)

Total Risk Based Capital	$	92,629		14.20	%	$	52,183		8	%		N/A		N/A
(to Risk Weighted Assets)

Tier 1 Capital	$	84,394		12.94	%	$	26,092		4	%		N/A		N/A
(to Risk Weighted Assets)

Tier 1 Capital	$	84,394		11.23	%	$	30,062		4	%		N/A		N/A
(to Average Assets)

	Actual					For Capital Adequacy Purposes					To be Well- Capitalized Under Prompt Corrective Action Provisions
Parke Bank	Amount		Ratio			Amount		Ratio			Amount		Ratio


As of June 30, 2011
(amounts in thousands except ratios)

Total Risk Based Capital	$	96,494		14.92	%	$	51,743		8	%	$	64,679		10	%
(to Risk Weighted Assets)

Tier 1 Capital	$	88,305		13.65	%	$	25,871		4	%	$	38,807		6	%
(to Risk Weighted Assets)

Tier 1 Capital	$	88,305		12.02	%	$	29,379		4	%	$	36,724		5	%
(to Average Assets)

	Actual					For Capital Adequacy Purposes					To be Well- Capitalized Under Prompt Corrective Action Provisions
Parke Bank	Amount		Ratio			Amount		Ratio			Amount		Ratio


As of December 31, 2010
(amounts in thousands except ratios)

Total Risk Based Capital	$	92,687		14.21	%	$	52,181		8	%	$	65,226		10	%
(to Risk Weighted Assets)

Tier 1 Capital	$	84,452		12.95	%	$	26,091		4	%	$	39,136		6	%
(to Risk Weighted Assets)

Tier 1 Capital	$	84,452		11.24	%	$	30,062		4	%	$	37,577		5	%
(to Average Assets)

On October 3, 2008 Congress passed the Emergency Economic Stabilization Act of 2008 (EESA), which provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to the U.S. markets. One of the provisions resulting from the Act was the Treasury Capital Purchase Program (CPP) which provides for the direct equity investment of perpetual preferred stock by the U.S. Treasury in qualified financial institutions. This program was voluntary and requires an institution to comply with several restrictions and provisions, including limits on executive compensation, stock redemptions, and declaration of dividends. The perpetual preferred stock has a dividend rate of 5% per year until the fifth anniversary of the Treasury investment and a dividend of 9%, thereafter. The CPP also requires the Treasury to receive warrants for common stock equal to 15% of the capital invested by the U.S. Treasury. The Company received an investment in perpetual preferred stock of $16,288,000 on January 30, 2009. These proceeds were allocated between the preferred stock and warrants based on relative fair value in accordance with FASB ASC Topic 470-20, Debt with Conversion and Other Options. The allocation of proceeds resulted in a discount on the preferred stock that will be accreted over five years. The Company issued 329,757 common stock warrants to the U.S. Treasury and $930,000 of those proceeds were allocated to the warrants. The warrants are accounted for as equity

securities. The warrants have a contractual life of 10 years and an exercise price of $7.41 per share of common stock.

NOTE 7. OTHER COMPREHENSIVE INCOME

The Company’s other comprehensive income is presented in the following tables:

	For the six months ended June 30, (amounts in thousands)
	2011				2010
Non-credit unrealized gains (losses) on debt securities with OTTI:
Available-for-sale		$	56		$	78
Unrealized gains (losses) on available for sale securities without OTTI			119			3,313
Minimum pension liability			34			37
Tax impact			(85	)		(1,372	)
Other comprehensive income		$	124		$	2,056

	For the three months ended June 30, (amounts in thousands)
	2011				2010
Non-credit unrealized gains (losses) on debt securities with OTTI:
Available-for-sale		$	18		$	100
Unrealized gains (losses) on available for sale securities without OTTI			249			316
Minimum pension liability			17			19
Tax impact			(114	)		(174	)
Other comprehensive income		$	170		$	261

NOTE 8. 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 ASC, 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.

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 Inputs:

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.”

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. 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 date.

Investment Securities Available for Sale:

Where quoted prices are available in an active market, securities are classified in Level 1 of the valuation hierarchy. Securities in Level 1 are exchange-traded equities. If quoted market prices are not available for the specific security, then fair values are provided by independent third-party valuations services. These valuations 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 U.S. Government agencies, mortgage-backed securities, state and municipal securities and trust preferred securities. Securities in Level 3 include thinly traded collateralized mortgage obligations and collateralized debt obligations.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.

Financial Assets	Level 1		Level 2		Level 3		Total
	(amounts in thousands)
Securities Available for Sale

As of June 30, 2011
U.S. Government sponsored entities	$	—	$	2,998	$	—	$	2,998
Corporate debt obligations		—		1,555		—		1,555
Residential mortgage-backed securities		—		14,773		—		14,773
Collateralized mortgage-backed securities				1,493		332		1,825
Collateralized debt obligations		—		—		4,033		4,033
Total	$	—	$	20,819	$	4,365	$	25,184

As of December 31, 2010
U.S. Government sponsored entities	$	—	$	2,925	$	—	$	2,925
Corporate debt obligations		—		2,094		—		2,094
Residential mortgage-backed securities		—		16,559		—		16,559
Collateralized mortgage-backed securities				1,592		560		2,152
Collateralized debt obligations		—		—		4,000		4,000
Total	$	—	$	23,170	$	4,560	$	27,730

For the three and six months ending June 30, 2011, there have been no transfers between the levels within the fair value hierarchy.

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows:

	Securities Available for Sale
	2011			2010
	(amounts in thousands)
Beginning balance at January 1,	$	4,560		$	1,851
Total net gains (losses) included in:
Net income (loss)		(57	)		(18	)
Other comprehensive income (loss)		29			2,628
Settlements		(167	)		(158	)
Net transfers into Level 3		—			—
Ending balance June 30,	$	4,365		$	4,303

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
	(amounts in thousands)
As of June 30, 2011
Impaired loans	$	—	$	—	$	35,717	$	35,717
OREO		—		—		18,643		18,643

As of December 31, 2010
Impaired loans	$	—	$	—	$	26,122	$	26,122
OREO		—		—		16,701		16,701

Impaired loans, which are measured in accordance with FASB ASC Topic 310 “Receivables”, for impairment, had a carrying amount of $38.8 million and $29.0 million at June 30, 2011 and December 31, 2010 respectively, with a valuation allowance of $3.0 million and $2.9 million at June 30, 2011 and December 31, 2010 respectively. The valuation allowance for impaired loans is included in the allowance for loan losses in the balance sheet.

Other real estate owned (OREO) consists of commercial real estate properties which are recorded at fair value based upon current appraised value less estimated disposition costs, which is adjusted based upon Management’s review and changes in market conditions (level 3 inputs) Properties are reappraised annually.

Fair Value of Financial Instruments

The Company discloses estimated fair values for its significant financial instruments in accordance with FASB ASC Topic 825, “Disclosures about Fair Value of Financial Instruments”. The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The methodologies for other financial assets and liabilities are discussed below.

Cash and Cash Equivalents: The carrying amount of cash, due from banks, and federal funds sold approximates fair value.

Investment Securities: Fair value of securities available for sale is described above. Fair value of held-to-maturity securities are based upon quoted market prices.

Restricted Stock: The carrying value of restricted stock approximates fair value based on redemption provisions.

Loans (other than impaired): Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, residential mortgage and other consumer. Each loan category is further segmented into groups by fixed and adjustable rate interest terms and by performing and non-performing categories.

The fair value of performing loans is typically calculated by discounting scheduled cash flows through their estimated maturity, using estimated market discount rates that reflect the credit and interest rate risk inherent in each group of loans. The estimate of maturity is based on contractual maturities for loans within each group, or on the Company’s historical experience with repayments for each loan classification, modified as required by an estimate of the effect of current economic conditions.

For all loans, assumptions regarding the characteristics and segregation of loans, maturities, credit risk, cash flows, and discount rates are judgmentally determined using specific borrower and other available information.

Accrued Interest Receivable and Payable: The fair value of interest receivable and payable is estimated to approximate the carrying amounts.

Deposits: The fair value of deposits with no stated maturity, such as demand deposits, checking accounts, savings and money market accounts, is equal to the carrying amount. The fair value of certificates of deposit is based on the discounted value of contractual cash flows, where the discount rate is estimated using the market rates currently offered for deposits of similar remaining maturities.

Borrowings: The fair values of FHLB borrowings, other borrowed funds and subordinated debt are based on the discounted value of estimated cash flows. The discounted rate is estimated using market rates currently offered for similar advances or borrowings.

Off-Balance Sheet Instruments: Since the majority of the Company’s off-balance sheet instruments consist of non fee-producing, variable rate commitments, the Company has determined they do not have a distinguishable fair value.

The following table summarizes carrying amounts and fair values for financial instruments at June 30, 2011 and December 31, 2010:

	June 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(amounts in thousands)
Financial Assets:
Cash and cash equivalents	$	54,685	$	54,685	$	57,628	$	57,628
Investment securities (available-for-sale and held-to-maturity)		27,200		27,186		29,729		29,778
Restricted stock		3,119		3,119		3,040		3,040
Loans held for sale		1,228		1,228		11,454		11,454
Loans, net		613,753		623,087		610,950		618,721
Accrued interest receivable		3,055		3,055		3,273		3,273

Financial Liabilities:
Demand and savings deposits	$	324,036	$	324,036	$	298,598	$	298,598
Time deposits		277,843		279,353		306,124		307,776
Borrowings		64,087		68,131		75,616		79,029
Accrued interest payable		640		640		828		828

NOTE 8. EARNINGS PER SHARE (“EPS”)

The following tables set forth the calculation of basic and diluted EPS for the six month and three month periods ending June 30, 2011 and 2010.

	For the six months ended June 30,				For the three months ended June 30,
	2011		2010		2011		2010
	(in thousands except share data)
Basic earnings per common share
Net income available to common shareholders	$	3,937	$	3,304	$	1,894	$	1,757
Average common shares outstanding		4,886,178		4,850,458		4,866,178		4,859,608
Basic earnings per common share	$	0.81	$	0.68	$	0.39	$	0.36

Diluted earnings per common share
Net income available to common shareholders	$	3,937	$	3,304	$	1,894	$	1,757
Average common shares outstanding		4,886,178		4,850,458		4,866,178		4,859,608
Dilutive potential common shares		123,337		117,523		121,017		145,470
Total diluted average common shares outstanding		5,009,515		4,967,981		4,987,195		5,005,078
Diluted earnings per common share	$	0.79	$	0.67	$	0.38	$	0.35

For the six months ended June 30, 2011 and 2010, average options to purchase 321,475 shares and 324,232 shares, respectively, were outstanding but were not included in the computation of diluted EPS because the options' common stock equivalents were antidilutive.

For the three months ended June 30, 2011 and 2010, average options to purchase 325,053 shares and 319,633 shares, respectively, were outstanding but were not included in the computation of diluted EPS because the options' common stock equivalents were antidilutive.

NOTE 9. SUBSEQUENT EVENTS

Accounting guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Accordingly, Management has evaluated subsequent events after June 30, 2011 through the date the financial statements were issued and determined that no subsequent events warranted recognition in or disclosure in the interim financial statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

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, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, inflation, interest rate, market and monetary fluctuations; 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); technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing.

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.

General

The Company's results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on its interest-earning assets, such as loans and securities, and the interest expense paid on its interest-bearing liabilities, such as deposits and borrowings. The Company also generates non-interest income such as service charges, gains from the sale of loans, earnings from bank owned life insurance (BOLI), loan exit fees and other fees. The Company's non-interest expenses primarily consist of employee compensation and benefits, occupancy expenses, marketing expenses, data processing costs and other operating expenses. The Company is also subject to losses in its loan portfolio if borrowers fail to meet their obligations. The Company's results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory agencies.

The Company is intently focused on managing its non-performing assets. The deterioration of the local real estate market and the continued high levels of unemployment have had a significant negative impact on the credit quality of our loan portfolio. Management has allocated significant resources to resolve these issues, either through foreclosure or working with borrowers to bring the loans current. New processes have been implemented to identify and monitor impaired loans. New appraisals of the collateral securing impaired loans have been obtained to identify any potential exposure. The lengthy process of foreclosure has had a negative impact on earnings due to higher levels of legal fees.

Comparison of Financial Condition at June 30, 2011 and December 31, 2010

At June 30, 2011, the Company’s total assets decreased to $745.5 million from $756.8 million at December 31, 2010, a decrease of $11.3 million or 1.5%. The decrease was largely due to $11.5 million of SBA loans that were held for sale at December 31, 2010 and were subsequently sold.

Cash and cash equivalents decreased $2.9 million to $54.7 million at June 30, 2011 from $57.6 million at December 31, 2010.

Total investment securities decreased to $27.2 million at June 30, 2011 ($25.2 million classified as available-for-sale or 92.6%) from $29.7 million at December 31, 2010, a decrease of $2.5 million or 8.5%. The decrease is due to cash flow from principal payments.

Management evaluates the investment portfolio for OTTI on a quarterly basis. Factors considered in the analysis include, but are not limited to, whether an adverse change in cash flows has occurred, the length of time and the extent to which the fair value has been less than cost, whether the Company intends to sell, or will more likely than not be required to sell the investment before recovery of its amortized cost basis, which may be maturity, credit rating downgrades, the percentage of performing collateral that would need to default or defer to cause a break in yield or a temporary interest shortfall, and management’s assessment of the financial condition of the underlying issuers. For the six months ended June 30, 2011, the Company recognized credit-related OTTI charges (pre-tax) of $57,000 on a private-label CMO.

Total loans increased to $630.3 million at June 30, 2011 from $626.7 million at December 31, 2010, a increase of $3.6 million or 0.6%. Growth in the portfolio was offset by charge-offs of impaired loan balances and loan pay-offs.

Delinquent loans decreased $5.3 million to $38.0 million or 6.0% of total loans at June 30, 2011 from $43.3 million or 6.9% of total loans at December 31, 2010. Delinquent loan balances by number of days delinquent were: 31 to 59 days --- $3.3 million; 60 to 89 days --- $71,000; 90 days and greater not accruing interest --- $34.6 million. The decline is attributable to borrowers remediating the delinquency and foreclosures.

At June 30, 2011, the Company had $34.6 million in nonaccrual loans or 4.8% of total loans, an increase from $27.4 million or 4.4% of total loans at December 31, 2010. The three largest relationships in nonaccrual loans are a $5.7 million residential loan, a $2.8 million commercial real estate loan, and a $2.5 million commercial real estate loan.

The composition of nonaccrual loans as of June 30, 2011 and December 31, 2010 was as follows:

	June 30, 2011			December 31, 2010
	(amounts in thousands except ratios)
Commercial and industrial	$	—		$	—
Real estate construction:
Residential		4,609			8,546
Commercial		7,827			6,701
Real estate mortgage:
Commercial – owner occupied		4,795			546
Commercial – non owner occupied		5,343			826
Residential – 1 to 4 family		11,398			9,415
Residential - Multifamily		587			1,350
Consumer		61			61
Total	$	34,620		$	27,445

Nonperforming loans to total loans		4.77	%		4.38	%

At June 30, 2011 and December 31, 2010 Parke Bancorp's allowance for loan losses was $16.5 million. The ratio of allowance for loan losses to total loans increased to 2.62% at June 30, 2011 from 2.36% at December 31, 2010. During the six month period ended June 30, 2011, the Company charged-off $2.7 million in loans. Specific allowances for loan losses have been established in the amount of $3.1 million on impaired loans totaling $41.9 million at June 30, 2011. To the best of our knowledge, we have provided for all losses that are both probable and reasonably estimable at June 30, 2011 and December 31, 2010. There can be no assurance, however, that further additions to the allowance will not be required in future periods.

The negative economic trends that began in 2008, including the weakness in the residential and commercial real estate markets and high levels of unemployment, have had a significant impact on the credit quality of our loan portfolio. Nonperforming assets have increased from 5.82% of total assets at December 31, 2010 to 7.15% at June 30, 2011. We are aggressively managing all loan relationships by enhancing our credit monitoring and tracking systems. New processes have been established to manage delinquencies. We are working closely with borrowers to resolve these non-performing loans. Updated appraisals are being obtained, where appropriate, to ensure that collateral values are sufficient to cover outstanding loan balances, and we are establishing specific reserves for any potential shortfall. See Note 4 – Loans. Cash flow-dependent commercial real estate properties are being visited to inspect current tenant lease status. Where necessary, we will apply our loan work-out experience to protect our collateral position.

OREO at June 30, 2011 was $18.7 million, compared to $16.7 million at December 31, 2010, the largest being a condominium development at $11.7 million. This property was sold in 2010 but does not qualify for a sales treatment under GAAP.

An analysis of OREO activity is as follow:

	For the Six Months Ended June 30,
	2011				2010
	(amounts in thousands)
Balance at beginning of period		$	16,701			$	—
Real estate acquired in settlement of loans			682				10,712
Sales of real estate			(2,483	)			(329	)
Capitalized improvements to real estate			3,782				—
Balance at end of period		$	18,682			$	10,383

At June 30, 2011, the Bank’s total deposits decreased to $601.9 million from $604.7 million at December 31, 2010, a decrease of $2.8 million or 0.35%. The decrease was due to a planned run-off of brokered deposits, which decreased $21.3 million, offset by an increase in retail deposits of $18.5 million.

At June 30, 2011, total equity increased to $75.0 million from $70.7 million at December 31, 2010, an increase of $4.3 million or 6.0% due to the retention of earnings from the period.

Comparison of Operating Results for the Six Months Ended June 30, 2011 and 2010

General: Net income available to common shareholders for the six months ended June 30, 2011 was $3.9 million, compared to $3.3 million for the same period in 2010. The increase was impacted by the following:

Interest Income: Interest income increased $154,000, or 0.8%, to $20.6 million for the six months ended June 30, 2011, from $20.4 million for the six months ended June 30, 2010. The increase is attributable to higher average loan balances, somewhat offset by a lower yield on loans. Average loans for the six month period ended June 30, 2011 were $635.9 million compared to $614.2 million for the same period last year. The average yield on loans was 6.31% for the six months ended June 30, 2011 compared to 6.43% for the same period in 2010.

Interest Expense: Interest expense decreased $1.0 million or 18.0%, to $4.7 million for the six months ended June 30, 2011, from $5.7 million for the six months June 30, 2010. The decrease is primarily attributable to a lower cost of deposits as the Bank has been able to re-price deposits due to the current, historically low, rate environment while still maintaining strong deposit growth. The average rate paid on deposits for the six month period ended June 30, 2011 was 1.42% compared to 1.90% for the same period last year.

Net Interest Income: Net interest income increased $1.2 million, or 8.1%, to $15.9 million for the six months ended June 30, 2011, from $14.7 million for the six months ended June 30, 2010. We experienced an increase in our net interest rate spread of 37 basis points, to 4.72% for the six months ended June 30, 2011, from 4.35% for the same period last year. Our net interest margin increased 25 basis points, to 4.80% for the six months ended June 30, 2011, from 4.55% for the same period last year. Our ability to lower our cost of deposits and our practice of setting interest rate floors on commercial and real estate loans has allowed for this growth in net interest rate margin.

Provision for Loan Losses: We recorded a provision for loan losses of $4.5 million for the six months ended June 30, 2011 compared to $4.3 million for the six months ended June 30, 2010. The increase in the provision for losses over the prior year correlates to credit deterioration within the loan portfolio and management’s analysis of non-performing loans, and credit risk inherent in the overall loan portfolio.

Non-interest Income: Non-interest income was $3.7 million for the six months ended June 30, 2011, compared to $1.1 million for the same period last year. The Company recognized $3.1 million in gains from the sale of the guaranteed portion of SBA loans in 2011 compared to $676,000 for the same period last year. The increase in gain on sale of loans is a result of a change in the SBA sales agreement; warranty language was removed from the sales agreement and the Company is no longer required to defer the recognition of the gain for 90 days. The gain recorded represents loans sold during the six month period ended June 30, 2011 ($1.8 million) and previously deferred gains from the quarter ended December 31, 2010($1.3 million).

Non-interest Expense: Non-interest expense increased $1.5 million to $6.5 million for the six months ended June 30, 2011, from $5.0 million for the six months ended June 30, 2010. Compensation and benefits expenses increased $344,000 due to increased staffing related to a branch expansion, annual merit raises and higher fringe benefit costs. Other operating expenses increased to $1.6 million for the six month period, from $882,000 for the same period last year, an increase of $869,000. The increase is primarily due to OREO and other loan related expenses including appraisal fees, real estate taxes and insurance.

Income Taxes: The Company recorded income tax expense of $3.4 million, on income before taxes of $8.6 million for the six months ended June 30, 2011, resulting in an effective tax rate of 40.2%, compared to income tax expense of $2.6 million on income before taxes of $6.5 million for the same period of 2010, resulting in an effective tax rate of 40.5%.

The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, and have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. Yields and costs have been annualized.

	For the Six Months Ended June 30,
	2011								2010
	Average Balance			Interest Income/ Expense		Yield/ Cost			Average Balance			Interest Income/ Expense		Yield/ Cost
	(amounts in thousands, except percentages)
Assets
Loans	$	635,866		$	19,890		6.31	%	$	614,195		$	19,577		6.43	%
Investment securities		31,587			704		4.49	%		36,105			863		4.82	%
Federal funds sold and cash equivalents		—			—		0.00	%		134			—		0.00	%
Total interest-earning assets		667,453			20,594		6.22	%		650,434			20,440		6.34	%
Non-interest earning assets		85,220								35,908
Allowance for loan losses		(15,452	)							(13,333	)
Total assets	$	737,221							$	673,009

Liabilities and Shareholders’ Equity
Interest bearing deposits
NOWs	$	15,076		$	74		0.99	%	$	10,684		$	59		1.11	%
Money markets		91,921			497		1.09	%		90,153			533		1.19	%
Savings		186,625			1,148		1.24	%		144,492			1,129		1.58	%
Time deposits		224,436			1,780		1.60	%		176,628			1,857		2.12	%
Brokered certificates of deposit		49,903			506		2.04	%		95,093			1,288		2.73	%
Total interest-bearing deposits		567,961			4,005		1.42	%		517,050			4,866		1.90	%
Borrowings		64,119			714		2.25	%		67,011			886		2.67	%
Total interest-bearing liabilities		632,080			4,719		1.51	%		584,061			5,752		1.99	%
Non-interest bearing deposits		21,450								19,115
Other liabilities		10,117								4,389
Total liabilities		663,647								607,565
Shareholders’ equity		73,574								65,444
Total liabilities and shareholders’ equity	$	737,221							$	673,009
Net interest income				$	15,875							$	14,688
Interest rate spread							4.71	%							4.35	%
Net interest margin							4.80	%							4.55	%

Comparison of Operating Results for the Three Months Ended June 30, 2011 and 2010

General: Net income available to common shareholders for the three months ended June 30, 2011 was $1.9 million, compared to $1.8 million for the same period in 2010. The increase was impacted by the following:

Interest Income: Interest income increased $41,000, or 0.4%, to $10.4 million for the three months ended June 30, 2011, from $10.3 million for the three months ended June 30, 2010. The increase is attributable to higher average loan balances, somewhat offset by a lower yield on loans. Average loans for the three month period ended June 30, 2011 were $627.1 million compared to $617.7 million for the same period last year. The average yield on loans was 6.44% for the three months ended June 30, 2011 compared to 6.45% for the same period in 2010.

Interest Expense: Interest expense decreased $486,000 or 17.4%, to $2.3 million for the three months ended June 30, 2011, from $2.9 million for the three months June 30, 2010. The decrease is primarily attributable to a lower cost of deposits as the Bank has been able to re-price deposits due to the current, historically low, rate environment while still maintaining strong deposit growth. The average rate paid on deposits for the three month period ended June 30, 2011 was 1.37% compared to 1.81% for the same period last year.

Net Interest Income: Net interest income increased $527,000, or 7.0%, to $8.1 million for the three months ended June 30, 2011, from $7.6 million for the three months ended June 30, 2010. We experienced an increase in our net interest rate spread of 44 basis points, to 4.88% for the three months ended June 30, 2011, from 4.44% for the same period last year. Our net interest margin increased 30 basis points, to 4.93% for the three months ended June 30, 2011, from 4.63% for the same period last year. Our ability to lower our cost of deposits and our practice of setting interest rate floors on commercial and real estate loans has allowed for this growth in net interest rate margin.

Provision for Loan Losses: We recorded a provision for loan losses of $2.1 million for the three months ended June 30, 2011 compared to $2.2 million for the three months ended June 30, 2010. The continued high level of provision for losses correlates to credit deterioration within the loan portfolio and management’s analysis of non-performing loans, and credit risk inherent in the overall loan portfolio.

Non-interest Income: Non-interest income was $1.1 million for the three months ended June 30, 2011, compared to $903,000 for the same period last year. The Company recognized $899,000 in gains from the sale of the guaranteed portion of SBA loans in for the three months ended June 30, 2011, compared to $676,000 for the same period last year.

Non-interest Expense: Non-interest expense increased $587,000 to $3.3 million for the three months ended June 30, 2011, from $2.8 million for the three months ended June 30, 2010. Compensation and benefits expenses increased $123,000 due to increased staffing related to a branch expansion, annual merit raises and higher fringe benefit costs. Other operating expenses increased to $766,000 for the three month period, from $542,000 million for the same period last year, an increase of $224,000. The increase is primarily due to OREO and other loan related expenses including appraisal fees, real estate taxes and insurance.

Income Taxes: The Company recorded income tax expense of $1.6 million, on income before taxes of $3.9 million for the three months ended June 30, 2011, resulting in an effective tax rate of 40.3%, compared to income tax expense of $1.5 million on income before taxes of $3.6 million for the same period of 2010, resulting in an effective tax rate of 40.9%.

	For the Three Months Ended June 30,
	2011								2010
	Average Balance			Interest Income/ Expense		Yield/ Cost			Average Balance			Interest Income/ Expense		Yield/ Cost
	(amounts in thousands, except percentages)
Assets
Loans	$	627,114		$	10,074		6.44	%	$	617,689		$	9,927		6.45	%
Investment securities		31,081			330		4.26	%		37,226			436		4.70	%
Total interest-earning assets		658,195			10,404		6.34	%		655,079			10,363		6.35	%
Non-interest earning assets		92,002								39,818
Allowance for loan losses		(15,426	)							(13,772	)
Total assets	$	734,771							$	681,125

Liabilities and Shareholders’ Equity
Interest bearing deposits
NOWs	$	15,779		$	39		0.99	%	$	10,390		$	27		1.04	%
Money markets		91,356			248		1.09	%		91,843			270		1.18	%
Savings		192,614			595		1.24	%		145,073			546		1.51	%
Time deposits		223,748			843		1.51	%		183,341			920		2.01	%
Brokered certificates of deposit		46,517			225		1.94	%		93,523			599		2.57	%
Total interest-bearing deposits		570,014			1,950		1.37	%		524,170			2,362		1.81	%
Borrowings		64,100			362		2.27	%		66,100			436		2.65	%
Total interest-bearing liabilities		634,114			2,312		1.46	%		590,270			2,798		1.90	%
Non-interest bearing deposits		22,043								18,829
Other liabilities		4,017								4,682
Total liabilities		660,174								613,781
Shareholders’ equity		74,597								67,344
Total liabilities and shareholders’ equity	$	734,771							$	681,125
Net interest income				$	8,092							$	7,565
Interest rate spread							4.88	%							4.45	%
Net interest margin							4.93	%							4.63	%

Critical Accounting Policies

In the preparation of our consolidated financial statements, management has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States. The significant accounting policies are described in the Note 2 to the Consolidated Financial Statements.

Certain accounting policies involve significant judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities. Management considers these accounting policies to be critical accounting policies. The judgments and assumptions used are based on historical experience and other factors, which management believes to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of assets and liabilities and results of operations.

Allowance for Loan Losses: The allowance for loan losses is considered a critical accounting policy. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment.

In evaluating the allowance for loan losses, management considers historical loss factors, the mix of the loan portfolio (types of loans and amounts), geographic and industry concentrations, current national and local economic conditions and other factors related to the collectability of the loan portfolio, including underlying collateral values and estimated future cash flows. All of these estimates are susceptible to significant change. Large groups of smaller balance homogeneous loans, such as residential real estate, home equity loans, and consumer loans, are evaluated in the aggregate under FASB ASC Topic 450, “Accounting for Contingencies”, using historical loss factors adjusted for economic conditions and other qualitative factors which include trends in delinquencies, classified and non-performing loans, loan concentrations by loan category and by property type, seasonality of the portfolio, internal and external analysis of credit quality, peer group data, loan charge offs, local and national economic conditions and single and total credit exposure. Large balance and/or more complex loans, such as multi-family and commercial real estate loans, commercial business loans, and construction loans are evaluated individually for impairment in accordance with FASB ASC Topic 310 “Receivables”. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s effective interest rate or at the fair value of collateral if repayment is expected solely from the collateral. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available or as projected events change.

Management reviews the level of the allowance monthly. Although management used the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance, as an integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Other Than Temporary Impairment on Investment Securities: Management periodically performs analyses to determine whether there has been an other-than-temporary decline in the value of one or more securities. The available-for-sale securities portfolio is carried at estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholder’s equity. The held-to-maturity securities portfolio, consisting of debt securities for which there is a positive intent and ability to hold to maturity, is carried at amortized cost. Management conducts a quarterly

review and evaluation of the securities portfolio to determine if the value of any security has declined below its cost or amortized cost, and whether such decline is other-than-temporary. If such decline is deemed other-than-temporary, the cost basis of the security is adjusted by writing down the security to estimated fair market value through a charge to current period earnings to the extent that such decline is credit related. All other changes in unrealized gains or losses for investment securities available for sale are recorded, net of tax effect, through other comprehensive income.

Income Taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 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 would 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.

Liquidity: Liquidity describes the ability to meet the financial obligations that arise out of the ordinary course of business. Liquidity addresses the Company's ability to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund current and planned expenditures. Liquidity is derived from increased repayment and income from interest-earning assets. The loan to deposit ratio was 104.7% and 103.6% at June 30, 2010 and December 31, 2010, respectively. Funds received from new and existing depositors provided a large source of liquidity for the three month period ended June 30, 2011. The Company seeks to rely primarily on core deposits from customers to provide stable and cost-effective sources of funding to support loan growth. The Company also seeks to augment such deposits with longer term and higher yielding certificates of deposit. To the extent that retail deposits are not adequate to fund customer loan demand, liquidity needs can be met in the short-term funds market. As of June 30, 2011, the Company had a short term line of credit with Atlantic Central Bankers Bank for $3.0 million. There were no outstanding borrowings on this line at June 30, 2011. Longer term funding can be obtained through advances from the FHLB. As of June 30, 2011, the Company maintained lines of credit with the FHLB of $115.2 million, of which $40.7 million was outstanding at June 30, 2011.

As of June 30, 2011, the Company's investment securities portfolio included $14.0 million of mortgage-backed securities that provide cash flow each month. The majority of the investment portfolio is classified as available for sale, is marketable, and is available to meet liquidity needs. The Company's residential real estate portfolio includes loans, which are underwritten to secondary market criteria, and accordingly could be sold in the secondary mortgage market if needed as an additional source of liquidity. The Company's management is not aware of any known trends, demands, commitments or uncertainties that are reasonably likely to result in material changes in liquidity.

Capital: A strong capital position is fundamental to support the continued growth of the Company. The Company and the Bank are subject to various regulatory capital requirements. Regulatory capital is defined in terms of Tier I capital (shareholders' equity as adjusted for unrealized gains or losses on

available-for-sale securities), Tier II capital (which includes a portion of the allowance for loan losses) and total capital (Tier I plus Tier II). Risk-based capital ratios are expressed as a percentage of risk-weighted assets. Risk-weighted assets are determined by assigning various weights to all assets and off-balance sheet associated risk in accordance with regulatory criteria. Regulators have also adopted minimum Tier I leverage ratio standards, which measure the ratio of Tier I capital to total assets.

At June 30, 2011 management believes that the Company and the Bank are "well-capitalized" and in compliance with all applicable regulatory requirements.

Recent Legislation

The Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) which was signed into law on July 21, 2010, Generally, the Dodd-Frank Act is effective the day after it was signed into law, but different effective dates apply to specific sections of the law. Uncertainty remains as to the ultimate impact of the Dodd-Frank Act, which could have a material adverse impact either on the financial services industry as a whole, or on the Company’s or the Bank’s business, results of operations and financial condition. The Dodd-Frank Act, among other things:

·	Directs the Federal Reserve to issue rules which are expected to limit debit-card interchange fees;

Removes trust preferred securities issued after May 19, 2010, as a permitted component of a holding company’s Tier 1 capital and, after a three-year phase-in period beginning January 1, 2013, eliminates Tier 1 capital treatment for all trust preferred securities issued by holding companies with more than $15 billion in total consolidated assets;

·	Provides for an increase in the FDIC assessment for depository institutions with assets of $10 billion or more, increases in the minimum reserve ratio for the deposit insurance fund from 1.15% to 1.35% and changes in the basis for determining FDIC premiums from deposits to assets;

·	Creates a new consumer financial protection bureau that will have rulemaking authority for a wide range of consumer protection laws that would apply to all banks and would have broad powers to supervise and enforce consumer protection laws;

·	Provides for new disclosure and other requirements relating to executive compensation and corporate governance;

·	Changes standards for Federal preemption of state laws related to federally chartered institutions and their subsidiaries;

Provides mortgage reform provisions regarding a customer’s ability to repay, restricting variable-rate lending by requiring the ability to repay to be determined for variable-rate loans by using the maximum rate that will apply during the first five years of a variable-rate loan term, and making more loans subject to provisions for higher cost loans, new disclosures, and certain other revisions;

·	Creates a financial stability oversight council that will recommend to the Federal Reserve increasingly strict rules for capital, leverage, liquidity, risk management and other requirements as companies grow in size and complexity;

·	Permanently increases the deposit insurance coverage to $250 thousand and allows depository institutions to pay interest on checking accounts; and

·	Requires publicly-traded bank holding companies with assets of $10 billion or more to establish a risk committee responsible for enterprise-wide risk management practices.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable as the Company is a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Evaluation of disclosure controls and procedures. Based on their evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, (the "Exchange Act")), the Company's principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the required time periods specified in the SEC’s rules and forms.

Internal Controls

Changes in internal control over financial reporting. During the last quarter, there was no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company was not a party to any material legal proceedings.

ITEM 1A. RISK FACTORS

Not applicable as the Company is a smaller reporting company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

31.1

Certification of CEO required by Rule 13a-14(a).

31.2

Certification of CFO required by Rule 13a-14(a).

Certification required by 18 U.S.C. §1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PARKE BANCORP, INC.

Date: August 15, 2011		/s/ Vito S. Pantilione
		Vito S. Pantilione
		and Chief Executive Officer
		(Principal Executive Officer

Date: August 15, 2011		/s/ John F. Hawkins
		John F. Hawkins
		Senior Vice President and
		Chief Financial Officer
		(Principal Accounting Officer