PARKE BANCORP, INC. - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2023

[☐] 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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of Each Exchange on Which Registered
Common Stock, par value $0.10 per share	PKBK	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [☒] No [☐]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [☒] No [☐]

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

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

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

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

Yes [☐ ] No [☒]

As of May 9, 2023, there were 11,946,671 shares of the registrant's common stock ($0.10 par value) outstanding.

INDEX


		Page
Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	1
	Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 (unaudited)	2
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Equity for the three months ended March 31, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Cash Flow for the three months ended March 31, 2023 and 2022 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36

SIGNATURES		37

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Parke Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)

(Dollars in thousands except per share data)


	March 31, 2023		December 31, 2022
Assets
Cash and due from banks	$	21,472	$	27,165
Interest bearing deposits with banks	124,502		154,985
Cash and cash equivalents	145,974		182,150
Investment securities available for sale, at fair value	8,977		9,366
Investment securities held to maturity (fair value of $7,966 at March 31, 2023 and $7,805 at December 31, 2022)	9,359		9,378
Total investment securities	18,336		18,744

Loans, net of unearned income	1,762,696		1,751,459
Less: Allowance for credit losses	(31,507)		(31,845)
Net loans	1,731,189		1,719,614
Accrued interest receivable	8,930		8,768
Premises and equipment, net	5,842		5,958
Restricted stock	9,129		5,439
Bank owned life insurance (BOLI)	28,288		28,145
Deferred tax asset	9,878		9,184
Other real estate owned (OREO)	1,673		1,550
Other	5,006		5,363
Total assets	$	1,964,245	$	1,984,915
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing deposits	$	277,128	$	352,546
Interest-bearing deposits	1,186,666		1,223,435
Total deposits	1,463,794		1,575,981
FHLBNY borrowings	165,150		83,150

Subordinated debentures	42,969		42,921
Accrued interest payable	3,143		2,664
Other	16,083		14,165
Total liabilities	1,691,139		1,718,881
Shareholders' Equity
Preferred stock, 1,000,000 shares authorized, $1,000 liquidation value Series B non-cumulative convertible; 445 shares outstanding at March 31, 2023 and December 31, 2022	445		445
Common stock, $0.10 par value; authorized 15,000,000 shares; Issued: 12,231,193 shares and 12,225,097 shares at March 31, 2023 and December 31, 2022, respectively	1,223		1,223
Additional paid-in capital	136,341		136,201
Retained earnings	138,577		131,706
Accumulated other comprehensive loss	(465)		(526)
Treasury stock, 284,522 shares at March 31, 2023 and Dec. 31, 2022, at cost	(3,015)		(3,015)
Total shareholders’ equity	273,106		266,034


Total liabilities and shareholders' equity	$	1,964,245	$	1,984,915

See accompanying notes to consolidated financial statements

Parke Bancorp Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(Dollars in thousands except per share data)


	For the Three Months Ended March 31,
	2023		2022

Interest income:
Interest and fees on loans	$	24,545	$	19,199
Interest and dividends on investments	210		189
Interest on deposits with banks	1,269		248
Total interest income	26,024		19,636
Interest expense:
Interest on deposits	7,582		1,840
Interest on borrowings	1,293		696
Total interest expense	8,875		2,536
Net interest income	17,149		17,100
Provision for (recovery of) credit losses	(2,400)		—
Net interest income after provision for (recovery of) credit losses	19,549		17,100
Non-interest income
Service fees on deposit accounts	1,215		1,316

Other loan fees	178		276
Bank owned life insurance income	143		138
Net gain on sale and valuation adjustment of OREO	—		47
Other	246		298
Total non-interest income	1,782		2,075
Non-interest expense
Compensation and benefits	3,641		2,688
Professional services	593		551
Occupancy and equipment	644		645
Data processing	301		324
FDIC insurance and other assessments	225		287
OREO expense	172		34
Other operating expense	1,185		1,149
Total non-interest expense	6,761		5,678
Income before income tax expense	14,570		13,497
Income tax expense	3,440		3,406
Net income attributable to Company	11,130		10,091


Less: Preferred stock dividend	(7)		(7)
Net income available to common shareholders	$	11,123	$	10,084
Earnings per common share
Basic	$	0.93	$	0.85
Diluted	$	0.92	$	0.83
Weighted average common shares outstanding
Basic	11,944,163		11,905,330
Diluted	12,160,793		12,180,320

See accompanying notes to consolidated financial statements

Parke Bancorp Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(Dollars in thousands)


	For the Three Months Ended March 31,
	2023		2022

Net income	$	11,130	$	10,091
Unrealized gain (loss) on investment securities:
Unrealized gain (loss) on investment securities	82		(584)
Tax impact on unrealized (gain) loss	(21)		151
Total unrealized gain (loss) on investment securities	61		(433)


Comprehensive income attributable to the Company	$	11,191	$	9,658

See accompanying notes to consolidated financial statements

Parke Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(Dollars in thousands except share data)


	Preferred Stock		Shares of Common Stock issued	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Total Shareholders' Equity
Three Months Ended
Balance, December 31, 2021	$	445	12,182,081	$	1,218	$	135,451	$	98,017	$	245	$	(3,015)	$	232,361
Net income	—		—	—		—		10,091		—		—		10,091


Common stock options exercised	—		15,938	2		112		—		—		—		114

Other comprehensive loss	—		—	—		—		—		(433)		—		(433)
Stock compensation expense	—		—	—		60		—		—		—		60

Dividend on preferred stock (1)	—		—	—		—		(7)		—		—		(7)
Dividend on common stock (2)	—		—	—		—		(1,907)		—		—		(1,907)
Balance, March 31, 2022	$	445	12,198,019	$	1,220	$	135,623	$	106,194	$	(188)	$	(3,015)	$	240,279
Three Months Ended
Balance, December 31, 2022	$	445	12,225,097	$	1,223	$	136,201	$	131,706	$	(526)	$	(3,015)	$	266,034
Cumulative effect of adoption of ASU 2016-13	—		—	—		—		(2,102)		—		—		(2,102)
Net income	—		—	—		—		11,130		—		—		11,130

Common stock options exercised	—		6,096	—		33		—		—		—		33

Other comprehensive income	—		—	—		—		—		61		—		61
Stock compensation expense	—		—	—		107		—		—		—		107
Dividend on preferred stock (1)	—		—	—		—		(7)		—		—		(7)
Dividend on common stock (2)	—		—	—		—		(2,150)		—		—		(2,150)
Balance, March 31, 2023	$	445	12,231,193	$	1,223	$	136,341	$	138,577	$	(465)	$	(3,015)	$	273,106

(1) Dividends per share of $15.0 were declared on series B preferred stock for the three months ended March 31, 2023 and 2022, respectively.

(2) Dividends per share of $0.18 and $0.16, respectively, were declared on common stock outstanding for the three months ended March 31, 2023 and 2022.

See accompanying notes to consolidated financial statements

Parke Bancorp Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(Dollars in thousands)


	For the Three Months Ended March 31,
	2023		2022

Cash Flows from Operating Activities:
Net income	$	11,130	$	10,091
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	31		165
(Recovery of) provision for credit losses	(2,400)		—
Increase in value of bank owned life insurance	(143)		(138)



Net gain on sale of OREO and valuation adjustments	—		(47)

Net accretion of purchase premiums and discounts on securities	(9)		—
Stock based compensation	107		60

Net changes in:
Decrease (increase) in accrued interest receivable and other assets	195		(2,443)
Increase in accrued interest payable and other accrued liabilities	1,638		981
Net cash provided by operating activities	10,549		8,669
Cash Flows from Investing Activities:
Repayments and maturities of investment securities available for sale	465		944
Repayments and maturities of investment securities held to maturity	34		35

Net increase in loans	(11,356)		(10,927)
Sales (purchases) of bank premises and equipment	133		(38)
Proceeds from sale of OREO, net	—		1,606

Purchases of restricted stock	(3,690)		(13)
Net cash used in investing activities	(14,414)		(8,393)
Cash Flows from Financing Activities:
Cash dividends	(2,157)		(1,914)

Proceeds from exercise of stock options	33		114

Decrease in FHLBNY and short-term borrowings	(30,000)		—
Increase in FHLBNY and short-term borrowings	112,000		—

Net decrease in noninterest-bearing deposits	(75,418)		(81,870)
Net decrease in interest-bearing deposits	(36,769)		(9,330)
Net cash used in financing activities	(32,311)		(93,000)
Net decrease in cash and cash equivalents	(36,176)		(92,724)
Cash and Cash Equivalents, January 1,	182,150		596,553
Cash and Cash Equivalents, March 31,	$	145,974	$	503,829

Supplemental Disclosure of Cash Flow Information:
Interest paid	$	8,396	$	3,110
Income taxes paid	$	1,445	$	3,894

Non-cash Investing and Financing Items
Loans transferred to OREO	$	123	$	71
Accrued dividends payable	$	2,157	$	2,157

See accompanying notes to consolidated financial statements

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1. ORGANIZATION

Parke Bancorp, Inc. (the “Company, we, us, our”) is a bank holding company headquartered in Sewell, New Jersey. Through subsidiaries, the Company provides individuals, corporations and other businesses and institutions with commercial and retail banking services, principally loans and deposits. The Company was incorporated in January 2005 under the laws of the State of New Jersey for the sole purpose of becoming the holding company of Parke Bank (the "Bank").

The Bank is a commercial bank, which was incorporated on August 25, 1998, and commenced operations on January 28, 1999. The Bank is chartered by the New Jersey Department of Banking and Insurance and its deposits are insured by the Federal Deposit Insurance Corporation. The Bank maintains its principal office at 601 Delsea Drive, Sewell, New Jersey, and has six additional branch office locations; 501 Tilton Road, Northfield, New Jersey, 567 Egg Harbor Road, Washington Township, New Jersey, 67 East Jimmie Leeds Road, Galloway Township, New Jersey, 1150 Haddon Avenue, Collingswood, New Jersey, 1610 Spruce Street, Philadelphia, Pennsylvania, and 1032 Arch Street, Philadelphia, Pennsylvania. The Bank also has a loan office located at 1817 East Venango Street, Philadelphia, Pennsylvania.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation: We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank (including certain partnership interests). Parke Capital Trust I, Parke Capital Trust II and Parke Capital Trust III are wholly-owned subsidiaries but are not consolidated as they do not meet the requirements for consolidation under applicable accounting guidance. We have eliminated inter-company balances and transactions. We have also reclassified certain prior year amounts to conform to the current year presentation, which did not have a material impact on our consolidated financial condition or results of operations.

The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The accompanying interim financial statements for the three months ended March 31, 2023 and 2022 are unaudited. The balance sheet as of December 31, 2022, 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 ended March 31, 2023 are not necessarily indicative of the results for the full year or any other period.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the allowance for loan losses, the valuation of deferred income taxes, and the carrying value of other real estate owned ("OREO").

Allowance for Credit Losses on Loans and Leases

The allowance for credit losses on loans and leases is a valuation account that is deducted from the loan or lease’s amortized cost basis to present the net amount expected to be collected on the loans and leases. Loans and leases deemed to be uncollectible are charged against the allowance for credit losses on loans and leases, and subsequent recoveries, if any, are credited to the allowance for credit losses on loans and leases. Changes to the allowance for credit losses on loans and leases are recorded through the provision for credit losses. The allowance for credit losses on loans and leases is maintained at a level considered appropriate to absorb expected credit losses over the expected life of the portfolio as of the reporting date.

The allowance for credit losses on loans and leases is measured on a collective (pool) basis when similar risk characteristics exist. Parke's loan portfolio segments include commercial and industrial, construction, commercial - owner occupied, commercial - non-owner occupied, residential - 1 to 4 family, residential - 1 to 4 family investment, residential - multifamily, and consumer. Loans that do not share similar risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. For individually assessed loans, see related details in the Individually Assessed Loans section below.

The allowance for credit losses on collectively assessed loans and leases is measured over the expected life of the loan or lease using a vintage loss rate approach, which will then be supplemented with qualitative factors. The vintage loss rate approach creates pools of loans (made up of individual loans) based on the loan segmentation. The loan pools are aggregated by origination year. Charge-offs, net of recoveries, are allocated by the year of charge-off to each loan pool. An average life is prescribed to a pool of loans that were originated in a particular year. The actual charge-offs as a percent of total loans are calculated for each historical year, and projected for future years for each year within the average life time horizon. The sum of the actual charge-offs and projected charge-offs are divided by the average amortized origination amount for each respective year. Those charge-off percentages are added together to obtain an aggregated vintage loss percentage which is then multiplied by the outstanding loan balances to obtain a reserve requirement. Parke runs the Current Expected Credit Loss ("CECL") impairment models on a quarterly basis and qualitatively adjusts model results for risk factors that are not considered within the model but which are relevant in assessing the expected credit losses within the loan and lease pools. Management generally considers the following qualitative factors:

•Volume and severity of past-due loans, non-accrual loans and classified loans;

•Lending policies and procedures, including underwriting standards and historically based loss/collection, charge-off and recovery practices;

•National and economic conditions that may have an impact on credit quality;

•Nature and volume of the portfolio;

•Existence and effect of any credit concentrations and changes in the level of such concentrations;

•The value of the underlying collateral for loans that are not collateral dependent;

•Changes in the quality of the loan review system; and

•Experience, ability and depth of lending management and staff

Parke has elected to not estimate an allowance for credit losses on accrued interest receivable, as it already has a policy in place to reverse or write-off accrued interest, through interest income, in a timely manner.

Allowance for Credit Losses on Lending-Related Commitments

Parke estimates expected credit losses over the contractual period in which it is exposed to credit risk on contractual obligations to extend credit, unless the obligation is unconditionally cancellable by the Company. The allowance for credit losses on lending-related commitments is recorded in other liabilities in the consolidated balance sheet and is recorded as a provision for credit losses in the consolidated income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The lifetime loss rates for off-balance sheet credit exposures are calculated in the same manner as on-balance sheet credit exposures, using the same model and economic forecasts, adjusted for the estimated likelihood that funding will occur.

Individually Assessed Loans and Leases

ASC 326 provides that a loan or lease is measured individually if it does not share similar risk characteristics with other financial assets. For Parke, loans and leases which are identified to be individually assessed under CECL typically would have been evaluated individually as impaired loans using accounting guidance in effect in periods prior to the adoption of CECL and include collateral dependent loans.

Collateral Dependent Loans

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

Allowance for Credit Losses on Held to Maturity Securities

We follow Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company classifies the held-to-maturity debt securities into the following major security types: residential mortgage backed, and state and political subdivisions. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-

to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience including no losses, we have determined that an allowance for credit loss on the held-to-maturity portfolio is not required

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

Allowance for Credit Losses on Available for Sale Securities

We follow ASC 326-30, Financial Instruments - Credit Loss - Available-for-Sale Debt Securities, which provides guidance related to the recognition of and expanded disclosure requirements for expected credit losses on available-for-sale debt securities. For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to non-interest income in the Consolidated Statements of Income.

For debt securities available-for-sale which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, we evaluate whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating. In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.

Recently Issued Accounting Pronouncements:

In March 2020, the FASB issued ASU No. 2020.-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance to entities for a limited period of time to ease the transition in accounting for and recognizing the effects of reference rate reform on financial reporting. Under the guidance, modifications of contracts due to reference rate reform will not require contract remeasurement or reassessment of a previous accounting determination. For hedge accounting, modification of critical terms of the hedge due to changes in reference rate reform will not affect hedge accounting or dedesignate the hedging relationship. The guidance also provides specific expedients for fair value hedges, cash flow hedges, and excluded components. Further, the guidance provides a none-time election to sell or transfer held to maturity debt 46 securities that are affected by the reference rate change. The guidance is effective upon issuance through December 31, 2022. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of Accounting Standards Codification (ASC) Topic 848 to December 31, 2024. This gives reporting entities two additional years to apply the accounting relief provided under ASC Topic 848 for matters related to reference rate reform. ASU 2022-06 is effective for all reporting entities immediately upon issuance and must be applied on a prospective basis. The Company does not expect the application of this guidance to have a material impact on the Consolidated Financial Statements.

Accounting Pronouncements Adopted in 2023

In June 2016, the Financial Accounting Standard Board (FASB) issued accounting standards update ("ASU") 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 (Topic 326), replaces the incurred loss impairment methodology in current GAAP with a CECL methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. The ASU was amended in some aspects by subsequent Accounting Standards Updates. This guidance became effective on January 1, 2023 for the Company. Results and disclosures for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity debt securities, and unfunded commitments. On January 1, 2023, the Company recorded a cumulative effect decrease to retained earnings of $2.1 million, net of tax, of which $1.9 million related to loans, and $960.0 thousand related to unfunded commitments. There were no such charges for securities held by the Company at the date of adoption.

The following table illustrates the impact of adopting ASC 326:


(Amounts in thousands)	January 1, 2023
Assets	Pre-adoption		Adoption Impact		As Reported
ACL on loans
Commercial and Industrial	$	390	$	168	$	558
Construction	2,581		1,899		4,480
Commercial - Owner Occupied	2,298		(171)		2,127
Commercial - Non-owner Occupied	9,709		(951)		8,758
Residential - 1 to 4 Family	6,076		1,782		7,858
Residential - 1 to 4 Family Investment	9,381		(795)		8,586
Residential - Multifamily	1,347		(128)		1,219
Consumer	63		53		116
Total ACL on loans	31,845		1,857		33,702
Deferred Tax Assets	9,184		716		9,900
Liabilities
ACL for unfunded commitments	—		960		960
Equity
Retained Earnings	$	131,706	$	(2,101)	$	129,605

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 March 31, 2023 and December 31, 2022:


As of March 31, 2023	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(Dollars in thousands)
Available for sale:
Corporate debt obligations	$	500	$	—	$	—	$	500
Residential mortgage-backed securities	9,104		4		631		8,477

Total available for sale	$	9,604	$	4	$	631	$	8,977

Held to maturity:
Residential mortgage-backed securities	$	5,521	$	—	$	1,032	$	4,489
States and political subdivisions	3,838		62		423		3,477
Total held to maturity	$	9,359	$	62	$	1,455	$	7,966


As of December 31, 2022	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(Dollars in thousands)
Available for sale:
Corporate debt obligations	$	500	$	—	$	—	$	500
Residential mortgage-backed securities	9,575		3		712		8,866

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

Held to maturity:
Residential mortgage-backed securities	$	5,556	$	—	$	1,096	$	4,460
States and political subdivisions	3,822		56		533		3,345
Total held to maturity	$	9,378	$	56	$	1,629	$	7,805

The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of March 31, 2023 are as follows:


	Amortized Cost		Fair Value
	(Dollars in thousands)
Available for sale:
Due within one year	$	500	$	500
Due after one year through five years	1,868		1,712
Due after five years through ten years	3,183		3,028
Due after ten years	4,053		3,737
Total available for sale	$	9,604	$	8,977

Held to maturity:
Due within one year	$	—	$	—
Due after one year through five years	1,362		1,425
Due after five years through ten years	—		—
Due after ten years	7,997		6,541
Total held to maturity	$	9,359	$	7,966

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

The Company did not sell any securities during the three months ended March 31, 2023. The following tables show the gross unrealized losses and fair value of the Company's investments for which an allowance for credit losses has not been recorded, which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2023 and December 31, 2022:


As of March 31, 2023	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousand)
Available for sale:
Residential mortgage-backed securities	$	882	$	15	$	7,361	$	616	$	8,243	$	631
Total available for sale	$	882	$	15	$	7,361	$	616	$	8,243	$	631
Held to maturity:
Residential mortgage-backed securities	$	—	$	—	$	4,489	$	1,032	$	4,489	$	1,032
States and political subdivisions	—		—		2,052		423		2,052		423
Total held to maturity	$	—	$	—	$	6,541	$	1,455	$	6,541	$	1,455


As of December 31, 2022	Less Than 12 Months				12 Months or Greater				Total
Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
Available for sale:
Residential mortgage-backed securities	$	7,579	$	576	$	1,043	$	136	$	8,622	$	712
Total available for sale	$	7,579	$	576	$	1,043	$	136	$	8,622	$	712
Held to maturity:
Residential mortgage-backed securities	$	—	$	—	$	4,460	$	1,096	$	4,460	$	1,096
States and political subdivisions	—		—		1,943		533		1,943		533
Total held to maturity	$	—	$	—	$	6,403	$	1,629	$	6,403	$	1,629

The Company’s unrealized loss for the debt securities is comprised of 8 securities in the less than 12 months loss position and 16 securities in the 12 months or greater loss position at March 31, 2023. The mortgage-backed securities that had unrealized losses were issued or guaranteed by the US government or US government sponsored entities. The unrealized losses associated with those mortgage-backed securities are generally driven by changes in interest rates and are not due to credit losses given the explicit or implicit guarantees provided by the U.S. government. The states and political subdivisions securities that had unrealized losses were issued by a school district, and the loss is attributed to changes in interest rates and not due to credit losses. Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be credit losses at March 31, 2023.

NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

At March 31, 2023 and December 31, 2022, the Company had $1.76 billion and $1.75 billion, respectively, in loans receivable outstanding. Outstanding balances include a total net increase of $2.2 million and $1.9 million at March 31, 2023 and December 31, 2022, respectively, for net deferred loan costs, and unamortized discounts. The portfolio segments of loans receivable at March 31, 2023 and December 31, 2022, consist of the following:


	March 31, 2023		December 31, 2022
	Amount		Amount
	(Dollars in thousands)
Commercial and Industrial	$	34,138	$	32,383
Construction	169,375		192,357
Real Estate Mortgage:
Commercial – Owner Occupied	141,083		125,950
Commercial – Non-owner Occupied	379,140		377,452
Residential – 1 to 4 Family	442,110		444,820
Residential – 1 to 4 Family Investment	490,779		476,210
Residential – Multifamily	99,586		95,556
Consumer	6,485		6,731
Total Loan receivable	1,762,696		1,751,459
Allowance for credit losses on loans	(31,507)		(31,845)
Total loan receivable, net of allowance for credit losses on loans	$	1,731,189	$	1,719,614

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


March 31, 2023	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans
	(Dollars in Thousands)
Commercial and Industrial	$	45	$	87	$	198	$	330	$	33,808	$	34,138
Construction	—		—		1,091		1,091		168,284		169,375
Real Estate Mortgage:
Commercial – Owner Occupied	—		—		400		400		140,683		141,083
Commercial – Non-owner Occupied	—		—		14,380		14,380		364,760		379,140
Residential – 1 to 4 Family	447		—		—		447		441,663		442,110
Residential – 1 to 4 Family Investment	—		—		—		—		490,779		490,779
Residential – Multifamily	—		—		—		—		99,586		99,586
Consumer	—		—		70		70		6,415		6,485
Total Loans	$	492	$	87	$	16,139	$	16,718	$	1,745,978	$	1,762,696


December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans
	(Dollars in thousands)
Commercial and Industrial	$	—	$	89	$	—	$	89	$	32,294	$	32,383
Construction	—		—		1,091		1,091		191,266		192,357
Real Estate Mortgage:
Commercial – Owner Occupied	—		—		400		400		125,550		125,950
Commercial – Non-owner Occupied	—		—		14,553		14,553		362,899		377,452
Residential – 1 to 4 Family	58		—		162		220		444,600		444,820
Residential – 1 to 4 Family Investment	—		—		—		—		476,210		476,210
Residential – Multifamily	—		—		—		—		95,556		95,556
Consumer	78		—		70		148		6,583		6,731
Total Loans	$	136	$	89	$	16,276	$	16,501	$	1,734,958	$	1,751,459

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


	March 31, 2023
(amounts in thousands)	Nonaccrual with no ACL		Nonaccrual with ACL		Total Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Total Nonperforming
Commercial and Industrial	$	198	$	—	$	198	$	—	$	198
Construction	1,091		—		1,091		—		1,091
Commercial - Owner Occupied	—		400		400		—		400
Commercial - Non-owner Occupied	10,943		3,437		14,380		—		14,380
Residential - 1 to 4 Family	—		—		—		—		—
Residential - 1 to 4 Family Investment	—		—		—		—		—
Residential - Multifamily	—		—		—		—		—
Consumer	70		—		70		—		70
Total	$	12,302	$	3,837	$	16,139	$	—	$	16,139


	December 31, 2022
(amounts in thousands)	Total Nonaccrual		Loans Past Due Over 90 Days Still Accruing
Commercial and Industrial	$	—	$	—
Construction	1,091		—
Commercial - Owner Occupied	587		—
Commercial - Non-owner Occupied	19,568		—
Residential - 1 to 4 Family	417		—
Residential - 1 to 4 Family Investment	—		—
Residential - Multifamily	—		—
Consumer	70		—
Total	$	21,733	$	—

Allowance For Credit Losses (ACL)

We maintain the ACL at a level that we believe to be appropriate to absorb estimated credit losses in the loan portfolios as of the balance sheet date. We established our allowance in accordance with guidance provided in Accounting Standard Codification ("ASC") - Financial Instruments - Credit Losses ("ASC 326").

The allowance for credit losses represents management’s estimate of expected losses inherent in the Company’s lending activities excluding loans accounted for under fair value. The allowance for credit losses is maintained through charges to the provision for credit losses in the Consolidated Statements of Income as expected losses are estimated. Loans or portions thereof that are determined to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.

The Company performs periodic reviews of its loan and lease portfolios to identify credit risks and to assess the overall collectability of those portfolios. The Company's allowance for credit losses includes a general component and an asset-specific component for collateral-dependent loans. To determine the asset-specific component of the allowance, the loans are evaluated individually based on the fair value of the underlying collateral. The Company generally measures the asset-specific allowance as the difference between the net realizable value of loan collateral and the recorded investment of a loan.

The general component of the allowance evaluates the impairments of pools of the loan portfolio collectively. It incorporates a historical valuation allowance and qualitative allowance. The historical valuation utilizes a vintage loss rate approach utilizing a third party software model. The vintage loss rate approach creates pools of loans based on the segments defined by management, and consists of commercial and industrial, construction, commercial - owner occupied, commercial - non-owner occupied, residential - 1 to 4 family, residential - 1 to 4 family investment, residential - multifamily, and consumer. The loan pools are aggregated by origination year. Charge-offs, net of recoveries, are allocated by the year of charge-off to each loan pool. An average life is prescribed to a pool of loans that were originated in a particular year. The actual charge-offs as a percent of total loans are calculated for each historical year, and projected for future years for each year within the average life time horizon. The sum of the actual charge-offs and projected charge-offs are divided by the average amortized origination amount for each respective year. Those charge-off percentages are added together to obtain an aggregated vintage loss percentage which is then multiplied by the outstanding loan balances to obtain a reserve requirement.

The qualitative allowance component is based on general economic conditions and other qualitative risk factors both internal and external to the Company. It is generally determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank's lending management and staff; (ii) the effectiveness of the Bank's lending policies, procedures and internal controls;(iii) volume and severity of loan credit quality; (iv) nature and volume of portfolio and term of loans (v) the composition and concentrations of credit; (vi) the effectiveness of the internal loan review system; and (vii) national and local economic trends and conditions, and industry conditions. Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. 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.

The Company has elected to exclude accrued interest receivable from the measurement of the ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is generally reversed against interest income.

The process of determining the level of the allowance for credit losses requires a high degree of estimate and judgment. It is reasonably possible that actual outcomes may differ from our estimates.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. At March 31, 2023, the allowance for credit losses on off-balance sheet credit exposures was $760.0 thousand.

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


					Real Estate Mortgage
	Commercial and Industrial		Construction		Commercial Owner Occupied		Commercial Non-owner Occupied		Residential 1 to 4 Family		Residential 1 to 4 Family Investment		Residential Multifamily		Consumer		Total
Allowance for credit losses	(Dollars in thousands)
Three months ended March 31, 2023
December 31, 2022	$	390	$	2,581	$	2,298	$	9,709	$	6,076	$	9,381	$	1,347	$	63	$	31,845
Impact of adoption ASC 326	168		1,899		(171)		(951)		1,782		(795)		(128)		53		1,857
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	3		—		2		—		—		—		—		—		5
Provisions (benefits)	177		(881)		(253)		(682)		(52)		(516)		19		(12)		(2,200)
Ending Balance at March 31, 2023	$	738	$	3,599	$	1,876	$	8,076	$	7,806	$	8,070	$	1,238	$	104	$	31,507

During the quarter, the credit provisions to the Construction, Commercial Non-owner Occupied, and Residential 1-4 Family Investment segments were largely driven by declines or slowdowns to growth within the portfolio that lowered the loan exposure and also caused changes to the qualitative factors related to loan volume within the portfolio segments. The credit provision to the Commercial Owner Occupied segment was largely driven by a reduction in other assets especially mentioned ("OAEM") loans during the quarter, partially offset by increase in loan volume.

The following tables present the information regarding the allowance for loan losses and associated loan data by portfolio segment under the incurred loss model:


					Real Estate Mortgage
	Commercial and Industrial		Construction		Commercial Owner Occupied		Commercial Non-owner Occupied		Residential 1 to 4 Family		Residential 1 to 4 Family Investment		Residential Multifamily		Consumer		Total
Allowance for loan losses	(Dollars in thousands)
Three months ended March 31, 2022
December 31, 2021	$	417	$	2,662	$	2,997	$	7,476	$	7,045	$	7,925	$	1,215	$	108	$	29,845
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	6		—		2		—		121		—		7		—		136
Provisions (benefits)	86		(465)		13		(223)		311		80		193		5		—
Ending Balance at March 31, 2022	$	509	$	2,197	$	3,012	$	7,253	$	7,477	$	8,005	$	1,415	$	113	$	29,981









Allowance for loan losses
Individually evaluated for impairment	$	—	$	—	$	4	$	148	$	29	$	—	$	—	$	—	$	181
Collectively evaluated for impairment	509		2,197		3,008		7,105		7,448		8,005		1,415		113		29,800
Ending Balance at March 31, 2022	$	509	$	2,197	$	3,012	$	7,253	$	7,477	$	8,005	$	1,415	$	113	$	29,981

Loans
Individually evaluated for impairment	$	196	$	1,139	$	2,433	$	5,369	$	687	$	—	$	—	$	—	$	9,824
Collectively evaluated for impairment	38,629		134,871		129,842		310,884		395,587		383,608		84,970		7,624		1,486,015
Ending Balance at March 31, 2022	$	38,825	$	136,010	$	132,275	$	316,253	$	396,274	$	383,608	$	84,970	$	7,624	$	1,495,839

The increase in the allowance for loan loss balance for the residential 1 to 4 family portfolio segment for the three months ended March 31, 2022 is mainly due to loan growth. The increase in the allowance for loan loss balance for the residential multifamily portfolio segment is mainly due to increases in qualitative factors, namely economic conditions. The decrease in the allowance for loan loss balance for the construction portfolio segment for the three months ended March 31, 2022 is due to the decrease in loan balance.

Collateral-Dependent Loans

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


(amounts in thousands)	Real Estate		Business Assets		Other
Commercial and Industrial	$	198	$	—	$	—
Construction	1,091		—		—
Commercial - Owner Occupied	400		—		—
Commercial - Non-owner Occupied	14,380		—		—
Residential - 1 to 4 Family	—		—		—
Residential - 1 to 4 Family Investment	—		—		—
Residential - Multifamily	—		—		—
Consumer	70		—		—
Total	$	16,139	$	—	$	—

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

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 7. Grades 1 through 4 are considered “Pass”. A description of the general characteristics of the seven risk grades is as follows:

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

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

3.Satisfactory (B): Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk. Loans are considered fully collectable.

4.Watch List: Borrower reflects a fair financial condition, but there exists an overall greater than average risk. Risk is deemed acceptable by virtue of increased monitoring and control over borrowings. Probability of timely repayment is present.

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

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

7.Doubtful: Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value; accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable. Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank.

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


(Dollars in thousands)	Term Loans Amortized Cost Basis by Origination Year								Revolving Loans at Amortized Cost Basis
As of March 31, 2023	2023		2022		2021		2020				Prior		Total
Commercial and Industrial
Pass	$	723	$	2,147	$	190	$	3,538	$	9,027	$	18,323	$	33,948
OAEM	—		—		—		—		—		—		—
Substandard	—		—		—		—		190		—		190
Doubtful	—		—		—		—		—		—		—
	$	723	$	2,147	$	190	$	3,538	$	9,217	$	18,323	$	34,138
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass	$	—	$	5,693	$	4,500	$	194	$	—	$	157,897	$	168,284
OAEM	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		1,091		1,091
Doubtful	—		—		—		—		—		—		—
	$	—	$	5,693	$	4,500	$	194	$	—	$	158,988	$	169,375
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial – Owner Occupied
Pass	$	14,822	$	32,507	$	13,407	$	7,504	$	61,420	$	11,023	$	140,683
OAEM	—		—		—		—		—		—		—
Substandard	—		—		—		—		400		—		400
Doubtful	—		—		—		—		—		—		—
	$	14,822	$	32,507	$	13,407	$	7,504	$	61,820	$	11,023	$	141,083
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial – Non-owner Occupied
Pass	$	2,540	$	101,039	$	39,364	$	34,950	$	186,456	$	452	$	364,801
OAEM	—		—		—		—		—		—		—
Substandard	—		—		—		—		14,339		—		14,339
Doubtful	—		—		—		—		—		—		—
	$	2,540	$	101,039	$	39,364	$	34,950	$	200,795	$	452	$	379,140
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential – 1 to 4 Family
Performing	$	14,340	$	122,576	$	65,675	$	34,717	$	200,096	$	4,706	$	442,110
Nonperforming	—		—		—		—		—		—		—
	$	14,340	$	122,576	$	65,675	$	34,717	$	200,096	$	4,706	$	442,110
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential – 1 to 4 Family Investment
Performing	$	19,217	$	146,553	$	124,391	$	54,042	$	146,576	$	—	$	490,779
Nonperforming	—		—		—		—		—		—		—
	$	19,217	$	146,553	$	124,391	$	54,042	$	146,576	$	—	$	490,779
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential – Multifamily
Pass	$	500	$	5,312	$	26,956	$	14,451	$	52,367	$	—	$	99,586
OAEM	—		—		—		—		—		—		$	—
Substandard	—		—		—		—		—		—		$	—
Doubtful	—		—		—		—		—		—		—
	$	500	$	5,312	$	26,956	$	14,451	$	52,367	$	—	$	99,586
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Performing	$	11	$	—	$	—	$	—	$	6,385	$	18	$	6,414
Nonperforming	—		—		—		—		71		—		71
	$	11	$	—	$	—	$	—	$	6,456	$	18	$	6,485
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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


At December 31, 2022	Pass		OAEM		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial and Industrial	$	32,383	$	—	$	—	$	—	$	32,383
Construction	191,266		—		1,091		—		192,357
Real Estate Mortgage:
Commercial – Owner Occupied	122,523		3,027		400		—		125,950
Commercial – Non-owner Occupied	362,899		—		14,553		—		377,452
Residential – 1 to 4 Family	444,658		—		162		—		444,820
Residential – 1 to 4 Family Investment	476,210		—		—		—		476,210
Residential – Multifamily	95,556		—		—		—		95,556
Consumer	6,661		—		70		—		6,731
Total	$	1,732,156	$	3,027	$	16,276	$	—	$	1,751,459

There were no loans modified to borrowers with financial difficulty during the quarter ended March 31, 2023.

NOTE 5. EARNINGS PER SHARE (“EPS”)

The following tables set forth the calculation of basic and diluted EPS for the three-month periods ended March 31, 2023 and 2022.


	Three months ended March 31,
	2023		2022
	(Dollars in thousands except share and per share data)
Basic earnings per common share
Net income available to the Company	$	11,130	$	10,091
Less: Dividend on series B preferred stock	(7)		(7)
Net income available to common shareholders	11,123		10,084
Basic weighted-average common shares outstanding	11,944,163		11,905,330
Basic earnings per common share	$	0.93	$	0.85
Diluted earnings per common share
Net income available to common shares	$	11,123	$	10,084
Add: Dividend on series B preferred stock	7		7
Net income available to diluted common shares	11,130		10,091
Basic weighted-average common shares outstanding	11,944,163		11,905,330
Dilutive potential common shares	216,630		274,990
Diluted weighted-average common shares outstanding	12,160,793		12,180,320
Diluted earnings per common share	$	0.92	$	0.83

NOTE 6. 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. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:

Level 1 Input:

1)Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Inputs:

1)Quoted prices for similar assets or liabilities in active markets.

2)Quoted prices for identical or similar assets or liabilities in markets that are not active.

3)Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

Level 3 Inputs:

1)Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

2)These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Fair Value on a Recurring Basis:

The following is a description of the Company’s valuation methodologies for assets carried at fair value on a recurring basis. These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes that its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting measurement date.

Investments in Available for Sale Securities:

Where quoted prices are available in an active market, securities or other assets are classified in Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security or available for sale loans, then fair values are provided by independent third-party valuation services. These valuation services estimate fair values using pricing models and other accepted valuation methodologies, such as quotes for similar securities and observable yield curves and spreads. As part of the Company’s overall valuation process, management evaluates these third-party methodologies to ensure that they are representative of exit prices in the Company’s principal markets. Securities in Level 2 include mortgage-backed securities, corporate debt obligations, and collateralized mortgage-backed securities.

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


Financial Assets	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Available for Sale Securities
As of March 31, 2023
Corporate debt obligations	$	—	$	500	$	—	$	500
Residential mortgage-backed securities	—		8,477		—		8,477


Total	$	—	$	8,977	$	—	$	8,977
As of December 31, 2022
Corporate debt obligations	$	—	$	500	$	—	$	500
Residential mortgage-backed securities	—		8,866		—		8,866


Total	$	—	$	9,366	$	—	$	9,366

For the three months ended March 31, 2023, there were no transfers between the levels within the fair value hierarchy. There were no level 3 assets or liabilities held during the three months ended March 31, 2023 and 2022.

Fair Value on a Non-recurring Basis:

Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).


Financial Assets	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
As of March 31, 2023
Collateral-dependent loans	$	—	$	—	$	1,091	$	1,091
OREO	—		—		1,673		1,673
As of December 31, 2022
Collateral-dependent loans	$	—	$	—	$	1,091	$	1,091
OREO	—		—		1,550		1,550

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

OREO consists of real estate properties that are recorded at fair value based upon current appraised value, or agreements of sale, less estimated disposition costs using 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.

For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These instruments include cash and cash equivalents, accrued interest receivable, bank owned life insurance, restricted stock, demand and other non-maturity deposits and accrued interest payable, and they are considered to be level 1 measurements.

The following table summarizes the carrying amounts and fair values for financial instruments that are not carried at fair value at March 31, 2023 and December 31, 2022:


March 31, 2023	Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Financial Assets:


Investment securities HTM	$	9,359	$	7,966	$	—	$	7,966	$	—


Loans, net	1,731,189		1,674,609		—		1,657,686		16,923


Financial Liabilities:

Time deposits	$	618,152	$	626,111	$	—	$	626,111	$	—
Borrowings	$	208,119	$	210,354	$	—	$	210,354	$	—


December 31, 2022	Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Financial Assets:


Investment securities HTM	$	9,378	$	7,805	$	—	$	7,805	$	—


Loans, net	1,719,614		1,661,974		—		1,641,444		20,530


Financial Liabilities:

Time deposits	$	603,135	$	609,097	$	—	$	609,097	$	—
Borrowings	126,071		127,254		—		127,254		—

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of these instruments reflect the extent of the Company’s involvement in these particular classes of financial instruments. The Company’s exposure to the maximum possible credit risk in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment and income-producing commercial properties. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments to fund fixed-rate loans were immaterial at March 31, 2023. Variable-rate commitments are generally issued for less than one year and carry market rates of interest. Such instruments are not likely to be affected by annual rate caps triggered by rising interest rates. Management believes that off-balance sheet risk is not material to the results of operations or financial condition. As of March 31, 2023 and December 31, 2022, unused commitments to extend credit amounted to approximately $133.9 million and $159.0 million, respectively. At March 31, 2023, the allowance for credit losses on off-balance sheet credit exposures was $760.0 thousand.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities

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

On December 30, 2022, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $50.0 million. The MLOC is used to pledge against public deposits and expires on April 4, 2023. There were no outstanding borrowings on the letter of credit as of March 31, 2023.

The Company also has entered into an employment contract with the President of the Company, which provides for continued payment of certain employment salary and benefits prior to the expiration date of the agreement and in the event of a change in control, as defined. The Company has also entered in Change-in-Control Severance Agreements with certain officers which provide for the payment of severance in certain circumstances following a change in control.

We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries. Cannabis businesses are legal in these States, although it is not legal at the federal level. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses. A financial institution that provides services to cannabis-related businesses can comply with Bank Secrecy Act (“BSA”) disclosure standards by following the FinCEN guidelines. We maintain stringent written policies and procedures related to the acceptance of such businesses and to the monitoring and maintenance of such business accounts. We conduct a significant due diligence review of the cannabis business before the business is accepted, including confirmation that the business is properly licensed by the applicable state. Throughout the relationship, we continue monitoring the business, including site visits, to ensure that the business continues to meet our stringent requirements, including maintenance of required licenses and periodic financial reviews of the business.

While we believe we are operating in compliance with the FinCEN guidelines, there can be no assurance that federal enforcement guidelines will not change. Federal prosecutors have significant discretion and there can be no assurance that the federal prosecutors will not choose to strictly enforce the federal laws governing cannabis. Any change in the Federal government’s enforcement position, could cause us to immediately cease providing banking services to the cannabis industry.

At March 31, 2023 and December 31, 2022, deposit balances from cannabis customers were approximately $123.5 million and $177.3 million, or 8.4% and 11.3% of total deposits, respectively, with three customers accounting for 48.3% and 36.9% of the total at March 31, 2023 and December 31, 2022. At March 31, 2023 and December 31, 2022, there were cannabis-related loans in the amounts of $18.8 million and $3.8 million, respectively.

Armored Car Matter

An armored car company used by the Bank to transport and store cash for the Bank’s cannabis-related customers, has informed the Company that some of the cash stored for the Bank is missing from its vault and is presumed to have been stolen. The amount that the Bank had recorded as being held at the armored car company's facility on the last day that records were provided was $9.5 million. There is not enough information to determine the exact amount of the potential loss, if any, as well as the amount that could be recovered. The Bank is working with relevant state and federal law enforcement authorities to investigate this matter as well as pursuing judicial avenues of recovery. The Bank is pursuing various avenues of recovery that it may have, including, among others, possible insurance claims. If it is ultimately determined that a loss is probable and estimable, we will record the loss in the appropriate fiscal period. If we are successful in making recoveries, we will record the recoveries in the period received, or when the receipt of such recoveries becomes certain.

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

Forward-Looking Statements

Throughout this report, "Parke Bancorp" and "the Company" refer to Parke Bancorp Inc. and its consolidated subsidiaries. The Company is collectively referred to as "we", "us" or "our". Parke Bank is referred to as the "Bank".

The Company may from time to time make written or oral "forward-looking statements" including statements contained in this Report and in other communications by the Company which are made in good faith pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, such as statements of the Company's plans, objectives, expectations, estimates and intentions, involve risks and uncertainties and are subject to change based on various important factors (some of which are beyond the Company's control). The following factors, among others, could cause the Company's financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in which the Company conducts operations; the effects of the COVID-19 pandemic on the United States economy in general and the local economies in which the Company operates; 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 potential adverse effects of the Consent Orders and any additional regulatory restrictions that may be imposed by banking regulators; the timely development of, and acceptance of, new products and services of the Company and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services; the impact of changes in financial services laws and regulations (including laws concerning taxes, banking, securities and insurance); the effect of any change in federal government enforcement of federal laws affecting the cannabis industry; technological changes; acquisitions; changes in consumer spending and saving habits; and the success of the Company at managing the risks involved in the foregoing.

Financial institutions can be affected by changing conditions in the real estate and financial markets. The lingering effects of the COVID-19 pandemic, geopolitical instability, including the conflict between Russia and Ukraine, foreign currency exchange volatility, volatility in global capital markets, inflationary pressures, and higher interest rates may meaningfully impact loan production, income levels, and the measurement of certain significant estimates such as the allowance for credit losses. Moreover, in a period of economic contraction, we may experience elevated levels of credit losses, reduced interest income, impairment of financial assets, diminished access to capital markets and other funding sources, and reduced demand for our products and services. Volatility in the housing markets, real estate values and unemployment levels results in significant write-downs of asset values by financial institutions. Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing in and around southern New Jersey and Philadelphia, Pennsylvania. We focus our lending efforts primarily in three lending areas: residential mortgage loans, commercial mortgage loans, and construction loans. As a result of this geographic concentration, a significant broad-based deterioration in economic conditions in these areas could have a material adverse impact on the quality of our loan portfolio, results of operations and future growth potential.

An unexpected COVID-19 pandemic resurgence due to new variants could cause us to experience higher credit losses in our lending portfolio, additional increases in our allowance for credit losses, impairment of financial assets, diminished access to capital markets and other funding sources, further reduced demand for our products and services, and other negative impacts on our financial position, results of operations.

During 2022, the Federal Reserve took unprecedented action during the year to restrain inflation and improve the stability of the economy by raising the target federal funds rate several times from 25 basis points in the beginning of the year to 75 basis points toward the end of the year and brought the benchmark interest rates up by a collective 4.50 percent. During the first quarter 2023, the Federal Reserve increased the target federal funds rate another 0.25 percent and may further increase the target federal funds rate in 2023 in an attempt to reduce inflation. Any substantial or unexpected change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations. As inflation increases and market interest rates rise, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation generally increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our non-interest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.

Any of these effects, if sustained, may impair our capital and liquidity positions, require us to take capital actions, prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, or result in downgrades in our credit ratings and the reduction or elimination of our common stock dividend in future periods. The extent to which current economic environment has a further impact on our business, results of operations, and financial condition, as well as the regulatory capital

and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the current economic environment and actions taken by governmental authorities and other third parties in response to the geopolitical conflict, and inflationary pressure.

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.

Overview

The following discussion provides information about our results of operations, financial condition, liquidity and asset quality. We intend that this information facilitates your understanding and assessment of significant changes and trends related to our financial condition and results of operations. You should read this section in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

We are a bank holding company and are headquartered in Washington Township, New Jersey. Through the Bank, we provide personal and business financial services to individuals and small to mid-sized businesses primarily in New Jersey and Pennsylvania. The Bank has branches in Galloway Township, Northfield, Washington Township, Collingswood, New Jersey and Philadelphia, Pennsylvania. The vast majority of our revenue and income is currently generated through the Bank.

We manage our Company for the long term. We are focused on the fundamentals of growing customers, loans, deposits and revenue and improving profitability, while investing for the future and managing risk, expenses and capital. We continue to invest in our products, markets and brand, and embrace our commitments to our customers, shareholders, employees and the communities where we do business. Our approach is concentrated on organically growing and deepening client relationships across our businesses that meet our risk/return measures.

We focus on small to mid-sized business and retail customers and offer a range of loan products, deposits services, and other financial products through our retail branches and other channels. The Company's results of operations are dependent primarily on its net interest income, which is the difference between the interest income earned on its interest earning-assets and the interest expense paid on its interest-bearing liabilities. In our operations, we have three major lines of lending: residential real estate mortgage, commercial real estate mortgage, and construction lending. Our interest income is primarily generated from our lending and investment activities. Our deposit products include checking, savings, money market accounts, and certificates of deposit. The majority of our deposit accounts are obtained through our retail banking business, which provides us with low cost funding to grow our lending efforts. The Company also generates income from loan and deposit fees and other non-interest related activities. The Company's non-interest expense primarily consists of employee compensation, administration, and other operating expenses.

At March 31, 2023, we had total assets of $1.96 billion, and total equity of $273.1 million. Net income available to common shareholders for the three months ended March 31, 2023 was $11.1 million.

Results of Operations

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Net Income: Our net income available to common shareholders for the first quarter of 2023 increased $1.0 million, or 10.3%, to $11.1 million, compared to $10.1 million for the same period last year. Earnings per share were $0.93 per basic common share and $0.92 per diluted common share for the first quarter of 2023 compared to $0.85 per basic common share and $0.83 per diluted common share for the same period last year. The increase in net income available to common shareholders primarily resulted from a $2.4 million reversal of allowance for credit loss, partially offset by a $293.0 thousand decrease in non-interest income and a $1.1 million increase in non-interest expense.

Net Interest Income: Our net interest income was flat at $17.1 million for the first quarter of 2023 compared to $17.1 million for the first quarter of 2022. Interest income increased $6.4 million during the three months ended March 31, 2023 as compared to the same period in the prior year. The increase in interest income was primarily due to an increase of $5.3 million in interest and fees on loans, due to higher loan balances and interest rates, as well as a $1.0 million increase on interest on deposits with banks. The increase in interest income was partially offset by an increase in interest expense of $6.3 million, due to an increase in interest on deposits of $5.7 million and an increase in interest on borrowings of $600.0 thousand. During the three months ended March 31, 2023, interest on deposits increased due to an increase in market interest rates, while the increase in interest on borrowings was due to an increase in the amount of borrowings and an increase in interest rates.

Provision for credit losses: For the three months ended March 31, 2023, the provision for credit losses decreased $2.4 million, compared to zero for the three months ended March 31, 2022. On January 1, 2023 we implemented ASU 2016-13 Financial Instruments - Credit Losses. This resulted in an increase to the allowance for credit losses of $1.9 million. For the three months ended March 31, 2023, we recorded a recovery to the allowance for credit losses of $2.4 million, mainly due to the decrease in the construction loan portfolio balance. For more information about our provision and allowance for loan and lease losses and our loss experience, see “Financial Condition-Allowance for Loan and Lease Losses” below and Note 4 - Loans And Allowance For Credit Losses on Loans to the unaudited consolidated financial statements.

Non-interest Income: Our non-interest income was $1.8 million for the three months ended March 31, 2023, a decrease of $293.0 thousand, compared to $2.1 million for the three months ended March 31, 2022. The decrease is primarily attributable to a decrease in service fees on deposit account of $101.0 thousand, primarily attributable to a decrease in our cannabis banking deposit accounts, as well as a decrease in loan fees of $97.0 thousand.

Non-interest Expense: Our non-interest expense increased $1.1 million to $6.8 million for the three months ended March 31, 2023, from $5.7 million for the three months ended March 31, 2022. The increase is primarily driven by a $953.0 thousand increase in compensation and a $139.0 thousand increase in OREO expense. The increase in compensation and benefits was mainly driven by an increase in salaries, an increase in pension cost, and a decrease in deferred origination costs. The increase in OREO costs is due to higher costs to maintain the properties, as well as legal expenses related to the OREO properties.

Income Tax: Income tax expense was $3.4 million on income before taxes of $14.6 million for the three months ended March 31, 2023, resulting in an effective tax rate of 23.6%, compared to income tax expense of $3.4 million on income before taxes of $13.5 million for the same period of 2022, resulting in an effective tax rate of 25.2%.

Net Interest Income

Net interest income is the interest earned on investment securities, loans and other interest-earning assets minus the interest paid on deposits, short-term borrowings and long-term debt. The net interest margin is the average yield of net interest income on average earning assets. Net interest income and the net interest margin in any one period can be significantly affected by a variety of factors including the mix and overall size of our earning assets portfolio and the cost of funding those assets.

The following tables presents the average daily balances of assets, liabilities and equity and the respective interest earned or paid on interest-earning assets and interest-bearing liabilities, as well as average annualized rates, for the periods indicated.


	For the Three Months Ended March 31,
	2023						2022
	Average Balance		Interest Income/ Expense		Yield/ Cost		Average Balance		Interest Income/ Expense		Yield/ Cost
	(Dollars in thousands)
Assets
Loans*	$	1,763,219	$	24,545	5.65	%	$	1,468,889	$	19,199	5.30	%
Investment securities**	25,434		210		3.35	%	27,623		189		2.77	%
Interest bearing deposits	117,128		1,269		4.39	%	534,886		248		0.19	%
Total interest-earning assets	1,905,781		26,024		5.54	%	2,031,398		19,636		3.92	%
Other assets	80,113						77,969
Allowance for credit losses	(31,843)						(29,956)
Total assets	$	1,954,051					$	2,079,411
Liabilities and Shareholders’ Equity
Interest bearing deposits:
Checking	$	83,278	$	130	0.63	%	$	98,576	$	96	0.39	%
Money markets	335,722		2,758		3.33	%	351,625		450		0.52	%
Savings	174,600		463		1.08	%	187,943		163		0.35	%
Time deposits	499,910		2,931		2.38	%	562,777		1,104		0.80	%
Brokered certificates of deposit	113,372		1,300		4.65	%	9,120		27		1.20	%
Total interest-bearing deposits	1,206,882		7,582		2.55	%	1,210,041		1,840		0.62	%
Borrowings	143,021		1,293		3.67	%	120,899		696		2.33	%
Total interest-bearing liabilities	1,349,903		8,875		2.67	%	1,330,940		2,536		0.77	%
Non-interest bearing deposits	316,365						497,733
Other liabilities	16,331						12,966
Total non-interest bearing liabilities	332,696						510,699
Equity	271,452						237,772
Total liabilities and shareholders’ equity	$	1,954,051					$	2,079,411
Net interest income			$	17,149					$	17,100
Interest rate spread					2.87	%					3.15	%
Net interest margin					3.65	%					3.41	%

*The average balance of loans includes loans on nonaccrual.

** Includes balances of FHLB and ACBB stock.

Financial Condition

General

At March 31, 2023, the Company’s total assets were $1.96 billion, a decrease of $20.7 million, or 1.0%, from December 31, 2022. The decrease in total assets was primarily attributable to a decrease in cash and cash equivalents of $36.2 million, partially offset by an increase in loans receivable. The decrease in cash and cash equivalents was primarily due to cash withdrawn from deposits, as well as an increase in loans receivable, partially offset by an increase in borrowings. Loans increased $11.2 million at March 31, 2023, primarily due to increases in loan balances classified as CRE owner occupied and residential 1-4 family, partially offset by a decrease in the construction loan portfolio, compared to the balances at December 31, 2022.

Total liabilities were $1.69 billion at March 31, 2023. This represented a $27.7 million, or 1.6%, decrease, from $1.72 billion at December 31, 2022. The decrease in total liabilities was primarily due to a decrease in total deposits, which decreased $112.2 million, or 7.1%, to $1.46 billion at March 31, 2023, from $1.58 billion at December 31, 2022. The decrease in deposits was attributable to a decrease in non-interest demand deposits of $75.4 million and savings of $35.9 million, partially offset by an increase in time deposits of $13.3 million.

Total equity was $273.1 million and $266.0 million at March 31, 2023 and December 31, 2022, respectively, an increase of $7.1 million from December 31, 2022. The increase was primarily due to the retention of earnings, partially offset by the payment of $2.2 million of cash dividends, and $2.1 million adoption of ASC 326.

The following table presents certain key condensed balance sheet data as of March 31, 2023 and December 31, 2022:


	March 31, 2023		December 31, 2022		Change		% Change
	(Dollars in thousands)
Cash and cash equivalents	$	145,974	$	182,150	$	(36,176)	(19.9)	%
Investment securities	18,336		18,744		(408)		(2.2)	%

Loans, net of unearned income	1,762,696		1,751,459		11,237		0.6	%
Allowance for credit losses	(31,507)		(31,845)		338		(1.1)	%
Total assets	1,964,245		1,984,915		(20,670)		(1.0)	%
Total deposits	1,463,794		1,575,981		(112,187)		(7.1)	%
FHLBNY borrowings	165,150		83,150		82,000		98.6	%
Subordinated debt	42,969		42,921		48		0.1	%

Total liabilities	1,691,139		1,718,881		(27,742)		(1.6)	%
Total equity	273,106		266,034		7,072		2.7	%
Total liabilities and equity	1,964,245		1,984,915		(20,670)		(1.0)	%

Cash and cash equivalents

Cash and cash equivalents decreased $36.2 million to $146.0 million at March 31, 2023 from $182.2 million at December 31, 2022, a decrease of 19.9%. The decrease was primarily due to cash withdrawn from deposits and the funding of loans.

Investment securities

Total investment securities decreased to $18.3 million at March 31, 2023, from $18.7 million at December 31, 2022, a decrease of $408.0 thousand or 2.2%. The decrease was attributed to normal pay downs of $490.0 thousand, partially offset by an increase in the fair market valuation of $82.0 thousand. For detailed information on the composition and maturity distribution of our investment portfolio, see NOTE 3 - Investment Securities in the notes to the unaudited consolidated financial statements.

Loans

Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing in and around Southern New Jersey and Philadelphia, Pennsylvania. We have also expanded our lending footprint in other areas. We focus our lending efforts primarily in three lending areas: residential mortgage loans, commercial mortgage loans, and construction loans.

We originate residential mortgage loans with adjustable and fixed-rates that are secured by 1- 4 family and multifamily residential properties. These loans are generally underwritten under terms, conditions and documentation acceptable to the secondary mortgage market. A substantial majority of such loans can be pledged for potential borrowings.

We originate commercial real estate loans that are secured by commercial real estate properties that are owner and non-owner occupied real estate properties. These loans are typically larger in dollar size and are primarily secured by office buildings, retail buildings, warehouses and general purpose business space. The commercial mortgage loans generally have maturities of twenty years, but re-price within five years.

The construction loans we originate provide real estate acquisition, development and construction funds to individuals and real estate developers. The loans are secured by the properties under development. The construction loan funds are disbursed periodically at pre-specified stages of completion.

We also originate commercial and industrial loans, which provide liquidity to businesses in the form of lines of credit and may be secured by accounts receivable, inventory, equipment or other assets. In addition, we have a small consumer loan portfolio which provides loans to individual borrowers.

Loans receivable: Loans receivable increased to $1.76 billion at March 31, 2023 from $1.75 billion at December 31, 2022. The increase was primarily due to increases in the CRE owner occupied and the residential - 1 to 4 family portfolios, partially offset by a decrease in the construction loan portfolio. Loans receivable, excluding loans held for sale, as of March 31, 2023 and December 31, 2022, consisted of the following:


	March 31, 2023				December 31, 2022
	Amount		Percentage of Loans to total Loans		Amount		Percentage of Loans to total Loans
	(Dollars in thousands)
Commercial and Industrial	$	34,138	1.9	%	$	32,383	1.8	%
Construction	169,375		9.6	%	192,357		11.0	%
Real Estate Mortgage:
Commercial – Owner Occupied	141,083		8.0	%	125,950		7.2	%
Commercial – Non-owner Occupied	379,140		21.5	%	377,452		21.6	%
Residential – 1 to 4 Family	442,110		25.2	%	444,820		25.3	%
Residential – 1 to 4 Family Investment	490,779		27.8	%	476,210		27.2	%
Residential – Multifamily	99,586		5.6	%	95,556		5.5	%
Consumer	6,485		0.4	%	6,731		0.4	%
Total Loans	$	1,762,696	100.0	%	$	1,751,459	100.0	%

Deposits

At March 31, 2023, total deposits decreased to $1.46 billion from $1.58 billion at December 31, 2022, a decrease of $112.2 million, or 7.1%. The decrease in deposits was primarily due to a decrease in non-interest bearing demand deposits, and a decrease in savings deposits, partially offset by an increase in time deposit accounts. The decrease in non-interest bearing demand deposits was mainly driven by withdrawals from our cannabis related deposits, which decreased $53.9 million, from $176.6 million at December 31, 2022 to $122.8 million at March 31, 2023, as well as a decrease in business checking of $11.7 million during the same time period.


	March 31,		December 31,
	2023		2022
	(Dollars in thousands)
Noninterest-bearing	$	277,128	$	352,546
Interest-bearing
Checking	76,983		83,080
Savings	152,604		188,541
Money market	338,927		348,680
Time deposits	618,152		603,135

Total deposits	$	1,463,794	$	1,575,982
Estimated uninsured deposits	$	560,630	$	622,966

Borrowings

Total borrowings were $208.1 million at March 31, 2023 and $126.1 million at December 31, 2022. The increase in borrowings is due to the increase in Federal Home Loan Bank of New York ("FHLBNY") advances.

Equity

Total equity increased to $273.1 million at March 31, 2023 from $266.0 million at December 31, 2022, an increase of $7.1 million, or 2.7%, primarily due to the retention of earnings from the period, partially offset by $2.2 million of cash dividends, and $2.1 million adoption of ASC 326.

Liquidity and Capital Resources

Liquidity is a measure of our ability to generate cash to support asset growth, meet deposit withdrawals, satisfy other contractual obligations, and otherwise operate on an ongoing basis. At March 31, 2023, our cash position was $146.0 million. We invest cash that is in excess of our immediate operating needs primarily in our interest-bearing account at the Federal Reserve.

Our primary source of funding has been deposits. Funds from other operations, financing arrangements, investment securities available-for-sale also provide significant sources of funding. The Company seeks to rely primarily on core deposits from customers to provide stable and cost-effective sources of funding to support loan growth. We focus on customer service which we believe has resulted in a history of customer loyalty. Stability, low cost and customer loyalty comprise key characteristics of core deposits.

We also use brokered deposits as a funding source, which is more volatile than core deposits. The Bank also joined IntraFi Financial Network to secure an additional alternative funding source. IntraFi provides the Bank an additional source of external funds through their weekly CDARS® settlement process. The rates are comparable to brokered deposits and can be obtained within a shorter period of time than brokered deposits. While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY. As of March 31, 2023, the Company had lines of credit with the FHLBNY of $732.3 million, of which $165.2 million was outstanding, and an additional $50.0 million from a letter of credit for securing public funds. The remaining borrowing capacity was $517.1 million at March 31, 2023.

Our investment portfolio primarily consists of mortgage-backed available for sale securities issued by US government agencies and government sponsored entities. These available for sale securities are readily marketable and are available to meet our additional liquidity needs. At March 31, 2023, the Company's investment securities portfolio classified as available for sale was $9.0 million.

We had outstanding loan commitments of $133.9 million at March 31, 2023. Our loan commitments are normally originated with the full amount of collateral. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The funding requirements for such commitments occur on a measured basis over time and would be funded by normal deposit growth.

The following is a discussion of our cash flows for the three months ended March 31, 2023 and 2022.

Cash provided by operating activities was $10.5 million in the three months ended March 31, 2023, compared to $8.7 million for the same period in the prior year. The increase in operating cash flow was primarily due to the increase in accrued interest payable and other accrued liabilities and the increase in net income, net of the decrease in the provision for credit losses.

Cash used in investing activities was $14.4 million in the three months ended March 31, 2023, compared to cash used in investing activities of $8.4 million in the same period last year. The increase in cash used in the investing activities was primarily due to the cash outflow from the increase in loans during the period, as well as the purchase of FHLBNY restricted stock.

Cash used in financing activities was $32.3 million in the three months ended March 31, 2023, compared to cash used in financing activities of $93.0 million in the same period of last year. The decrease in cash used in financing activities was driven by a net increase in FHLBNY borrowings of $82.0 million, partially offset by $112.2 million of cash outflows from the decrease in deposits.

Capital Adequacy

We utilize a comprehensive process for assessing the Company’s overall capital adequacy. We actively review our capital strategies in light of current and anticipated business risks, future growth opportunities, industry standards, and compliance with regulatory requirements. The assessment of overall capital adequacy depends on a variety of factors, including asset quality, liquidity, earnings stability, competitive forces, economic conditions, and strength of management. Our objective is to maintain capital at an amount commensurate with our risk profile and risk tolerance objectives, and to meet both regulatory and market expectations. We primarily manage our capital through the retention of earnings. We also use other means to manage our capital. Total equity increased $7.1 million at March 31, 2023, from December 31, 2022, primarily from the Company’s net income of

$11.1 million for the period, net of common and preferred stock dividends of $2.2 million and the adoption of ASC 326 of $2.1 million.

Banks and bank holding companies are subject to various regulatory capital requirements administered by federal banking agencies. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and the Company must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items, as calculated under the regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies. Failure to meet minimum capital requirements can result in regulatory actions.

Under the capital rules issued by the Federal Banking agencies, which became effective in January 2015, the Company and the Bank elected to exclude the effects of certain Accumulated Other Comprehensive Income (“AOCI”) items from its regulatory capital calculation. At March 31, 2023, the Bank and the Company were both considered “well capitalized”.

The following table presents the tier 1 regulatory capital leverage ratios of the Company and the Bank at March 31, 2023:


	Amount		Ratio		Amount		Ratio
	(Dollars in thousands except ratios)
	Company				Parke Bank
Tier 1 leverage	$	286,529	14.66	%	$	315,662	16.15	%

Also, in July 2020, we issued $30 million in ten-year, fixed-to-floating rate subordinated notes due 2030 to certain qualified institutional buyers and accredited investors. The Notes have been structured to qualify initially as Tier 2 capital for regulatory capital purposes for our consolidated entity.

Risk Management and Asset Quality

In the normal course of business the Company is exposed to a variety of operational, reputational, legal, regulatory, market, liquidity, and credit risks that could adversely affect our financial performance and financial position. Sound risk management enables us to serve our customers and deliver for our shareholders.

Our asset risk is primarily tied to credit risk. We define credit risk as the risk of loss associated with a borrower or counterparty default. Credit risk exists with many of our assets and exposures including loans, deposit overdrafts, and assets held-for-sale. The discussion below focuses on our loan portfolios, which represent the largest component of assets on our balance sheet for which we have credit risk.

We manage our credit risk by establishing what we believe are sound credit policies for underwriting new loans, while monitoring and reviewing the performance of our existing loan portfolios. We employ various credit risk management and monitoring activities to mitigate risks associated with loans we hold or originate. In making credit decisions, we consider loan concentrations and related credit quality, economic and market conditions, regulatory mandates, and changes in interest rates.

A key to our credit risk management is adherence to a well-controlled underwriting process. When we originate a loan, we assess the borrower’s ability to meet the loan’s terms and conditions based on the risk profile of the borrower, repayment sources, the nature of underlying collateral, and other support given current events, conditions and expectations. We actively monitor and review our loan portfolio throughout a borrower’s credit cycle. A borrower’s ability to repay can be adversely affected by economic and personal financial changes as well as other factors. Likewise, changes in market conditions and other external factors can affect collateral valuations. We adjust our financial assessments to reflect changes in the financial condition, cash flow, risk profile or outlook of a borrower.

We have established a credit monitoring and tracking system and closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk. The system supplements the credit review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit risk, loan delinquencies, loan modifications made to borrowers experiencing financial difficulty, nonperforming loans and potential problems loans.

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

Although credit policies are designed to minimize risk, management recognizes that loan losses will occur and the amount of these losses will fluctuate depending on the risk characteristics of the loan portfolio as well as general and regional economic conditions.

Allowance for Credit Losses:

We maintain the allowance for credit losses at levels that we believe to be appropriate to absorb estimated probable credit losses incurred in the portfolios as of the balance sheet date. Refer to Note 4 - Loans and Allowance for Loan Credit Losses on Loans in the notes to the unaudited consolidated financial statements for further discussion on management's methodology for estimating the allowance for credit losses.

At March 31, 2023, the allowance for credit losses was $31.5 million, as compared to $31.8 million at December 31, 2022. The ratio of the allowance for credit losses to total loans was 1.79% and 1.82% at March 31, 2023 and December 31, 2022, respectively. The ratio of the allowance for credit losses to non-performing assets decreased to 176.9% at March 31, 2023, compared to 178.6% at December 31, 2022. During the three month periods ended March 31, 2023 and 2022, the Company did not charge off any loans, and recovered $5,000 and $136,000, respectively. Specific allowances for loan losses have been established in the amount of $398.0 thousand at March 31, 2023, as compared to $549.0 thousand at December 31, 2022. We have established reserves for all expected credit losses at March 31, 2023 and December 31, 2022. There can be no assurance, however, that further additions to the allowance will not be required in future periods.

On January 1, 2023, we implemented ASU 2016-13 Financial Instruments - Credit Losses. This resulted in an increase to the allowance for credit losses on loans of $1.9 million.

The Company estimates the loan credit allowance using an expected life of loss credit methodology in accordance with ASU 2016-13 Financial Instruments - Credit Losses. We recorded a credit loss recovery of $2.4 million during the three months ended March 31, 2023, of which $2.2 million related to the allowance for credit loss on loans, and $200.0 thousand related to the allowance for credit loss on unfunded commitments, compared to zero during the three months ended March 31, 2022.

Loan Delinquencies and Nonperforming Assets:

We have established credit monitoring and tracking systems and closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk. Trends in delinquency rates may be a key indicator, among other considerations, of credit risk within the loan portfolios.

The measurement of delinquency status is based on the contractual terms of each loan. 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 that are 30 days or more past due in terms of principal and interest payments are considered delinquent. Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when a loan is 90 days past due, unless the loan is well secured and in the process of collection, as required by regulatory provisions. 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.

Delinquent loans totaled $16.7 million, or 0.9% of total loans at March 31, 2023, an increase of $0.2 million from December 31, 2022. At March 31, 2023, loans 30 to 89 days delinquent totaled $579.0 thousand, an increase of $354.0 thousand from December 31, 2022. The increase in loans 30 to 89 days delinquent is mainly driven by an increase in residential 1 to 4 family loans that became delinquent during the quarter ended March 31, 2023. Loans delinquent 90 days or more and not accruing interest totaled $16.1 million or 0.9% of total loans at March 31, 2023, a decrease of $0.1 million from $16.3 million, or 0.9% of total loans, at December 31, 2022. The two largest nonperforming loan relationships as of March 31, 2023 were a $10.9 million and a $3.4 million owner occupied commercial real estate loan.

Critical Accounting Policies

The Company’s accounting policies are more fully described in Note 1 of the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. As disclosed in Note 1, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. The Company believes that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the portrayal of the Company’s financial condition and results of operations and require management’s most difficult, subjective and complex judgments.

Allowance for Credit Losses: Our allowances for credit losses represents management's best estimate of probable losses inherent in our investment and loan portfolios, excluding those loans accounted for under fair value. Our process for determining the allowance for credit losses is discussed in Note 1 to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K.

Our determination of the allowance for credit losses is based on periodic evaluations of the loan and lease portfolios and other relevant factors, broken down into vintage based on year of origination. These critical estimates include significant use of our own historical data and other qualitative, and quantitative data. These evaluations are inherently subjective, as they require material estimates and may be susceptible to significant change. Our allowance for credit losses is comprised of two components, a specific allowance and a general calculation. A specific allowance is calculated for loans and leases that do not share similar risk characteristics with other financial assets, and include collateral dependent loans. A loan is considered to be collateral dependent when foreclosure of the underlying collateral is probable. Parke has elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty. The general based component covers loans and leases on which there are expected credit losses that are not yet individually identifiable. The allowance calculation and determination process is dependent on the use of key assumptions. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower, projected industry outlook, and economic conditions.

The process of determining the level of the allowance for credit losses requires a high degree of judgment. To the extent actual outcomes differ from our estimates, additional provision for loan and lease losses may be required that would reduce future earnings.

Fair Value Estimates: ASC 820 - Fair Value Measurements defines fair value as a market-based measurement and is the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. We classify fair value measurements of financial instruments based on the three-level fair value hierarchy in the accounting standards. We are required to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value. The fair values of assets may include using estimates, assumptions, and judgments. Valuations of assets or liabilities using techniques non quoted market price are sensitive to assumptions used for the significant inputs. Assets and liabilities carried at fair value inherently result in a higher degree of financial statement volatility. Changes in underlying factors, assumptions, or estimates used for estimating fair values could materially impact our future financial condition and results of operations.

The majority of our assets recorded at fair value are our investment securities available for sale. The fair value of our available for sale securities are provided by independent third-party valuation services. We may also have a small amount of SBA loans recorded at fair value, which represents the face value of the guaranteed portion of the SBA loans pending settlement. OREO is recorded at fair value on a non-recurring basis and is based on the values of independent third-party full appraisals, less costs to sell (a range of 5% to 10%). Appraisals are updated every 12 months or sooner if we have identified possible further deterioration in value. Refer to Note 7. Fair Value in the Notes to the unaudited consolidated financial statements for further information.

Income Taxes: In the normal course of business, we and our subsidiaries enter into transactions for which the tax treatment is unclear or subject to varying interpretations. We evaluate and assess the relative risks and merits of the tax treatment of transactions, filing positions, filing methods and taxable income calculations after considering statutes, regulations, and other information, and maintain tax accruals consistent with our evaluation of these relative risks and merits. The result of our evaluation and assessment is by its nature an estimate.

When tax returns are filed, it is highly likely 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. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, (the "Exchange Act")), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms.

Effective January 1, 2023, the Company adopted CECL. The Company designed new controls and modified existing controls as part of this adoption. These additional controls over financial reporting included controls over model creation and design, model governance, assumptions, and expanded controls over loan level data. There were no other changes in the Company's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended March 31, 2023 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Absecon Gardens Condominium Association v. Parke Bank Matter

Absecon Gardens Condominium Association v. Parke Bank, One Mechanic Street, et al, Superior Court of New Jersey, Law Division, Atlantic County, Docket No. ATL-L-2321-21. The Company is the successor to the interests of the developer of the Absecon Gardens Condominium project in Absecon NJ. Some of the unit owners have suggested that the Company is responsible for contributions and/or repair for alleged damages purportedly relating to construction. The owners filed a Complaint, alleging that the damages total approximately $1.7 million. The matter is in the early stages of discovery so it is difficult to determine whether that amount accurately reflects the claimed damages, or whether the Company is in any way culpable for the damages. At this time it is too early to predict whether an unfavorable outcome will result. The Company is vigorously defending this matter. In the normal course of business, there are outstanding various contingent liabilities such as claims and legal action, which are not reflected in the financial statements. In the opinion of management, no material losses are anticipated as a result of these actions or claims.

Other than the foregoing, there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

ITEM 1A. RISK FACTORS

Not applicable.

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

There were no repurchases of our common stock during the three months ended March 31, 2023.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS




3.1			Certificate of Incorporation of Parke Bancorp, Inc. (1)

3.2			Bylaws of Parke Bancorp, Inc. (2)

3.3			Certificate of Amendment setting forth the terms of the Registrant's 6.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series B (3)

4.1			Specimen stock certificate of Parke Bancorp, Inc. (1)

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

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

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

101			The following materials from the Company’s Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.

101.INS			Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1) Incorporated by Reference to the Company’s Registration Statement on Form S-4 filed with the SEC on January 31, 2005 (File No. 333-122406).

(2) Incorporated by Reference to Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2021 (File No. 000-51338).

(3) Incorporated by Reference to Company’s Current Report on Form 8-K filed with the SEC on December 24, 2013 (File No. 000-51338).

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:	May 10, 2023	/s/ Vito S. Pantilione
		Vito S. Pantilione
		President and Chief Executive Officer (Principal Executive Officer)

Date:	May 10, 2023	/s/ John S. Kaufman
		John S. Kaufman
		Executive Vice President and Chief Financial Officer (Principal Accounting Officer)