Parke Bancorp(PKBK) - 2023 Q4 - Annual Report

Financial Performance - Net income available to common shareholders for 2023 was $28.4 million, a decrease of 32.0% compared to 2022, primarily due to a $11.4 million increase in non-interest expenses[152] - Net interest income decreased by $9.1 million (12.4%) to $64.2 million in 2023, driven by a $34.3 million increase in interest expense, partially offset by a $25.2 million increase in interest income[155] - Non-interest income decreased by $1.7 million (20.2%) to $6.7 million in 2023, primarily due to lower fee income from commercial deposit accounts and other loan fees[166] - Fee income from commercial deposit accounts in the cannabis industry totaled $3.4 million in 2023, down from $4.4 million in 2022[167] - Income tax expense decreased by $5.0 million to $9.2 million in 2023, with an effective tax rate of 24.5%, down from 25.4% in 2022[170] Balance Sheet and Capital - Total assets as of December 31, 2023, were $2.02 billion, with total liabilities of $1.74 billion and total shareholders' equity of $284.3 million[152] - Total assets increased by $38.6 million (1.9%) to $2.02 billion in 2023, driven by a $35.9 million increase in total loans outstanding[171] - Total liabilities increased by $20.3 million (1.2%) to $1.74 billion in 2023, primarily due to a $42.0 million increase in borrowings, partially offset by a $23.2 million decrease in deposits[172] - Total equity increased by $18.3 million (6.9%) to $284.3 million in 2023, primarily due to retained earnings, partially offset by $8.6 million in cash dividends[181] - The risk-based tier 1 capital ratio was 20.8% as of December 31, 2023[152] Loans and Deposits - Loans receivable increased by $35.9 million (2.0%) to $1.79 billion in 2023, driven by increases in residential and commercial loans, partially offset by a $34.8 million decrease in construction loans[176] - Total deposits decreased by $23.2 million (1.5%) to $1.55 billion in 2023, with cannabis-related deposits dropping by $80.6 million to $96.7 million due to increased competition and industry consolidation[179] - Borrowings increased by $42.0 million to $168.1 million in 2023, primarily due to a $41.9 million increase in FHLBNY advances[180] - Unused commitments to extend credit decreased from $159.0 million in 2022 to $93.8 million in 2023[197] - Standby letters of credit remained stable at $1.5 million in both 2022 and 2023[198] Interest and Credit - Interest income on loans increased by $23.2 million (27.9%) to $106.1 million in 2023, driven by higher average outstanding loan balances and market interest rates[155] - Interest expense increased by $34.3 million (242.5%) to $48.5 million in 2023, primarily due to higher market interest rates on deposit accounts and changes in the deposit mix[155] - The provision for credit losses decreased by $3.9 million in 2023, with a recovery of $2.1 million compared to a provision of $1.8 million in 2022[162] - The company's allowance for credit losses is based on periodic evaluations of the loan and lease portfolios, using historical data and qualitative factors[205] - The allowance for credit losses includes a specific allowance for collateral-dependent loans and a general allowance for loans with expected credit losses[206] Cash and Investments - The company's cash position was $180.4 million at the end of 2023, with a $944.4 million line of credit from FHLBNY, of which $125.0 million was outstanding[182][184] - The company's investment securities portfolio classified as available for sale was $7.1 million at the end of 2023, primarily consisting of mortgage-backed securities[185] - Total interest-earning assets as of December 31, 2023, amounted to $1,969,639 thousand, with loans constituting the largest portion at $1,777,414 thousand[193] Risk and Sensitivity - The ratio of rate-sensitive assets to rate-sensitive liabilities was 132.3% as of December 31, 2023[193] - Cumulative interest sensitivity gap to total assets was 23.8% as of December 31, 2023[193] - The company manages credit risk in commitments to lend by limiting total commitments and applying consistent credit standards[195] - Inflation primarily affects non-interest expenses, such as employee compensation and occupancy costs[202] - The company's financial statements are prepared in accordance with GAAP, without adjusting for inflation[200] Dividends and Shareholder Returns - The company returned $8.6 million of capital to common shareholders through dividends in 2023[152] Non-Interest Expenses - Non-interest expense increased by $11.4 million to $35.3 million in 2023, primarily due to a $9.1 million increase in other operating expenses, including a one-time $9.5 million contingent loss related to stolen cash[169]