UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended: December 31, ~~2021~~2023 or

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

For the transition period from ____________ to ____________

Commission File No. 000-51338


PARKE BANCORP, INC.
(Exact name of Registrant as specified in its Charter)


New Jersey						65-1241959
(State or other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


601 Delsea Drive, Washington Township, New Jersey						08080
(Address of Principal Executive Offices)						(Zip Code)

Registrant’s telephone number, including area code: 856-256-2500

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


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $0.10 par value	PKBK	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

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 ý No o

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 (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

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 o

Accelerated filer o

Non-accelerated ~~filer~~Filer ☒

Smaller reporting company ☒

Emerging growth company ☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

Yes ☐ No ý☒

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Registrant’s common stock as quoted on the Nasdaq Capital Market on June 30, ~~2021~~2023 was approximately ~~$193.9~~$174.2 million.

As of March 11, ~~2022~~2024 there were ~~11,907,641~~11,958,321 outstanding shares of the Registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

1.Portions of the Proxy Statement for the ~~2022~~2024 Annual Meeting of Shareholders. (Part III)

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2021~~2023

INDEX


PART 1		Page
Item 1.	Business	21
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	15
Item 1C.	Cybersecurity	15
Item 2.	Properties	16
Item 3.	Legal Proceedings	1617
Item 4.	Mine Safety Disclosures	1618

PART II
Item 5.	Market for Common Equity, Related stockholder Matters and Issuer Purchases of Equity Securities	1618
Item 6.	[Reserved]	1719
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	29
Item 9.	Changes and Disagreements with Accountants on Accounting and Financial Disclosure	7273
Item 9A.	Controls and Procedures	7273
Item 9B.	Other Information	73
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	7673

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	7374
Item 11.	Executive Compensation	7374
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	73
~~Item 13.~~	~~Certain Relationships and Related Transactions, and Director Independence~~	74
Item 13.	Certain Relationships and Related Transactions, and Director Independence	75
Item 14.	Principal Accountant Fees and Services	7475

PART IV
Item 15.	Exhibits and Financial Statement Schedules	7475
Item 16.	Form 10-K Summary	7677
	Signatures	7677

Forward-Looking Statements

Parke Bancorp, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission (including this Annual Report on Form 10-K and the exhibits hereto), in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

As used in this Annual Report on Form 10-K, the terms "Parke Bancorp", "the Company", "registrant", "we", "us", and "our" mean Parke Bancorp, Inc. and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

This Annual Report on Form 10-K contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” and words of similar meaning. These forward-looking statements include, but are not limited to:

•statements of our goals, intentions and expectations;

•statements regarding our business plans, prospects, growth and operating strategies;

•statements regarding the quality of our loan and investment portfolios; and

•estimates of our risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of the Annual Report on Form 10-K.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

•~~the COVID-19 pandemic may continue to adversely impact the local and national economy and our business and results of operations may continue to be adversely affected;~~

•general economic conditions, either nationally or in our market areas, that are worse than expected;

•changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for ~~loan~~credit losses;

•our ability to access cost-effective funding;

•fluctuations in real estate values and both residential and commercial real estate market conditions;

•demand for loans and deposits in our market area;

•our ability to implement changes in our business strategies;

•competition among depository and other financial institutions;

•inflation and changes in the interest rate environment that reduce our margins and yields, or reduce the fair value of financial instruments or reduce the origination levels in our lending business, or increase the level of defaults, losses and prepayments on loans we have made and make whether held in portfolio or sold in the secondary markets

•adverse changes in the securities markets;

•changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

•changes in laws or government regulations or policies affecting financial institutions engaged in the ~~medical-use~~ cannabis related business;

•our ability to manage market risk, credit risk and operational risk in the current economic conditions;

•our ability to enter new markets successfully and capitalize on growth opportunities;

•our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

•changes in consumer demand, borrowing and savings habits;

•changes in accounting policies and practices, as may be adopted by bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

•our ability to retain key employees;

•technological changes;

•significant increases in our loan losses;

•cyber-attacks, computer viruses and other technological risks that may breach the security of our websites or other systems to obtain unauthorized access to confidential information and destroy data or disable our systems;

•technological changes that may be more difficult or expensive than expected;

•the ability of third-party providers to perform their obligations to us;

•the ability of the U.S. Government to manage federal debt limits;

•changes in the financial condition, results of operations or future prospects of issuers of securities that we own; and

•other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing products and services described elsewhere in this Annual Report on Form 10-K.

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

~~The COVID-19 Pandemic~~

The COVID-19 pandemic is continuing to have an adverse impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the business of the Company, its customers, employees and third-party service providers. The extent of such impact will depend on future developments, which are highly uncertain, including whether the pandemic can be controlled and abated. Additionally, the responses of various governmental and nongovernmental authorities to curtail business and consumer activities in an effort to mitigate the pandemic will have material long-term effects on the Company and its customers which are difficult to quantify in the near-term or long-term.

As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, the Company is subject to certain risks, any of which could have a material, adverse effect on the business, financial condition, liquidity, and results of operations of the Company. These risks include, among others, (i) risks to the capital markets that may impact the value or performance of the Company’s investment securities portfolio, as well as limit our access to the capital markets and wholesale funding sources; (ii) effects on key employees, including operational or management personnel and those charged with preparing, monitoring and evaluating the companies’ financial reporting and internal controls; (iii) declines in demand for loans and other banking services and products, as well as a decline in the credit quality of our loan portfolio, owing to the effects of COVID-19 in the markets served by the Company; (iv) collateral for loans, especially real estate, may continue to decline in value, which could cause loan losses to increase; (v) the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments; (vi) the allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect net income; (vii) if the economy is unable to substantially reopen or reopen in an efficient manner, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased loan losses and reduced interest income; (viii) in certain states in which we do business temporary bans on evictions and foreclosures have been enacted through executive orders, and may continue indefinitely, resulting in our inability to take timely possession of real estate assets collateralizing loans, which may increase our loan losses; (ix) as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on assets may decline to a greater extent than the decline in cost of interest-bearing liabilities, reducing net interest margin and spread and reducing net income; (x) cyber security risks are increased as the result of an increase in the number of employees working remotely and an increase in the number of our clients banking electronically; (xi) declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential” by governments in the markets served by the Company; and (xii) increasing or protracted volatility in the price of the Company’s common stock, which may also impair our goodwill or other intangible assets.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), we are subject to additional risks of litigation from our customers or other parties regarding our processing of loans for the PPP which could have a significant adverse impact on our business, financial position, results of operations, and prospects. The COVID-19 pandemic and its impact on the economy have led to actions including the enactment of the Coronavirus Aid, Relief and Economic Security Act, including the establishment of the PPP administered by the Small Business Administration (“SBA”). Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. We are participating as a lender in the PPP. Since the initiation of the PPP, several banks have been subject to litigation or threatened litigation regarding the process and procedures that such banks used in processing applications for the PPP. We may be exposed to the risk of litigation, from both clients and non-clients that approached us regarding PPP loans. If any such litigation is filed or threatened against us and is not resolved in a manner favorable to us, it may result in significant cost or adversely affect our reputation. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial position, results of operations and prospects.

The Company cautions that the listed factors are not exclusive. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Part I

Item 1. Business.

General

We are a bank holding company incorporated under the laws of the State of New Jersey in January 2005. Our business and operations primarily consist of our ownership of Parke Bank (the "Bank"). The Bank is a full service commercial bank and is chartered by the New Jersey Department of Banking and insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank conducts its business through offices in Gloucester, Atlantic and Camden Counties in New Jersey and the Philadelphia area in Pennsylvania.

We, through our wholly owned subsidiary Parke Bank, provide personal and business financial services to individuals and small to mid-sized businesses. We offer a range of loan products, deposits services, and other financial products through our retail branches and other channels to our customers. Our core lending businesses are commercial real estate lending, residential real estate lending, and construction lending. We also offer a variety of commercial and industry loan and consumer loan products to our customers. We fund our lending business primarily with deposits generated through retail deposits and commercial relationships. Our deposit products include checking, savings, money market deposit, time deposits, and other traditional deposit services. In addition to traditional products and services, we offer contemporary products and services, such as debit cards, internet banking and online bill payment.

We commenced operations on June 1, 2005, upon completion of the reorganization of the Bank into the holding company form of ownership following approval of the reorganization by shareholders of the Bank at its 2005 Annual Meeting of Shareholders. Our headquarters is located at 601 Delsea Drive, Washington Township, New Jersey. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available ~~for~~ free of charge at www.parkebank.com as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission ("SEC"). Investors are encouraged to access these reports and other information about our business on our website.

At December 31, ~~2021,~~2023, we had total assets of ~~$2.14~~$2.02 billion, including loans of ~~$1.48~~$1.79 billion, total deposits of ~~$1.77~~$1.55 billion and total equity of ~~$232.4~~$284.3 million.

Market Area

Substantially all of the Bank’s business is with customers in its market areas of Southern New Jersey, ~~and~~ the Philadelphia area of ~~Pennsylvania.~~Pennsylvania, and New York, New York. We have carefully expanded our lending footprint in other areas also. Most of

the Bank’s customers are individuals and small to medium-sized businesses which are dependent upon the regional economy. Adverse changes in economic and business conditions in the Bank’s markets could adversely affect the Bank’s borrowers, their ability to repay their loans and to borrow additional funds, and consequently the Bank’s financial condition and performance.

Additionally, most of the Bank’s loans are secured by real estate located in Southern New Jersey and the Philadelphia area. A decline in local economic conditions could adversely affect the values of such real estate. Consequently, a decline in local economic conditions may have a greater effect on the Bank’s earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are more geographically diverse.

Competition

The Bank faces significant competition, both in making loans and attracting deposits. The Bank’s competition in both areas comes principally from other commercial banks, thrift and savings institutions, including savings and loan associations and credit unions, and other types of financial institutions, including brokerage firms and credit card companies. The Bank

faces additional competition for deposits from short-term money market mutual funds and other corporate and government securities funds.

Most of the Bank’s competitors, whether traditional or nontraditional financial institutions, have a longer history and significantly greater financial and marketing resources than does the Bank. Among the advantages these institutions have over the Bank are their ability to finance wide-ranging and effective advertising campaigns, to access international money markets and to allocate their investment resources to regions of highest yield and demand. Major banks operating in the primary market area offer certain services, such as international banking and trust services, which are not offered directly by the Bank.

In commercial transactions, the Bank’s legal lending limit to a single borrower enables the Bank to compete effectively for the business of individuals and smaller enterprises. However, the Bank’s legal lending limit is considerably lower than that of various competing institutions, which have substantially greater capitalization. The Bank has a relatively smaller capital base than most other competing institutions which, although above regulatory minimums, may constrain the Bank’s effectiveness in competing for loans.

~~Medical-Use~~ Cannabis Related Business

In the State of New Jersey, cannabis is legal for recreational use. Once enacted, the new law legalized and regulated cannabis use and possession for adults 21 years and older. The law also clarified marijuana and cannabis use and possession penalties for individuals younger than 21 years old. Retail sales of cannabis began in New Jersey in April 2022. We provide banking services to customers that are licensed by various States to do business in the ~~medical-use~~ cannabis industry as growers, processors and ~~dispensaries. Medical-use~~dispensaries and who participate in retail sales of cannabis in New Jersey. Cannabis businesses are legal inunder the laws of these States, as well as in New Jersey, although it is not legal ~~at the~~under federal ~~level.~~law. 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 December 31, ~~2021~~2023 and ~~2020,~~2022, deposit balances from ~~medical-use~~ cannabis customers were approximately ~~$375.2~~$96.7 million and ~~$259.4~~$177.3 million, or ~~21.2%~~6.2% and ~~16.3%~~11.3% of total deposits, respectively, with two customers accounting for ~~19.3%~~60.6% and ~~19.2%~~36.9% of the total at December 31, ~~2021~~2023 and ~~2020.~~2022. At December 31, ~~2021~~2023 and ~~2020, there were~~2022, the Bank had cannabis-related loans in the amounts of ~~$5.4~~$27.1 million and ~~$8.0~~$3.8 million, respectively. ~~We recorded approximately $336,000~~and $465,000 of interest incomes in 2021 and 2020, respectively, related to these loans. The fee income for the years ended December 31, 2021 and 2020 from the commercial deposit accounts of depositors who do business in the medical-use cannabis industry were $5.1 million and $2.2 million, respectively, and are included in service fees on deposit accounts, in the accompanying consolidated statements of income.

Lending Activities

Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing primarily in and around ~~Southern~~southern New Jersey, southeastern Pennsylvania, and ~~Philadelphia, Pennsylvania.~~ the Brooklyn and Bronx sections of New York, New York.

We focus our lending efforts primarily in ~~three~~four lending areas: residential mortgage loans, commercial mortgage loans, commercial and industrial loans, and construction loans.

Loan Maturity. The following table sets forth the contractual maturity of certain loan categories and the dollar amount of loans in certain loan categories due after December 31, ~~2021,~~2023, which have predetermined interest rates and which have floating or adjustable interest rates at December 31, ~~2021.~~2023.


		Due within one year or less		Due after one through five years		Due after five through fifteen years		Due after fifteen years		Total			Due within one year or less	Due after one through five years	Due after five through fifteen years	Due after fifteen years	Total
		(Dollars in thousands)
Commercial and Industrial
Commercial and Industrial
Commercial and Industrial	Commercial and Industrial	$	23,190	$	22,625	$	11,336	$	—	$	57,151
Construction	Construction	131,416		22,196		—		465		154,077
Commercial Real Estate Mortgage:	Commercial Real Estate Mortgage:											Commercial Real Estate Mortgage:
Commercial - Owner Occupied	Commercial - Owner Occupied	10,291		42,171		69,548		1,662		123,672
Commercial - Non-Owner Occupied	Commercial - Non-Owner Occupied	23,976		83,777		198,733		—		306,486
Residential - 1 to 4 family	Residential - 1 to 4 family	7,998		21,176		128,358		592,993		750,525
Residential - 1 to 4 family investment
Residential - multifamily	Residential - multifamily	2,214		19,548		63,202		—		84,964
Consumer	Consumer	11		136		3,042		4,783		7,972
Total	Total	$	199,096	$	211,629	$	474,219	$	599,903	$	1,484,847

Loans at fixed interest rates	Loans at fixed interest rates	$	19,923	$	43,312	$	175,720	$	38,889	$	277,844
Loans at fixed interest rates
Loans at fixed interest rates
Loans at floating/variable interest rates	Loans at floating/variable interest rates	179,173		168,317		298,499		561,014		1,207,003
Total	Total	$	199,096	$	211,629	$	474,219	$	599,903	$	1,484,847

Commercial and Industrial Loans. The Bank originates secured loans for business purposes. Loans are made to provide working capital to businesses in the form of lines of credit, which may be secured by accounts receivable, inventory, equipment or other assets. The financial condition and cash flow of commercial borrowers are closely monitored by means of corporate financial statements, personal financial statements and income tax returns. The frequency of submissions of required financial information depends on the size and complexity of the credit and the collateral that secures the loan. The Bank’s general policy is to obtain personal guarantees from the principals of the commercial loan borrowers. Such loans are made to businesses located in the Bank’s market area.

Commercial business loans generally involve a greater degree of risk than residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the mobility of collateral, the effects of general economic conditions and the increased difficulty of evaluating and monitoring these types of loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income and which are secured by real property the value of which tends to be more easily ascertainable, commercial business loans typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself and the general economic environment. If the cash flow from business operations is reduced, the borrower’s ability to repay the loan may be impaired.

Construction Loans. The Bank originates construction loans to individuals and real estate developers in its market area. The advantages of construction lending are that the market is typically less competitive than more standard mortgage products, the interest rate typically charged is a variable rate, which permits the Bank to protect against sudden changes in its costs of funds, and the fees or “points” charged by the Bank to its customers can be amortized over the shorter term of a construction loan, typically, one to two years, which permits the Bank to recognize income received over a shorter period of time.

The Bank provides interim real estate acquisition development and construction loans to builders and developers. Construction loans to provide interim financing on the property are based on acceptable percentages of the appraised value of the property securing the loan in each case. Construction loan funds are disbursed periodically at pre-specified stages of

completion. Interest rates on these loans are generally adjustable. The Bank carefully monitors these loans with on-site inspections and control of disbursements. These loans are generally made on properties located in the Bank’s market area.

Construction loans are secured by the properties under development and personal guarantees are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property, the Bank considers the financial

condition and reputation of the borrower and any guarantors, the amount of the borrower’s equity in the project, independent appraisals, costs estimates and pre-construction sale information.

Loans to residential builders are for the construction of residential homes for which a binding sales contract exists and the prospective buyers have been pre-qualified for permanent mortgage financing. Loans to residential developers are made only to developers with a proven sales record. Generally, these loans are extended only when the borrower provides evidence that the lots under development will be sold to potential buyers satisfactory to the Bank.

The Bank also originates loans to individuals for construction of single family dwellings. These loans are for the construction of the individual’s primary residence. They are typically secured by the property under construction, occasionally include additional collateral (such as a second mortgage on the borrower’s present home), and commonly have maturities of six to twelve months.

Construction financing is labor intensive for the Bank, requiring employees of the Bank to expend substantial time and resources in monitoring and servicing each construction loan to completion. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction and development, the accuracy of projections, such as the sales of homes or the future leasing of commercial space, and the accuracy of the estimated cost (including interest) of construction. Substantial deviations can occur in such projections. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, the Bank may be required to advance funds beyond the amount originally committed to permit completion of the development. If the estimate of value proves to be inaccurate, the Bank may be confronted, at or prior to the maturity of the loan, with a project having a value which is insufficient to assure full repayment. Also, a construction loan that is in default can cause problems for the Bank such as selecting replacement builders for a project, considering alternate uses for the project and site and handling any structural and environmental issues that might arise.

Commercial Real Estate Mortgage Loans. The Bank originates mortgage loans secured by commercial real estate. Such loans are primarily secured by office buildings, retail buildings, warehouses and general purpose business space. Although terms may vary, the Bank’s commercial mortgages generally have maturities of twenty years, but re-price within five years.

Loans secured by commercial real estate are generally larger and involve a greater degree of risk than one-to four-family residential mortgage loans. Of primary concern in commercial and multi-family real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties are often dependent on the successful operation or management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans to adverse conditions in the real estate market or the economy.

The Bank seeks to reduce the risks associated with commercial mortgage lending by generally lending in its primary market area and obtaining periodic financial statements and tax returns from borrowers. It is also the Bank’s general policy to obtain personal guarantees from the principals of the borrowers and assignments of all leases related to the collateral.

Our commercial real estate mortgage portfolio was $511.7 million at December 31, 2023. Within the portfolio, we designate certain sectors of loans as high risk to monitor more closely, given the current economic conditions. At December 31, 2023, the high risk sectors consisted of office, hotel, retail, and restaurant loans. All of these sectors combined represent 11.5% of total loan receivable, with no individual sector higher than 3.6%.

Residential Real Estate Mortgage Loans. The Bank originates adjustable and fixed-rate residential mortgage loans. Such mortgage loans are generally originated under terms, conditions and documentation acceptable to the secondary mortgage market. Although the Bank has placed all of these loans into its portfolio, a substantial majority of such loans can be sold in the secondary market or pledged for potential borrowings.

Consumer Loans. The Bank offers a variety of consumer loans. These loans are typically secured by residential real estate or personal property, including automobiles. Home equity loans (closed-end and lines of credit) are typically made up to 80% of the appraised or assessed value of the property securing the loan in each case, less the amount of any existing prior liens

on the property, and generally have maximum terms of ten years. The interest rates on second mortgages are generally fixed, while interest rates on home equity lines of credit are variable.

Loans to One Borrower and Concentration of Loans. Federal regulations limit loans to one borrower in an amount equal to 15% of unimpaired capital and unimpaired surplus. At December 31, ~~2021,~~2023, the Bank’s loan to one borrower limit was approximately ~~$45.6~~$53.8 million and the Bank had no borrowers with loan balances in excess of this amount. At December 31, ~~2021,~~2023, the Bank’s largest loan to one borrower was a ~~combination loan/line of credit~~commercial owner occupied real estate loan with a balance of ~~loan and line of credit of $21.8~~$21.5 million that ~~were~~was secured by ~~mix of real estate, construction assets and other commercial assets.~~the property. At December 31, ~~2021, these loans were~~2023, this loan was current and performing in accordance with the terms of the loan agreement.

The size of loans which the Bank can offer to potential borrowers is less than the size of loans which many of the Bank’s competitors with larger capitalization are able to offer. The Bank may engage in loan participations with other banks for loans in excess of the Bank’s legal lending limits. However, no assurance can be given that such participations will be available at all or on terms which are favorable to the Bank and its customers.

The Bank establishes policies and methods to determine concentrations of credit risk and to maintain discipline in lending practices with a focus on portfolio diversification. The Bank limits on loans to one borrower, one industry as well as product concentrations. At December 31, ~~2021,~~2023, the Bank's loan portfolio consists of residential, commercial real estate loans, construction loans, commercial and industry loans as well as consumer loans.

Non-Performing and Problem Assets

Non-Performing Assets. Non-accrual loans are loans on which the accrual of interest has ceased. Loans are generally placed on non-accrual status if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more unless the collateral is considered sufficient to cover principal and interest and the loan is in the process of collection. Interest accrued, but not collected at the date a loan is placed on non-accrual status, is reversed and charged against interest income. Subsequent cash receipts are applied either to the outstanding principal or recorded as interest income, depending on management’s assessment of ultimate collectability of principal and interest. Loans are returned to an accrual status when the borrower’s ability to make periodic principal and interest payments has returned to normal (i.e., brought current with respect to principal or interest or restructured) and the paying capacity of the borrower and/or the underlying collateral is deemed sufficient to cover principal and interest.

A loan is considered ~~impaired~~individually evaluated when it has been modified for a borrower in financial distress or when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. ~~Impaired~~Individually evaluated loans that have been modified are measured based on the present value of expected future discounted cash flows, the market price of the loan or the fair value of the underlying collateral if the loan is collateral dependent. The recognition of interest income on ~~impaired~~individually evaluated loans is the same as for non-accrual loans discussed above. Total ~~impaired~~non-performing loans, which include non-accrual loans, ~~and performing troubled debt restructurings (“TDRs”),~~ were ~~$10.3~~$7.2 million and ~~$22.7~~$21.7 million at December 31, ~~2021~~2023 and ~~2020,~~2022, respectively. Included in ~~impaired~~individually evaluated loans at December 31, ~~2021~~2023 and ~~2020~~2022 were ~~$6.0 million~~zero and ~~$13.9~~$5.5 million, respectively, of loans ~~classified as TDRs as defined within accounting guidance and regulatory literature.~~modified to borrowers in financial distress.

As of December 31, ~~2021,~~2023, there was ~~$17.4~~$15.4 million in loans which were not then on non-accrual status or ~~a TDR~~modified but where there is a potential weakness or pose unwarranted financial risk to the Bank, even though the asset value is not currently impaired. These loans require an increased degree of monitoring and servicing by Management as a result of internal or external conditions.

When a loan is more than 30 days delinquent, the borrower is contacted by mail or phone and payment is requested. If the delinquency continues, subsequent efforts are made to contact the delinquent borrower. In certain instances, the Bank may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize their financial affairs. If the loan continues in a delinquent status for 90 days or more, the Bank generally will initiate foreclosure proceedings.

Loans are generally placed on non-accrual status when either principal or interest is 90 days or more past due. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income. Such interest, when ultimately collected, is applied either to the outstanding principal or recorded as interest income, depending on management’s assessment of ultimate collectability of principal and interest. ~~At December 31, 2021, the Bank had $4.3 million in loans that were on a non-accrual basis.~~Interest income of $406,391 was recognized on these loans during the year ended December 31, 2021. Gross interest income of $522,656 would have been recorded during the year ended December 31, 2021, if these loans had been performing in accordance with their terms.

Foreclosed Real Estate. Real estate acquired by the Bank as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned until such time as it is sold. When real estate owned is acquired, it is recorded at its fair value less

disposal costs. Management also periodically performs valuations of real estate owned and establishes allowances to reduce book values of the properties to their net realizable values when necessary. Any write-down of real estate owned is charged to operations. Real estate owned at December 31, ~~2021~~2023 and December 31, 2022, was ~~$1.7~~$1.6 million. Real estate owned consisted of 1two commercial owner occupied ~~property~~properties as of December 31, ~~2021.~~2023.

Allowance for ~~Losses on Loans.~~Credit Losses. It is the policy of management to estimate for possible losses on all loans in its portfolio, whether classified or not. A provision for ~~loan~~credit losses is charged to operations based on management’s evaluation of the inherent losses estimated to have occurred in the Bank’s loan portfolio.

Management’s judgment as to the level of probable losses on existing loans is based on its internal review of the loan portfolio, including an analysis of the borrower's current financial position; the level and trends in delinquencies, non-accruals and ~~impaired~~individually evaluated loans; the consideration of national and local economic conditions and trends; concentrations of credit; the impact of any changes in credit policy; the experience and depth of management and the lending staff; and any trends in loan volume and terms. In determining the collectability of certain loans, management also considers the fair value of any underlying collateral. However, management’s determination of the appropriate allowance level, which is based upon the factors outlined above, which are believed to be reasonable, may or may not prove to be valid. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for ~~loan~~credit losses or that additional increases in the allowance for ~~loan~~credit losses will not be required.

Allocation of Allowance for ~~Loan Losses.~~Credit Losses on Loans. The following table sets forth the allocation of the Bank’s allowance for ~~loan~~credit losses by loan category at the dates indicated and the related percentage of the loans in the portfolio. The portion of the loan loss allowance allocated to each loan category does not represent the total available for future losses that may occur within the loan category as the total loan loss allowance is a valuation reserve applicable to the entire loan portfolio.








		December 31, 2021									December 31, 2020
		Amount			% of Loans to total Loans		Net charge off/(recovery)		Net charge off to average loans outstanding		Amount			% of Loans to total Loans		Net charge off/(recovery)		Net charge off to average loans outstanding
		(Dollars in thousands)																		(Dollars in thousands)
Commercial and Industrial	Commercial and Industrial	$	417		3.8	%	$	(18)	—	%	$	492		7.8	%	$	(23)	—	%
Construction	Construction	2,662			10.4		226		0.01	%	3,359			13.5		—		—	%
Construction
Construction
Real Estate Mortgage:
Real Estate Mortgage:
Real Estate Mortgage:	Real Estate Mortgage:
Commercial – Owner Occupied	Commercial – Owner Occupied	2,997			8.3		100		0.01	%	3,078			8.4		(11)		—	%
Commercial – Owner Occupied
Commercial – Owner Occupied
Commercial – Non-owner Occupied
Commercial – Non-owner Occupied
Commercial – Non-owner Occupied	Commercial – Non-owner Occupied	7,476			20.6		(4)		—	%	8,398			20.7		(266)		(0.02)	%
Residential – 1 to 4 Family	Residential – 1 to 4 Family	14,970			50.7		49		—	%	12,595			42.8		59		—	%
Residential – 1 to 4 Family
Residential – 1 to 4 Family
Residential - 1 to 4 Family Investment
Residential - 1 to 4 Family Investment
Residential - 1 to 4 Family Investment
Residential – Multifamily
Residential – Multifamily
Residential – Multifamily	Residential – Multifamily	1,215			5.7		—		—	%	1,639			6.1		—		—	%
Consumer	Consumer	108			0.5		—		—	%	137			0.7		—		—	%
Total allowance for loan losses		$	29,845		100.0	%	$	353	0.02	%	$	29,698		100.0	%	$	(241)	(0.02)	%
Consumer
Consumer
Total allowance for credit losses
Total allowance for credit losses
Total allowance for credit losses
Period-end loans outstanding (net of deferred costs/fees)
Period-end loans outstanding (net of deferred costs/fees)
Period-end loans outstanding (net of deferred costs/fees)	Period-end loans outstanding (net of deferred costs/fees)	$	1,484,847								$	1,565,807
Average loans outstanding	Average loans outstanding	$	1,513,959								$	1,527,999
Total non-performing loans		$	4,308								$	8,729
Average loans outstanding
Average loans outstanding
Total non-accrual loans
Total non-accrual loans
Total non-accrual loans
Allowance as a percentage of period end loans
Allowance as a percentage of period end loans
Allowance as a percentage of period end loans	Allowance as a percentage of period end loans	2.01		%							1.90		%
Non-accrual loans as a percentage of period end loans	Non-accrual loans as a percentage of period end loans	0.29		%							0.56		%
Non-accrual loans as a percentage of period end loans
Non-accrual loans as a percentage of period end loans
Allowance as a percentage of non-performing loans	Allowance as a percentage of non-performing loans	692.78		%							340.22		%
Allowance as a percentage of non-performing loans
Allowance as a percentage of non-performing loans

Investment Activities

General. The investment policy of the Company is established by senior management and approved by the Board of Directors. It is based on asset and liability management goals and is designed to provide a portfolio of high quality investments that foster interest income within acceptable interest rate risk and liquidity guidelines. In accordance with accounting guidance, the Company classifies the majority of its portfolio of investment securities as “available for sale” with the remainder, which are a mix of municipal bonds and mortgage-backed-securities held for Community Reinvestment Act purposes, as “held to maturity.” At December 31, ~~2021,~~2023, the Bank’s investment policy allowed investments in instruments such as: (i) U.S. Treasury obligations, (ii) U.S. government agency or government-sponsored agency obligations, (iii) local municipal obligations, (iv)

mortgage-backed securities, (v) certificates of deposit, and (vi) investment grade corporate bonds, trust preferred securities and mutual funds. The Board of Directors may authorize additional investments. At December 31, ~~2021,~~2023, no one issuer of investment securities represented 10% or more of the Company’s stockholders’ equity.

Investment Portfolio Maturities. The following table sets forth information regarding the scheduled maturities, amortized costs, estimated fair values, and weighted average yields for the Bank’s investment securities portfolio at December 31, ~~2021,~~2023, by contractual maturity. ~~The following table does not take into consideration the effects of scheduled repayments or the effects of possible prepayments.~~


		At December 31, 2021																		At December 31, 2023
		One Year or Less			After One Through Five Years			After Five Years Through Ten Years			After Ten Years			Total Investment Securities						One Year or Less	After One Through Five Years	After Five Years Through Ten Years	After Ten Years	Total Investment Securities
		Amortized Cost			Amortized Cost			Amortized Cost			Amortized Cost			Amortized Cost			Fair Value			Amortized Cost				Amortized Cost	Fair Value
		(Amounts in thousands, except yields)																		(Dollars in thousands)
Securities Held to Maturity:	Securities Held to Maturity:																		Securities Held to Maturity:
State and political subdivisions	State and political subdivisions	$	—		$	—		$	1,283		$	2,478		$	3,761		$	3,986
Yield	Yield	—		%	—		%	4.76		%	0.64		%	2.03		%
Residential mortgage-backed securities	Residential mortgage-backed securities	—			—			—			6,157			6,157			6,039
Residential mortgage-backed securities
Residential mortgage-backed securities
Yield	Yield	—		%	—		%	—		%	0.64		%	0.64		%
Total securities held to maturity
Total securities held to maturity
Total securities held to maturity	Total securities held to maturity	—			—			1,283			8,635			9,918			10,025
Weighted Average Yield	Weighted Average Yield	—		%	—		%	4.76		%	0.64		%	1.16		%

Securities Available for Sale:	Securities Available for Sale:
Corporate debt obligations		$	—		$	500		$	—		$	—		$	500		$	500
Yield		—		%	3.28		%	—		%	—		%	3.28		%

Securities Available for Sale:

Securities Available for Sale:

Residential mortgage-backed securities

Residential mortgage-backed securities

Residential mortgage-backed securities	Residential mortgage-backed securities	10			110			7,223			5,170			12,513			12,843
Yield	Yield	—		%	1.71		%	2.07		%	1.93		%	1.99		%
Collateralized mortgage obligations		—			—			—			8			8			8
Yield		—		%	—		%	—		%	4.64		%	4.64		%

Total securities available for sale

Total securities available for sale

Total securities available for sale	Total securities available for sale	10			610			7,223			5,178			13,021			13,351
Weighted Average Yield	Weighted Average Yield	—		%	2.94		%	2.07		%	1.93		%	2.03		%
Total Investment Securities	Total Investment Securities	$	10		$	610		$	8,506		$	13,813		$	22,939		$	23,376
Total Investment Securities
Total Investment Securities
Total Weighted Average Yield	Total Weighted Average Yield	—		%	2.94		%	2.41		%	1.20		%	1.70		%

Yields are calculated on a weighted average basis using the investments amortized cost and respective average yields for each investment category. Expected maturities of mortgage-backed securities may differ from contractual maturities due to calls or prepay obligations.

Sources of Funds

General. Deposits are the major external source of the Bank’s funds for lending and other investment purposes. In addition to deposits, the Bank derives funds from the amortization, prepayment or sale of loans, maturities of investment securities and operations. Scheduled loan principal repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and market conditions.

Deposits. The Bank offers individuals and businesses a wide variety of accounts, including checking, savings, money market accounts, individual retirement accounts and certificates of deposit. Total deposits were ~~$1.77~~$1.55 billion at December 31, ~~2021.~~2023. Deposits are obtained primarily from communities that the Bank serves, however, the Bank held brokered deposits of ~~$9.1~~$223.4 million and ~~$71.1~~$140.8 million at December 31, ~~2021,~~2023, and ~~2020,~~2022, respectively. At December 31, 2023, the Bank held brokered deposit balances in NOW, money market, and time deposit categories. Brokered deposits are a more volatile source of funding than core deposits and do not increase the deposit franchise of the Bank. In a rising rate environment, the Bank may be unwilling or unable to pay a competitive rate. To the extent that such deposits do not remain with the Bank, they may need to be replaced with borrowings which could increase the Bank’s cost of funds and negatively impact its interest rate spread, financial condition and results of operation. To mitigate the potential negative impact associated with brokered deposits, the Bank joined

~~Promontory Interfinancial Network~~ the IntraFi network ("~~Promontory"~~IntraFi") to secure an additional alternative funding source. ~~Promontory~~IntraFi provides the Bank an additional source of external funds through their weekly CDARS™ settlement ~~process. The rates are comparable to brokered deposits~~process and ~~can be obtained within a shorter period of time than brokered deposits.~~their overnight ICS™ money market product. The Bank’s CDARS™ and ICS™ deposits included within the brokered deposit total amounted to ~~$4.5~~$216.9 million and ~~$66.4~~$106.6 million at December 31, ~~2021~~2023 and ~~2020,~~2022, respectively.

2021
Average
Balance Yield/Rate Percent of
Total

(Dollars in thousands, except percentages)
NOWs $ 75,502 0.43% 4.39 %
Money markets 322,201 0.66% 18.75 %
Savings 146,584 0.45% 8.53 %
Time deposits 632,874 1.01% 36.84 %
Brokered CDs 34,292 0.67% 2.00 %
Total interest-bearing deposits 1,211,453 0.81%
Non-interest bearing demand deposits 506,644 29.49 %
Total deposits $ 1,718,097 100.00 %
Uninsured deposits at the end of the period $ 802,665


	2023
	Average Balance		Yield/Rate	Percent of Total
	(Dollars in thousands)
NOWs	$	86,932	1.58%	5.79	%
Money markets	403,292		4.25%	26.84	%
Savings	127,442		1.17%	8.48	%
Time deposits	498,089		3.06%	33.15	%
Brokered CDs	121,702		4.97%	8.10	%
Total interest-bearing deposits	1,237,457		3.33%
Non-interest bearing demand deposits	265,148			17.65	%
Total deposits	$	1,502,605		100.00	%
Uninsured deposits at the end of the period	$	601,456


		2020						2022
		Average Balance		Yield/Rate	Percent of Total			Average Balance			Yield/Rate		Percent of Total
		(Dollars in thousands, except percentages)						(Dollars in thousands)
NOWs	NOWs	$	63,086	0.52%	4.16	%	NOWs	$	92,535	0.45%		0.45%		5.75	%
Money markets	Money markets	279,947		1.31%	18.47	%	Money markets	352,339		1.11%		1.11%		21.89	%
Savings	Savings	140,466		0.51%	9.27	%	Savings	195,029		0.46%		0.46%		12.12	%
Time deposits	Time deposits	562,655		1.96%	37.13	%	Time deposits	514,421		0.95%		0.95%		31.96	%
Brokered CDs	Brokered CDs	126,968		1.56%	8.38	%	Brokered CDs	26,785		3.48%		3.48%		1.66	%
Total interest-bearing deposits	Total interest-bearing deposits	1,173,122		1.51%			Total interest-bearing deposits	1,181,109		0.94%		0.94%
Non-interest bearing demand deposits	Non-interest bearing demand deposits	342,325			22.59	%	Non-interest bearing demand deposits	428,549						26.62	%
Total deposits	Total deposits	$	1,515,447		100.00	%	Total deposits	$	1,609,658					100.00	%
Uninsured deposits at the end of the period	Uninsured deposits at the end of the period	$	798,604

The following table indicates the amount of the Company’s certificates of deposit of $250,000 or more, and the portion that are in excess of the Federal Deposit Insurance ("FDIC") limit, by time remaining until maturity as of December 31, ~~2021.~~2023.

Maturity Period Certificates of Deposit Portion in Excess of FDIC Insurance Limit

(Dollars in thousands)
Within three months $ 42,214 $ 13,964
Over three through six months 27,511 15,261
Over six through twelve months 59,673 32,674
Over twelve months 34,518 20,018
Total $ 163,916 $ 81,917


Maturity Period	Certificates of Deposit		Portion in Excess of FDIC Insurance Limit
	(Dollars in thousands)
Within three months	$	34,533	$	11,533
Over three through six months	33,060		12,060
Over six through twelve months	15,438		5,438
Over twelve months	10,665		7,165
Total	$	93,696	$	36,196

Under FDIC regulations, insured banks that are well capitalized with examination ratings in one of the two highest categories are permitted to accept brokered deposits and are not restricted as to the rates that can be paid on such deposits. Banks that are less than well capitalized or are not in one of the two highest examination rating categories may not accept brokered deposits absent a waiver from the FDIC and may not pay interest on brokered deposits that they are permitted to accept at a rate that is more than 75 basis points greater than the average national rate paid on deposits of similar size and maturity. Pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”) ~~enacted in May 2018,~~, the FDIC has amended its brokered deposit rule to exempt reciprocal deposits ~~such as CDARs~~ in an amount not exceeding the lesser of $5 billion or 20% of a bank’s total liabilities from the definition of brokered deposits. A bank that was well-capitalized and highly rated may continue to accept reciprocal deposits after it becomes less than well-capitalized or is no longer highly rated provided that reciprocal deposits do not exceed the average amount of reciprocal deposits as the preceding four quarter ends.

Subsidiary Activities

The ~~largest~~Company's only significant subsidiary ~~of the Company~~ is the Bank. In 2018, the Company formed a joint venture with Bridgestone Capital LLC in PDL LLC, to originate short-term alternative real estate loan products. The Company had a 51% ownership interest in the joint venture, and Bridgestone Capital LLC made a $1.2 million capital contribution to PDL. In 2021, PDL LLC was fully liquidated and all earnings were distributed to the Company and Bridgestone Capital, LLC.

Personnel

At December 31, ~~2021,~~2023, the Bank had 98101 full-time and 125 part-time employees.

Regulation

Set forth below is a brief description of certain laws that relate to the regulation of the Bank and the Company. The description does not purport to be complete and is qualified in its entirety by reference to applicable laws and regulations.

~~The CARES Act and Initiatives Related to COVID-19~~

~~In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security Act(“CARES Act”~~) was signed into law on March 27, 2020 to provide national emergency economic relief measures. Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions, such as the Bank, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Board of Governors of the Federal Reserve System (the "Federal Reserve") and other federal banking agencies, including those with direct supervisory jurisdiction over the Bank and the Company. Furthermore, as the ongoing COVID-19 pandemic has evolved, federal regulatory authorities have continued to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19. The Company continues to assess the impact of the CARES Act and other statutes, regulations and supervisory guidance related to the COVID-19 pandemic.

~~Paycheck Protection Program.~~ Section 1102 of the CARES Act created the Paycheck Protection Program (“PPP”), a program administered by the SBA to provide loans to small businesses for payroll and other basic expenses during the COVID-19 pandemic. The Bank has participated in the PPP as a lender. These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. Additionally, loan payments will also be deferred for the first six months of the loan term. The PPP commenced on April 3, 2020 and was available to qualified borrowers through August 8, 2020. Neither the government nor lenders are permitted to charge the recipients any fees. In December 2020, Congress amended the CARES Act through the enactment of the Consolidated Appropriations Act of 2021 (the “CAA”). Among other things, the CAA renewed the PPP, allocating $284.45 billion for new first time PPP loans under the existing PPP and permitting the expansion of existing PPP loans for certain qualified, existing PPP borrowers. As a participating lender in the PPP, the Bank continues to monitor legislative, regulatory, and supervisory developments related thereto.

~~Guidance on Non-TDR Loan Modifications due to COVID-19~~.On March 22, 2020, the federal bank regulatory agencies issued the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus,” which encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the

CARES Act provided that a qualified loan modification is exempt by law from classification as a troubled debt restructuring (“TDR”) as defined by generally accepted accounting principles, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States terminates. The CAA extended this relief to the earlier of January 1, 2022 or the first day of a bank’s fiscal year that begins after the national emergency ends. In accordance with the CARES Act’s TDR relief provisions, as extended by the CAA, the Bank will not classify qualified loan modifications made through the end of 2021 as TDRs. See Note 4 to the consolidated financial statements.

Consent Orders with Banking Regulators

In the fourth quarter of 2020, the Bank entered into a Stipulation to the Issuance of a Consent Order with each of the Federal Deposit Insurance Corporation (the “FDIC”) and the New Jersey Department of Banking and Insurance (the “NJDOBI”), consenting to the issuance of substantially identical consent orders (the “Consent Orders”) relating to weaknesses in the Bank’s Bank Secrecy Act and Anti-Money Laundering (collectively “BSA”) compliance program. In consenting to the issuance of the Consent Orders, the Bank did not admit or deny any charges of unsafe or unsound banking practices related to the BSA compliance program.

Under the terms of the Consent Orders, the Bank and/or its Board of Directors is required to take certain actions which include, but are not limited to:

•Increase supervision and direction of the Bank’s BSA compliance program and assume full responsibility for the approval and implementation of sound BSA policies and procedures;

•Creation of a compliance committee of the Board of Directors of the Bank with the responsibility of overseeing compliance with the Orders, BSA and the BSA compliance program;

•Designate a qualified individual(s) acceptable to the FDIC and the NJDOBI as a BSA Officer;

•Review and improve the Bank’s BSA compliance program, BSA risk assessment, system of BSA internal controls, and customer due diligence policies;

•Develop, adopt and implement effective training programs for the Board and management on all relevant aspects of laws, regulations and policies relating to BSA and ensure that an adequate number of qualified staff have been retained for the Bank’s BSA Department;

•Ensure the Bank’s adherence to a written program of policies and procedures to provide for BSA compliance and the appropriate identification and monitoring of transactions that pose greater than normal risk for BSA compliance;

•Development and implementation of a customer due diligence program to enhance customer due diligence and risk assessment processes;

•Review and improve policies and procedures for monitoring and reporting suspicious activity;

•Conduct independent testing for compliance with BSA by either a qualified outside party or Bank personnel who are independent of the BSA function and are qualified to perform such testing; and

•Hire a qualified firm acceptable to the FDIC and the NJDOBI to conduct a look back review of accounts and transaction activity for the time period beginning January 1, 2019, through the effective date of the Orders.

Numerous actions have already been taken or commenced by the Bank, which will assist in complying with the Consent Orders and strengthen its BSA compliance practices, policies, procedures and controls.

The Consent Orders have resulted, and are expected to continue to result, in additional BSA compliance expenses for the Bank and the Company. The Consent Orders do not otherwise impact the Bank’s business activities outside of BSA.

The Consent Orders do not require the Bank to pay any civil money penalty or require additional capital.

The foregoing summary description of the Consent Orders is not complete and is qualified by reference to the full text of the Consent Orders, copies of which are filed as Exhibits 99.1 and 99.2 to this Annual Report on Form 10-K.

The Consent Orders will remain in effect and be enforceable until they are modified, terminated, suspended or set aside by the FDIC and the NJDOBI. Management and the Board have expressed their full intention to comply with all parts of the Consent Orders at the earliest possible date. Issuance of the Consent Orders do not preclude further government action with respect to the Bank’s BSA program, including the imposition of fines, sanctions, additional expenses and compliance cost, and/or restrictions on the activities of the Bank.

Holding Company Regulation

General. The Company is a bank holding company within the meaning of the Bank Holding Company Act of 1956 (the “BHC Act”), and is regulated by the Federal Reserve. The Federal Reserve has enforcement authority over the Company and the Company's non-bank subsidiary which also permits the Federal Reserve to restrict or prohibit activities that are determined to be a serious risk to the subsidiary bank. The Company is required to file periodic reports of its operations with, and is subject to examination by, the Federal Reserve. This regulation and oversight is generally intended to ensure that the Company limits its activities to those allowed by law and that it operates in a safe and sound manner without endangering the financial health of its subsidiary bank.

Under the BHC Act, the Company must obtain the prior approval of the Federal Reserve before it may acquire control of another bank or bank holding company, merge or consolidate with another bank holding company, acquire all or substantially all of the assets of another bank or bank holding company, or acquire direct or indirect ownership or control of any voting shares of any bank or bank holding company if, after such acquisition, the Company would directly or indirectly own or control more than 5% of such shares.

Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the BHC Act on extensions of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities of the bank holding company or its subsidiaries, and on the taking of such stock or securities as collateral for loans to any borrower. Furthermore, under amendments to the BHC Act and regulations of the Federal Reserve, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of credit or providing any property or services. Generally, this provision provides that a bank may not extend credit, lease or sell property, or furnish any service to a customer on the condition that the customer obtain additional credit or service from the bank, the bank holding company, or any other subsidiary of the bank holding company or on the condition that the customer not obtain other credit or service from a competitor of the bank, the bank holding company, or any subsidiary of the bank.

Source of Strength Doctrine. A bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the policy

of the Federal Reserve that a bank holding company should stand ready to use available resources to provide adequate capital to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve regulations, or both.

Non-Banking Activities. The business activities of the Company, as a bank holding company, are restricted by the BHC Act and the Federal Reserve’s bank holding company regulations. Under the BHC Act and Federal Reserve regulation, the Company generally may only engage in, or acquire or control voting securities or assets of a company engaged in, (1) banking or managing or controlling banks and other subsidiaries authorized under the BHC Act and (2) any BHC Act activity the Federal Reserve has determined to be so closely related to banking or managing or controlling banks to be a proper incident thereto. These include any incidental activities necessary to carry on those activities, as well as a lengthy list of activities that the Federal Reserve has determined to be so closely related to the business of banking as to be a proper incident thereto.

In addition, a bank holding company that qualifies to be treated as a “financial holding company” and submits a financial holding company notice to the Federal Reserve may engage in a broad range of additional activities that are (i) financial in nature or incidental to such financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. These activities include securities underwriting and dealing, insurance agency and underwriting, and making merchant banking investments. The Company has not submitted notice to the Federal Reserve of its intent to be deemed a financial holding company.

Regulatory Capital Requirements. The Federal Reserve has adopted regulatory capital requirements pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in analyzing applications to it under the BHC Act. The Federal Reserve’s capital requirements are similar to those imposed on the Bank by the FDIC. See “Regulation of the Bank-Regulatory Capital Requirements.” Under the Federal Reserve’s Small Bank Holding Company Policy Statement, however, such regulatory capital requirements generally do not apply on a consolidated basis to a bank holding company with total assets of less than $3 billion unless the holding company: (1) is engaged in significant nonbanking activities either directly or through a nonbank subsidiary; (2) conducts significant off-balance sheet activities (including securitization and asset management or administration) either directly or through a nonbank subsidiary; or (3) has a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the SEC. The Federal Reserve

may apply the regulatory capital standards at its discretion to any bank holding company, regardless of asset size, if such action is warranted for supervisory purposes.

Restrictions on Dividends. The Company is subject to various restrictions relating to the payment of dividends. The Federal Reserve has issued guidance indicating that bank holding companies should generally pay dividends only if the company’s net income available to common shareholders over the past year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the company’s capital needs, asset quality and overall financial condition. The Federal Reserve’s guidance also states that a bank holding company should inform and consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure.

The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends. In addition, the Federal Reserve’s guidance states that a bank holding company should consult with its regional Federal Reserve Bank in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure. Finally, under the federal prompt corrective action regulations, the Federal Reserve may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

As a majority of the Company’s revenues result from dividends paid to the Company by the Bank, the Company’s ability to pay dividends to our shareholders largely depends on the receipt of such dividends from the Bank. The Bank is subject to various laws and regulations limiting the amount of dividends that it can pay. Under New Jersey law, no dividend may be paid if the dividend would impair the capital stock of the Bank. In addition, no dividend may be paid unless the Bank would, after payment of the dividend, have a surplus of at least 50% of its capital stock (or if the payment of dividend would not reduce surplus). Finally, if the Bank does not maintain the capital conservation buffer required by applicable regulatory capital rules,

its ability to pay dividends or other capital distributions to the Company will be limited. See “- Regulation of the Bank - Regulatory Capital Requirements.”

Federal Securities Law. The Company’s common stock is registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and the Company is subject to the periodic reporting and other requirements of Section 12(b) of the 1934 Act, as amended.

Regulation of the Bank

The Bank operates in a highly regulated industry. This regulation and supervision establishes a comprehensive framework of activities in which a bank may engage and is intended primarily for the protection of the deposit insurance fund and depositors and not shareholders of the Bank.

Any change in applicable statutory and regulatory requirements, whether by the NJDOBI, the FDIC, the United States Congress or state legislatures, could have a material adverse impact on the Bank, and its operations. The adoption of regulations or the enactment of laws that restrict the operations of the Bank or impose burdensome requirements upon it could reduce its profitability and could impair the value of the Bank’s franchise, which developments could hurt the trading price of the Company’s stock.

As a New Jersey-chartered commercial bank, the Bank is subject to the regulation and supervision of the NJDOBI. As an FDIC-insured institution, the Bank is subject to regulation and supervision of the FDIC. The regulations of the FDIC and the NJDOBI affect virtually all activities of the Bank, including the minimum level of capital the Bank must maintain, the ability of the Bank to pay dividends, the ability of the Bank to expand through new branches or acquisitions and various other matters. The NJDOBI and the FDIC regularly examine the Bank and prepare reports to the Bank’s Board of Directors on deficiencies, if any, found in its operations. The regulatory authorities have substantial discretion to impose enforcement action on an institution that fails to comply with applicable regulatory requirements.

Under the New Jersey Banking Act of 1948, a bank may declare and pay dividends only if after payment of the dividend the capital stock of the bank will be unimpaired and either the bank will have a surplus of not less than 50% of its capital stock or the payment of the dividend will not reduce the bank's surplus.

Federal Deposit Insurance. The FDIC insures deposits at federally insured financial institutions such as the Bank. Deposit accounts in the Bank are insured by the FDIC's Deposit Insurance Fund up to a maximum of $250,000 per separately insured depositor.

The Bank is subject to deposit insurance assessments established by the FDIC ~~charges insured depository institutions premiums~~ to maintain the Deposit Insurance ~~Fund.~~Fund (the “DIF”). Under the FDIC’s risk-based assessment system, banks that are deemed to be less risky pay lower assessments. ~~Assessments~~Assessment rates for small institutions (those with ~~assets of~~ less than $10 billion ~~of assets, such as the Bank,~~in assets) are based on ~~financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure of~~ an institution’s ~~failure within three years.~~weighted average CAMELS component ratings and certain financial ratios and are applied to the institution’s assessment base, which equals its average total assets minus its average tangible equity.

~~The FDIC’s currently effective~~In October 2022, the FDIC adopted a final rule that increased the initial base deposit insurance assessment ~~range (inclusive of possible adjustments) for most insured depository institutions is 1.5~~rate schedules uniformly by 2 basis points beginning with the first quarterly assessment period of 2023. The increased assessment is expected to improve the likelihood that the DIF reserve ratio would reach the statutory minimum of 1.35% by the statutory deadline of September 30, 2028, consistent with the FDIC’s amended restoration plan. The FDIC assessment rates effective January 1, 2023 (which are subject to certain adjustments) range from 5 to 18 basis points for institutions with CAMELS composite ratings of ~~total assets less tangible equity. The FDIC has the authority~~1 or 2, 8 to ~~increase insurance assessments. Any significant~~32 basis points for those with a CAMELS composite score of 3, and 18 to 32 basis points for those with CAMELS composite scores of 4 or 5. Significant increases ~~would~~in assessments may have an adverse effect on the operating expenses and results of operations of the Bank. ~~We cannot predict what the FDIC assessment rates will be in the future.~~

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

Regulatory Capital Requirements. The Bank is required to ~~maintain specified levels of~~comply with applicable capital adequacy rules adopted by the FDIC and other federal bank regulatory ~~capital under federal banking regulations.~~agencies (the “Basel III Capital Rules”). The ~~capital requirements~~Basel III Capital Rules apply to all depository institutions as well as to all top-tier bank and savings and loan holding companies that are ~~quantitative measures established by regulation that require~~not subject to the Federal Reserve Small Bank to maintain minimum amounts and ratios of capital. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.Holding Company Policy Statement.

Under the ~~FDIC's regulatory capital rules, the Bank is~~Basel III Capital Rules, banks are required to meet four minimum capital standards: (1) a “Tier 1” or “core” capital leverage ratio equal to at least 4% of total adjusted ~~assets,~~assets; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted ~~assets,~~assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted ~~assets,~~assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets. Common equity Tier 1 capital is defined as common stock instruments, retained earnings, any common equity Tier 1 minority interest and, unless the bank has made an “opt-out” election, accumulated other comprehensive income, net of goodwill and certain other intangible assets. Tier 1 or core capital is defined as common equity Tier 1 capital plus certain qualifying subordinated interests and grandfathered capital instruments. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, qualifying subordinated instruments and certain grandfathered capital instruments. An institution’s risk-based capital requirements are measured against risk-weighted assets, which equal the sum of each on-balance-sheet asset and the credit-equivalent amount of each off-balance-sheet item after being multiplied by an assigned risk weight. Risk weightings range from 0% for cash to 100% for property acquired through foreclosure, commercial loans, and certain other assets to 150% for exposures that are more than 90 days past due or are on nonaccrual status and certain commercial real estate facilities that finance the acquisition, development or construction of real property.

In addition to ~~imposing higher capital~~the above minimum requirements, the Basel III Capital Rules require banks and covered financial institution holding companies to maintain a capital ~~rules limit a banking organization’s capital distributions and certain discretionary bonus payments if the organization does not hold a “capital~~ conservation ~~buffer” consisting~~buffer of at least 2.5% of ~~common equity Tier 1 capital to~~ risk-weighted assets over and above the ~~amount necessary to meet its~~ minimum risk-based capital requirements. Institutions that do not maintain the required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital ~~conservation~~ buffer requirement effectively ~~increases~~raises the minimum required risk-based capital ratios to 7% for ~~common equity~~Common Equity Tier 1 ~~capital,~~Capital, 8.5% for Tier 1 ~~capital~~Capital and 10.5% for Total ~~capital.~~Capital on a fully phased-in basis.

In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors but also qualitative factors, and has the authority to establish higher capital requirements for individual institutions where necessary.

Prompt Corrective Regulatory Action. Under applicable federal statute, the federal bank regulatory agencies are required to take “prompt corrective action” with respect to institutions that do not meet specified minimum capital requirements. For these purposes, the statute establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Under the implementing regulations, in order to be considered well capitalized, a bank must have a ratio of common equity Tier 1 capital to risk-weighted assets of 6.5%, a ratio of Tier 1 capital to risk-weighted assets of 8%, a ratio of total capital to risk-weighted assets of 10%, and a leverage ratio of 5%. ~~In order~~

An institution is “adequately capitalized” if it has a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, a Common Equity Tier 1 Capital Ratio of 4.5% or better and a Leverage Ratio of 4.0% or greater. An institution is “undercapitalized” if it has a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based Capital ratio of less than 6.0%, a Common Equity Tier 1 ratio of less than 4.5% or a Leverage Ratio of less than 4.0%. An institution is deemed to be “significantly undercapitalized” if it has a Total Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, a Common Equity Tier 1 ratio of less than 3.0% or a Leverage Ratio of less than 3.0%. An institution is considered ~~adequately capitalized, a bank must have the minimum capital ratios required by the regulatory capital rule described above. Institutions with lower capital ratios are assigned~~ to ~~lower capital categories. Based on safety and soundness concerns, a bank may~~ be assigned to a lower capital category than would otherwise apply based on its capital ratios. A bank that is not well capitalized is subject to certain restrictions on brokered deposits and interest rates on deposits. A bank that is not at least adequately capitalized is subject to numerous additional restrictions, and a guaranty by its holding company is required. A bank with“critically undercapitalized” if it has a ratio of tangible equity to total assets ~~of 2.0%~~that is equal to or less ~~is subject~~than 2.0%

The prompt corrective action regulations provide for the imposition of a variety of requirements and limitations on institutions that fail to meet the ~~appointment of~~above capital requirements. In particular, the FDIC ~~as receiver if~~may require any state non-member bank that is not “adequately capitalized” to take certain action to increase its capital ~~level does not improve within 90 days.~~ratios. If the non-member bank’s capital is significantly below the minimum required levels of capital or if it is unsuccessful in increasing its capital ratios, the bank’s activities may be restricted.

As of December 31, ~~2021,~~2023, the Bank was in compliance with all regulatory capital standards and qualified as “well capitalized.” See Note 13 of Notes to Consolidated Financial Statements.

~~Regulatory Capital Simplification - Community Bank Leverage Ratio.~~ The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), enacted in May 2018, introduced an optional simplified measure of capital adequacy for qualifying community banking organizations with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of tangible equity capital divided by average consolidated assets (“CBLR”) of between 8 and 10 percent. Under the statute, any qualifying depository institution or holding company that maintains a leverage ratio exceeding the CBLR will be considered to satisfy the generally applicable leverage and risk-based regulatory capital requirements.

The federal banking regulators jointly issued a final rule under the EGRRCPA, effective January 1, 2020, which provided that a community banking organization with less than $10 billion in assets may elect to use the CBLR capital framework so long as the bank has a Tier 1 leverage ratio of greater than 9% and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying bank that elects to use the CBLR framework will be deemed to satisfy the generally applicable leverage and risk-based regulatory capital requirements, will be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations, and will not be required to report or calculate risk-based capital. In accordance with the provisions of the CARES Act, the federal banking agencies issued a final rule in August 2020, under which the CBLR was lowered to 8% through the end of 2020, will be set at 8.5% for the 2021 calendar year, and will return to 9% on January 1, 2022. We have elected to use the CBLR framework.

Bank Secrecy Act / Anti-Money Laundering Laws. The Bank is subject to the Bank Secrecy Act and other anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001. These laws and regulations require the Bank to implement policies, procedures, and controls to detect, prevent, and report money laundering and terrorist financing and to verify the identity of their customers. Violations of these requirements can result in substantial civil and criminal sanctions. In addition, provisions of the USA PATRIOT Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing mergers and acquisitions.

Privacy Regulations and Cybersecurity. Federal regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of

establishing the customer relationship and annually thereafter. In addition, the Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and not to disclose account numbers or access codes to non-affiliated third parties for marketing purposes. The Bank currently has a privacy protection policy in place and believes that such policy is in compliance with the regulations.

In November 2021, the federal bank regulatory agencies issued a final rule requiring banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that rises to the level of a “notification incident,” as those terms are defined in the final rule, has occurred. A notification incident is a “computer-security incident” that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material portion of its customer base, jeopardize the viability of key operations of the banking organization, or impact the stability of the financial sector. The final rule also requires bank service providers to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for four or more hours.

Transactions with Related Parties. The Bank is subject to the Federal Reserve’s Regulation W, which implements the restrictions of Sections 23A and 23B of the Federal Reserve Act on transactions between a bank and its “affiliates.” The sole “affiliate” of the Bank, as defined in Regulation W, is the Company. Section 23A and Regulation W generally place limits on the amount of a bank’s loans or extensions of credit to, investments in, or certain other transactions with its affiliates, and on the amount of advances to third parties collateralized by the securities or obligations of affiliates. Section 23B and Regulation W also require a bank’s transactions with affiliates to be on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.

The Bank is also subject to certain restrictions under Sections 22(g) and 22(h) of the Federal Reserve Act on extensions of credit to the executive officers, directors, principal shareholders of the Bank and the Company, as well as to entities controlled by such persons. Among other things and subject to certain exceptions, these provisions generally require that the Bank’s extensions of credit to the insiders of the Bank and the Company must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not involve more than the normal risk of repayment or present other unfavorable features.

Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank (“FHLB”) of New York, which is one of 11 regional FHLBs. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from funds deposited by member institutions and proceeds from the sale of consolidated obligations of the FHLB System. It makes loans to members (i.e., advances) in accordance with policies and procedures established by the Board of Directors of the FHLB.

As a member, the Bank is required to purchase and maintain restricted stock in the FHLB of New York (“FHLBNY”) in an amount equal to the greater of 1% of its aggregate unpaid residential mortgage loans, home purchase contracts or similar obligations at the beginning of each year or 5% of the Bank’s outstanding advances from the FHLB. At December 31, 2023, the Bank was in compliance with this requirement.

Community Reinvestment Act and Fair Lending Laws. Under the Community Reinvestment Act, every insured depository institution, including the Bank, has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The Community Reinvestment Act requires the depository institution’s record of meeting the credit needs of its community to be assessed and taken into account in the evaluation of certain applications by such institution, such as a merger or the establishment of a branch office by the Bank. An unsatisfactory Community Reinvestment Act examination rating may be used as the basis for the denial of an application. The Bank received a ~~“satisfactory”~~“needs to improve” rating in its most recent Community Reinvestment Act examination.

In May 2022, the FDIC and the other federal bank regulatory agencies issued a joint proposal to modernize the regulations implementing the CRA, which would change both the process and substantive tests that the regulators use to assess the record of each bank in fulfilling its obligation to the community. The regulatory agencies stated that the proposal is intended to achieve the following objectives: (i) expand access to credit, investment and basic banking services in low- and moderate-income communities, (ii) adapt to changes in the banking industry, including internet and mobile banking, (iii) provide greater clarity, consistency and transparency in the application of the regulations and (iv) tailor performance standards to account for differences in bank size, business model, and local conditions. The Company will evaluate the impact of the

proposal’s potential changes to the regulations implementing the CRA and their impact to our financial condition and/or results of operations, which cannot be predicted at this time.

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A failure to comply with the Equal Credit Opportunity Act or the Fair Housing Act or with the federal fair lending regulations implementing those statutes could result in an enforcement action by the FDIC, as well as by the Department of Justice.

Incentive Compensation. The FDIC and the Federal Reserve review, as part of their regular, risk-focused examinations, the incentive compensation arrangements of banking organizations. These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. Deficiencies are incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

In 2010, the FDIC and the other federal bank regulatory agencies issued comprehensive guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, is based upon the principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

In 2016, the U.S. financial regulators, including the FDIC, the Federal Reserve and the SEC, proposed revised rules on incentive-based payment arrangements at financial institutions having at least $1 billion in total assets. These proposed rules have not been finalized.

In October 2023, the Nasdaq adopted listing standards requiring listed companies to adopt policies providing for the recovery or “clawback” of excess incentive-based compensation earned by current or former executive officers during the three fiscal years preceding the date the listed company determines an accounting restatement is required. The Company adopted a clawback policy compliant with the new Nasdaq listing standard, effective October 2 ,2023.

Item 1A. Risk Factors.

Not applicable

Item 1B. Unresolved Staff Comments.

None.

Item 1C.Cybersecurity

The Risk Management Committee of the Board of Directors (the “Committee”) is responsible for overseeing the risks from cybersecurity threats. The Committee receives reports from, and oversees, IT Risk Assessment, Cybersecurity Risk Assessment, Annual IT Program Status Report, Vendor Management Risk Assessment, and Quarterly Internal Vulnerability Reports and current Cyber Events briefings. The Committee also makes budgeting, procedure, and policy decisions designed and intended to improve the Company’s residual risk.

The IT Steering Committee consists of the Company’s senior management, the entire IT team, and various operations personnel. The primary function of the IT Steering Committee is to perform Strategic Planning, discuss hardware and software replacement, new projects, current cybersecurity threats, and ongoing cybersecurity issues and threats. The IT manager provides an IT status report to the Risk Management committee on a quarterly basis.

The Company has adopted an Incident Response Plan (the “Plan”) to monitor, detect, mitigate and remediate cybersecurity incidents. The Plan requires all employees to have a working knowledge of the Company’s Information Security Program and Incident Response Policies. Pursuant to the Plan, the Information Technology Administrator and Senior\Compliance Management identify information owners for sensitive customer information and create an incident

response team. Each Department Manager, upon notification of a potential unauthorized access, manipulation of data or theft of any item identified under GLBA Inventory and Asset Classification, is responsible for further assessing the situation in order to document the suspected or actual breech, and forward the appropriate documentation to the Information Technology Administrator. The documentation of the suspected or actual incident includes the following:

a.Identify the nature and scope of the incident.

b.Identify the information systems affected.

c.Identify the types of customer information potentially affected.

Once the Department Manager has determined that unauthorized access, manipulation of data or theft of any item identified under GLBA Inventory and Asset Classification has occurred, Senior Management, the Compliance Officer and the Information Technology Administrator must be contacted immediately.

If theft of any item identified under GLBA Inventory and Asset Classification has occurred, and it cannot be determined what specific information was included on the Asset, the Asset is treated as if it contained sensitive customer information and Senior Management, the Compliance Officer and the Information Technology Administrator must be contacted immediately. If the Information Technology Administrator and Senior\Compliance Management declare an incident or if there is a confirmed theft or loss of customer information, appropriate regulatory authorities, law enforcement, and legal counsel are notified.

During the fiscal year ended December 31, 2023, the risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, its business strategy, results of operations, or financial condition.

1516

Item 2. Properties.

(a)~~Properties.~~Properties

Office Location

Year Facility Opened

Lease or Owned

Parke Main Office

1999

Owned

601 Delsea Drive

Sewell, NJ 08080

Northfield Branch

2002

Leased

501 Tilton Road

Northfield, NJ 08225

Kennedy Branch

2003

Owned

567 Egg Harbor Road

Sewell, NJ 08080

Spruce Street Branch

2006

Leased

1610 Spruce Street

Philadelphia, PA 19103

Galloway Township Branch

2010

Owned

67 E. Jimmy Leeds Road

Galloway Township, NJ 08205

Collingswood Branch

2016

Owned

1150 Haddon Avenue

Collingswood, NJ 08108

Arch Street Branch

2016

Leased

1032 Arch Street

Philadelphia, PA 19108

Philadelphia Lending Office

2023

Leased

1817 E. Venango St.

Philadelphia, PA 19108

The Company’s and the Bank’s main office is located in Washington Township, Gloucester County, New Jersey, in an office building of approximately 13,000 square feet. The main office facilities include teller windows, a lobby area, drive-through windows, automated teller machine, a night depository, and executive and administrative offices.

The Bank also conducts business from a full-service office in Northfield, New Jersey, a full-service office in Washington Township, Gloucester County, New Jersey, a full-service office in Philadelphia, Pennsylvania, and a full-service office in Galloway Township, NJ. These offices were opened by the Bank in September 2002, February 2003, August 2006 and May 2010, respectively. The Northfield office and the Philadelphia office are leased. The Washington Township office was purchased in February 2003. The Bank opened two offices, a full service office in Collingswood, New Jersey, opened in September 2016, and a full service office in Philadelphia, Pennsylvania, opened December 2016. Both these offices are leased. Management considers the physical condition of all offices to be good and adequate for the conduct of the Bank’s business. At December 31, 2021, net property and equipment totaled approximately $6.3 million.

Item 3. Legal Proceedings.

~~None~~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. See "Note 15. Commitments and Contingencies" in the Notes to the Consolidated Financial Statements.

Mori Restaurant LLC v. Parke Bank Matter

On May 20, 2014, Parke Bank (the "Bank") loaned Voorhees Diner Corporation ("VDC") the original principal sum of $1,000,000.00 for purposes of tenant fit out, and operation, of the Voorhees Diner situated at 320 Route 73, Voorhees, New Jersey 08043. VDC leased the Diner property under that certain Lease with Mori Restaurant LLC ("Mori") dated May 20, 2014. In connection with the loan from the Bank and as security therefor, VDC pledged its leasehold interest to the Bank. On March 6, 2015, the loan was modified, and the principal amount of the loan was increased to $1,400,000.00. On January 8, 2020, the Bank declared VDC in default of its loan obligations. Judgment was entered against VDC and in favor of the Bank, and the court appointed Alan I. Gould, Esquire, as the Receiver for the Voorhees Diner Corporation. Mr. Gould subsequently caused VDC's leasehold interest in the Diner property to be sold at sheriffs sale. The Bank's REO subsidiary, 320 Route 73 LLC, was the successful bidder and took title thereto. Mori Restaurant has filed counterclaims against 320 Route 73 LLC and the Bank for rent allegedly accruing due during the period that the Receiver was in possession of the premises. As to all of Mori Restaurant’s claims, the Bank defendants’ primary, but not exclusive, defense in this matter is that, pursuant to that certain Fee Owner Consent executed by and between Mori Restaurant and the Bank, in November 2014, the lease between VDC and Mori Restaurant was terminated as a matter of law and neither the Bank nor 320 Route 73 LLC have liability to Mori Restaurant under the lease or otherwise. The Bank believes this suit is without merit, denies any and all liability and intends to vigorously defend against this matter.

Other than the foregoing, neither the Company nor the Bank are involved in any other pending legal proceedings, other than routine legal matters occurring in the ordinary course of business, which in the aggregate involve amounts which are believed by management to be immaterial to the consolidated financial condition or results of operations of the Company.

Item 4. Mine Safety Disclosures.

Not ~~applicable~~Applicable.

Part II

Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company's common stock is listed on the Nasdaq Capital Market under the trading symbol of "PKBK". The number of shareholders of record of common stock as of December 31, ~~2021,~~2023, was approximately ~~245.~~238. This does not reflect the number of persons or entities who held stock in nominee or "street" name through various brokerage firms. As of March 11, ~~2022,~~2024, there were ~~11,907641~~11,958,321 shares of our common stock issued and outstanding.

The Company paid a ~~$0.16~~$0.18 per share quarterly common stock cash dividend induring each quarter of ~~2021.~~2023. During ~~2021,~~2023, the Company paid a total of ~~$7.6~~$8.6 million in common stock cash dividends.

The Company also has ~~445~~375 shares of 6% non-Cumulative Series B Preferred Stock outstanding at December 31, ~~2021.~~2023. The preferred stock has a liquidation preference of $1,000 per share. Each share of Series B Preferred Stock is convertible, at the option of the holder into approximately 137.6 shares of Common Stock at December 31, ~~2021.~~2023. Upon full conversion of the outstanding shares of the Series B Preferred Stock, the Company will issue approximately ~~61,232~~51,600 shares of Common Stock assuming that the conversion rate does not change. The conversion rate and the total number of shares to be issued would be adjusted for future stock dividends, stock splits and other corporate actions.

The Company has recorded dividends on preferred stock in the approximate amount of ~~$28,200~~$26,000 and ~~$29,000~~$27,000 for the years ended December 31, ~~2021~~2023 and ~~2020,~~2022, respectively. The Company paid quarterly cash dividends of $15 per share on the preferred stock for the years ~~2021~~2023 and ~~2020.~~2022. During 2023, preferred stockholders converted 70 shares of preferred shares into 9,628

shares of common stock. The preferred stock qualifies, and is accounted, as equity securities and is included in the Company’s Tier I capital since issued.

The timing and amount of future dividends will be within the discretion of the Board of Directors and will depend on the consolidated earnings, financial condition, liquidity, and capital requirements of the Company and its subsidiaries, applicable governmental regulations and restrictions, and Board policies, and other factors deemed relevant by the Board.

The Company's ability to pay dividends is substantially dependent upon the dividends it receives from the Bank and is subject to other restrictions. Under current regulations, the Bank's ability to pay dividends is restricted as well.

Pursuant to the terms of the Series B Preferred Stock, the Company may not pay a cash dividend on the common stock unless all dividends on the Series B Preferred Stock for the then-current dividend period have been paid or set aside.

The Federal Deposit Insurance Act generally prohibits all payments of dividends by any insured bank that is in default of any assessment to the FDIC. Additionally, because the FDIC may prohibit a bank from engaging in unsafe or unsound practices, it is possible that under certain circumstances the FDIC could claim that a dividend payment constitutes an unsafe or unsound practice. The New Jersey Department of Banking and Insurance has similar power to issue cease and desist orders to prohibit what might constitute unsafe or unsound practices. The payment of dividends may also be affected by other factors (e.g., the need to maintain adequate capital or to meet loan loss reserve requirements).

There were no repurchases of the Company’s Common Stock during the twelve months ended December 31, ~~2021.~~2023.

Shareholders wishing to change the name, address or ownership of the Company’s stock, report lost certificates or consolidate accounts are asked to contact the Company’s Transfer Agent and Registrar directly: Computershare Investor Services ("Computershare"), P.O. Box 43078, Providence, Rhode Island 02940-3078. Shareholders may also contact Computershare at 1-800-942-5909 and www.computershare.com.

Item 6. [Reserved]

Not applicable

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

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, Pennsylvania, and ~~Pennsylvania.~~New York. The Bank has branches in Galloway Township, Northfield, Washington Township, and 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, deposit 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.

As of December 31, ~~2021,~~2023, we had total assets of ~~$2.14~~$2.02 billion, total liabilities of ~~$1.90~~$1.74 billion, and total shareholders' equity of ~~$232.4~~$284.3 million. Net income available to common shareholders for ~~2021~~2023 was ~~$40.7~~$28.4 million. In ~~2021,~~2023, net income available to common shareholders ~~increased 43.4%~~decreased 32.0% over the previous year primarily asdue to a ~~result~~$11.4 million increase in non-interest expenses, primarily due to a one-time recognition of a $9.5 million contingent loss related to cash that was stolen from a third-party armored car carrier facility that was used by the Company. In addition, non-interest expense increased due to an increase in compensation and benefits expense, lower net interest ~~expense on deposits,~~income, and lower non-interest income, partially offset by lower provision for ~~loan losses, and higher fee income. Total~~credit losses. At December 31, 2023, total assets increased ~~2.8%~~1.9% and total equity increased ~~14.7%~~6.9%, compared to December 31, ~~2020. We also maintained a strong capital position.~~2022. Our risk based tier 1 capital ratio was ~~19.0%~~20.8% at December 31, ~~2021. During 2021,~~2023. In addition, during 2023 we returned ~~$9.5~~$8.6 million of capital to our common shareholders through common stock dividends.

Our business operations are subject to risks and uncertainties that could materially affect our operating results. Beginning in the first quarter of 2020, the COVID-19 pandemic has posed a significant threat to people's health as well as the global and U.S. economies. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the business of the Company, its customers, employees and third-party service providers. The extent of such impact will depend on future developments, which are highly uncertain. There continues to be various other risks and uncertainties that could impact the Company’s businesses and future results, such as changes to the U.S. economic condition, market interest rates, the Federal Reserve Board's monetary policy, other government policies, and actions of regulatory agencies.

Results of Operations

Net Income

We recorded net income available to common shareholders of ~~$40.7~~$28.4 million or ~~$3.43~~$2.38 per basic common share and ~~$3.36~~$2.35 per diluted common share, for the year ended December 31, ~~2021~~2023, compared to ~~$28.4~~$41.8 million, or ~~$2.40~~$3.51 per basic common share and ~~$2.37~~$3.44 per diluted common share, for the year ended December 31, ~~2020, an increase~~2022, a decrease of ~~$12.3~~$13.4 million or ~~43.4%~~32.0%.

Net Interest Income

Net interest income ~~increased $6.5~~decreased $9.1 million, or ~~10.3%~~12.4%, to ~~$69.1~~$64.2 million for the year ended ~~2021~~2023 compared to ~~$62.6~~$73.3 million for the year ended ~~2020.~~2022. The ~~increase~~decrease in net interest income was primarily due to an increase in interest expense of $34.3 million, partially offset by an increase in interest income of $25.2 million. Interest income for 2023 increased to $112.7 million, an increase of $25.2 million, or 28.8%, from $87.5 million for 2022, primarily due to an increase in interest and fees on loans of $23.2 million, or 27.9%. Interest and fees on loans increased during the year ended December 31, 2023, due to higher average outstanding loan balances and higher market interest rates, and an increase in interest earned on average deposits held at the Federal Reserve Bank ("FRB") of $1.8 million, due to higher interest rates paid on deposits, partially offset by a decrease in ~~deposit rates, partially offset by lower~~the average balance of $225.1 million. Interest expense increased to $48.5 million for 2023, from $14.2 million for 2022, an increase of $34.3 million, or 242.5%. The increase in interest ~~income from loans~~expense was primarily due to an increase in market interest rates on deposit accounts at the Bank, as well as a ~~decline~~change in the ~~loan portfolio. Interest income for 2021 decreased to $82.1 million,~~deposit mix. In addition, a decrease ~~of $2.5 million, or 2.9%, from $84.5 million for 2020. Interest~~in non-interest bearing demand balances and an increase in brokered deposit balances contributed to the increase in interest expense ~~decreased to $13.0 million for 2021, from $21.9 million for 2020, a reduction of $8.9 million, or 40.8%.~~during the 2023 fiscal year..

Comparative Average Balances, Yields and Rates

The following table 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 years ended December 31, ~~2021~~2023 and ~~2020.~~2022. Interest rate spread is the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin is net interest income divided by average earning assets. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances and have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

1820


		For the Years Ended December 31,														For the Years Ended December 31,
		2021						2020								2023													2022
		Average Balance		Interest Income/ Expense		Yield/ Cost		Average Balance		Interest Income/ Expense		Yield/ Cost				Average Balance			Interest Income/ Expense			Yield/ Cost							Average Balance			Interest Income/ Expense			Yield/ Cost
		(Dollars in thousands except Yield/ Cost data)														(Dollars in thousands)
Assets	Assets													Assets
Loans		$	1,513,959	$	80,643	5.33	%	$	1,527,999	$	82,336	5.39	%
Loans (1) (2)														Loans (1) (2)		$	1,782,055		$	106,061		5.95		%					$	1,580,318		$	82,900		5.25		%
Investment securities	Investment securities	26,000		753		2.90	%	32,065		1,008		3.14	%	Investment securities		25,168			1,048	1,048		4.16	4.16	%					25,922			772	772		2.98	2.98	%
Deposits with banks	Deposits with banks	523,491		676		0.13	%	331,718		1,194		0.36	%	Deposits with banks		114,880			5,595	5,595		4.87	4.87	%					338,277			3,811	3,811		1.13	1.13	%
Total interest-earning assets	Total interest-earning assets	2,063,450		$	82,072	3.98	%	1,891,782		$	84,538	4.47	%	Total interest-earning assets		1,922,103			$	112,704		5.86	5.86	%					1,944,517			$	87,483		4.50	4.50	%
Non-interest earning assets	Non-interest earning assets	77,370						70,279
Allowance for loan losses		(30,019)						(25,145)
Allowance for credit losses
Allowance for credit losses
Allowance for credit losses
Total assets
Total assets
Total assets	Total assets	$	2,110,801					$	1,936,916
Liabilities and Equity	Liabilities and Equity
Liabilities and Equity
Liabilities and Equity
Interest bearing deposits	Interest bearing deposits
Interest bearing deposits
Interest bearing deposits
NOWs
NOWs
NOWs	NOWs	$	75,502	$	323	0.43	%	$	63,086	$	328	0.52	%	$	86,932		$	1,377		1.58	1.58	%					$	92,535		$	417		0.45	0.45	%
Money markets	Money markets	322,201		2,140		0.66	%	279,947		3,670		1.31	%	Money markets		403,292			17,120	17,120		4.25	4.25	%					352,339			3,927	3,927		1.11	1.11	%
Savings	Savings	146,585		664		0.45	%	140,466		711		0.51	%	Savings		127,442			1,486	1,486		1.17	1.17	%					195,029			905	905		0.46	0.46	%
Time deposits	Time deposits	632,874		6,399		1.01	%	562,655		11,016		1.96	%	Time deposits		498,089			15,232	15,232		3.06	3.06	%					514,421			4,890	4,890		0.95	0.95	%
Brokered certificates of deposit	Brokered certificates of deposit	34,292		228		0.66	%	126,968		1,986		1.56	%	Brokered certificates of deposit		121,702			6,044	6,044		4.97	4.97	%					26,785			932	932		3.48	3.48	%
Total interest-bearing deposits	Total interest-bearing deposits	1,211,454		9,754		0.81	%	1,173,122		17,711		1.51	%	Total interest-bearing deposits		1,237,457			41,259	41,259		3.33	3.33	%					1,181,109			11,071	11,071		0.94	0.94	%
Borrowings	Borrowings	158,943		3,202		2.01	%	216,641		4,182		1.93	%	Borrowings		170,093			7,231	7,231		4.25	4.25	%					119,422			3,085	3,085		2.58	2.58	%
Total interest-bearing liabilities	Total interest-bearing liabilities	1,370,397		$	12,956	0.95	%	1,389,763		$	21,893	1.58	%	Total interest-bearing liabilities		1,407,550			$	48,490		3.44	3.44	%					1,300,531			$	14,156		1.09	1.09	%
Non-interest bearing deposits	Non-interest bearing deposits	506,645						342,325
Other liabilities	Other liabilities	15,030						13,084
Other liabilities
Other liabilities
Total liabilities
Total liabilities
Total liabilities	Total liabilities	1,892,072						1,745,172
Equity	Equity	218,729						191,564
Equity
Equity
Total liabilities and equity
Total liabilities and equity
Total liabilities and equity	Total liabilities and equity	$	2,110,801					$	1,936,736
Net interest income	Net interest income			$	69,116					$	62,645
Net interest income
Net interest income
Interest rate spread
Interest rate spread
Interest rate spread	Interest rate spread					3.03	%					2.89	%										2.42		%													3.41	%
Net interest margin	Net interest margin					3.35	%					3.31	%	Net interest margin											3.34	%													3.77	%

(1) Interest income includes $3.8 million and $5.0 million of net fee income for the years ended 2023 and 2022, respectively.

(2) Average balances are net of unearned income and include nonperforming loans.

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. We expect net interest income and our net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.

Rate/Volume Analysis

For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by the previous rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

1921


		Years ended December 31,							Years ended December 31,
		2021 vs 2020							2023 vs 2022
		Variance due to change in							Variance due to change in
		Average Volume		Average Rate		Net Increase/ (Decrease)			Average Volume	Average Rate	Net Increase/ (Decrease)
		(Dollars in thousands)							(Dollars in thousands)
Interest Income:	Interest Income:							Interest Income:
Loans (net of deferred costs/fees)	Loans (net of deferred costs/fees)	$	(760)	$	(933)	$	(1,693)
Investment securities	Investment securities	(179)		(76)		(255)
Federal funds sold and cash equivalents		100		(618)		(518)
Deposits with banks
Total interest income	Total interest income	(839)		(1,627)		(2,466)
Interest Expense:	Interest Expense:							Interest Expense:
Deposits		559		(8,516)		(7,957)
NOWs
Money markets
Savings
Time deposits
Brokered CDs
Borrowed funds	Borrowed funds	(1,059)		79		(980)
Total interest expense	Total interest expense	(500)		(8,437)		(8,937)
Net interest income	Net interest income	$	(339)	$	6,810	$	6,471

Provision for ~~loan~~credit losses

Our provision for ~~loan~~credit losses in each period is driven by net charge-offs and changes to the allowance for ~~loan~~credit losses. We recorded a recovery for credit losses of $2.1 million and a provision for loan losses of ~~$0.5 million and $7.6~~$1.8 million in ~~2021~~2023 and ~~2020,~~2022, respectively. The (recovery) provision for ~~loan~~credit losses as a percentage of interest income was ~~0.61%~~(1.82)% and ~~9.04%~~2.06% in ~~2021~~2023 and ~~2020,~~2022, respectively.

Our provision for ~~loan~~credit losses decreased by ~~$7.1~~$3.9 million in ~~2021~~2023 compared to ~~2020~~2022 primarily as a result of a decrease in vintage loss rates and a change in the ~~economic uncertainties related~~loan portfolio mix, partially offset by an increase in outstanding loan balances. Additionally, the provision for unfunded commitments contributed to ~~COVID-19 which were evaluated in 2020.~~$461.0 thousand of the decrease. For more information about our provision and allowance for ~~loan and lease~~credit losses and our loss experience, see “Risk Management and Asset Quality-Allowance for ~~Loan and Lease~~Credit Losses” and NOTE 4. Loans and Allowance for ~~Loan and Lease~~Credit Losses in the Notes to the Consolidated Financial Statements.

Non-interest Income

The table below ~~displays~~shows the components of non-interest income for ~~2021~~the years ended December 31, 2023 and ~~2020.~~2022.


		2021		2020
		(Dollars in thousands)
Gain on sale of SBA loans		$	214	$	—
	2023									2023				2022					$ Change						% Change
	(Dollars in thousands)
Service fees on deposit accounts
Service fees on deposit accounts
Service fees on deposit accounts							$	3,872			$	4,927			$	(1,055)					(21.4)		%
Other Loan fees	Other Loan fees	1,346		860		Other Loan fees	851		1,379			1,379		(528)			(528)			(38.3)				(38.3)	%
Bank owned life insurance income	Bank owned life insurance income	575		592		Bank owned life insurance income	737		568			568		169			169			29.8				29.8	%
Service fees on deposit accounts		5,662		2,521
Gain/(loss) on sale and valuation adjustments of OREO		60		(371)
Gain on sale of SBA loans						Gain on sale of SBA loans	—				98				(98)						(100.0)		%
Gain on sale and valuation adjustments of OREO						Gain on sale and valuation adjustments of OREO	38				328				(290)						(88.4)		%
Other	Other	942		581		Other	1,194		1,082			1,082		112			112			10.4				10.4	%
Total non-interest income	Total non-interest income	$	8,799	$	4,183	Total non-interest income	$	6,692	$		$	8,382	$		$	(1,690)		(20.2)				(20.2)		%

Non-interest income ~~increased~~decreased by ~~$4.6~~$1.7 million to ~~$8.8~~$6.7 million ~~in 2021~~during the year ended December 31, 2023 compared to ~~2020~~2022, primarily due ~~to:~~

•~~An increase~~to a decrease in fee income related to commercial deposit ~~accounts;~~accounts and other loan fees, partially offset by an increase in income earned on bank owned life insurance.

The fee income for the year ended December 31, ~~2021~~2023 from the commercial deposit accounts of depositors who do business in the ~~medical-use~~ cannabis industry totaled ~~$5.1~~$3.4 million and is included in service fees on deposit accounts in the accompanying consolidated statements of income. Such deposit fee income totaled ~~$2.2~~$4.4 million during the year ended December 31, ~~2020.~~2022. Please refer to Note 15. Commitments and Contingencies in the Notes to the Consolidated Financial Statements for our banking services to customers who do business in the ~~medical-use~~ cannabis industry.

Non-Interest Expense

The following table displays the components of non-interest expense for ~~2021~~2023 and ~~2020.~~2022.


		2021		2020
		(Dollars in thousands)
	2023											2023							2022							$ Change					% Change
	(Dollars in thousands)
Compensation and benefits
Compensation and benefits
Compensation and benefits	Compensation and benefits	$	9,731	$	10,611	$	12,340			$			$	10,835			$			$	1,505			13.9				13.9	%
Professional services	Professional services	3,724		1,987		Professional services		2,328			2,249					2,249			79					79			3.5			3.5	%
Occupancy and equipment	Occupancy and equipment	2,381		2,031		Occupancy and equipment		2,604			2,522					2,522			82					82			3.3			3.3	%
Data processing	Data processing	1,306		1,290		Data processing		1,385			1,293					1,293			92					92			7.1			7.1	%
FDIC insurance and other assessments	FDIC insurance and other assessments	1,104		805		FDIC insurance and other assessments		1,292			1,050					1,050			242					242			23.0			23.0	%
OREO expense	OREO expense	287		271		OREO expense		839			493					493			346					346			70.2			70.2	%
Other operating expense	Other operating expense	3,970		3,301		Other operating expense		14,479			5,391					5,391			9,088					9,088			168.6			168.6	%
Total non-interest expense	Total non-interest expense	$	22,503	$	20,296	Total non-interest expense		$	35,267		$				$	23,833		$				$	11,434		48.0				48.0	%

Non-interest expense increased ~~$2.2~~$11.4 million to ~~$22.5~~$35.3 million for ~~2021,~~the year ended December 31, 2023, from ~~$20.3~~$23.8 million for ~~2020~~2022 primarily due to an increase in ~~professional services, and~~ other operating ~~expense. Professional services increased $1.7~~expense of $9.1 million, or 87.4% as a result of our consent order remediation efforts surrounding our BSA operations. Other operating expense increased $0.7 million, or 20.3%, generally due to the growth of the Company. These increases were partially offset by a decreasean increase in compensation and benefits ~~expense.~~of $1.5 million, and an increase in OREO expense of $0.3 million. The increase in other operating expense was primarily driven from a one-time recognition of a $9.5 million contingent loss related to cash that was stolen from a third-party armored car carrier facility that was used by the Company. The increase in compensation and benefits was primarily due to a $0.5 million increase in salaries, and a $0.9 million decrease in deferred loan origination costs, attributable to a reduction in the number of loans originated. The increase in OREO expense is due to higher costs to maintain the Company's OREO inventory.

Income Tax

Income tax expense ~~increased $3.9~~decreased $5.0 million to ~~$13.9~~$9.2 million on income before taxes of ~~$54.9~~$37.7 million for ~~2021,~~2023, compared to income tax expense of ~~$10.0~~$14.3 million on income before taxes of ~~$38.9~~$56.1 million for ~~2020.~~2022. The effective income tax rates for ~~2021~~2023 and ~~2020~~2022 were ~~25.4%~~24.5% and ~~25.7%~~25.4%, respectively.

Financial Condition

General

At December 31, ~~2021,~~2023, the Company’s total assets were ~~$2.14~~$2.02 billion, an increase of ~~$58.1~~$38.6 million or ~~2.8%~~1.9%, from December 31, ~~2020.~~2022. The increase in total assets was primarily attributable to an increase in ~~cash~~loans, restricted stock, and other assets. Cash and cash equivalents decreased $1.8 million, to $180.4 million at December 31, 2023. Total loans outstanding increased $35.9 million at December 31, 2023, primarily due to an increase in residential 1 to 4 family loans of $29.0 million; residential 1 to 4 family investment loans of $24.0 million; and commercial owner occupied loans of $15.7 million; partially offset by a decrease in ~~loans. Cash and cash equivalents increased $138.0 million, to $596.6 million at December 31, 2021. Total~~construction loans outstanding decreased $81.0 million, primarily due to the decrease in the commercial loan portfolio related to the Paycheck Protection Program loans, which decreased $63.4 million to $27.8 million at December 31, 2021, from $91.2 million at December 31, 2020.of $34.8 million.

Total liabilities were ~~$1.90~~$1.74 billion at December 31, ~~2021.~~2023. This represented a ~~$28.4~~$20.3 million, or ~~1.5%~~1.2%, increase from ~~$1.88~~$1.72 billion at December 31, ~~2020.~~2022. The increase in total liabilities was primarily due to an increase in ~~total deposits,~~borrowings, partially offset by a decrease in ~~borrowings of $146.3 million.~~deposits. Total deposits ~~increased $176.0~~decreased $23.2 million, or ~~11.1%~~1.5%, to ~~$1.8~~$1.55 billion at December 31, ~~2021,~~2023, from ~~$1.6~~$1.58 billion at December 31, ~~2020.~~2022. Deposits from the ~~medical-use~~ cannabis industries ~~increased~~decreased to ~~$375.2~~$96.7 million at December 31, ~~2021,~~2023, from $259.4 million at December 31, 2020. Total borrowings were $120.9 million at December 31, 2021, a decrease of $146.3 million, compared to December 31, 2020, primarily due to the repayment of $90.0 million in advances from the Federal Reserve Bank's Paycheck Protection Program Liquidity Facility ("PPPLF") for the Small Business Administration ('SBA") of PPP loans, and $56.5 million in pay downs of FHLBNY advances.

~~Total equity was $232.4 million and $202.6 million at December 31, 2021 and December 31, 2020, respectively, for an increase of $29.8 million from December 31, 2020.~~

2123

$177.3 million at December 31, 2022. Total borrowings were $168.1 million at December 31, 2023, an increase of $42.0 million, compared to December 31, 2022, primarily due to an increase in FHLB advances of $41.9 million.

Total equity was $284.3 million and $266.0 million at December 31, 2023 and December 31, 2022, respectively, an increase of $18.3 million from December 31, 2022.

The following table presents certain key condensed balance sheet data as of December 31, ~~2021~~2023 and December 31, ~~2020:~~2022:


		December 31, 2021		December 31, 2020			December 31, 2023					December 31, 2022				$ Change					% Change
		(Dollars in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	596,553	$	458,601
Cash and cash equivalents
Cash and cash equivalents							$	180,376				$	182,150			$	(1,774)				(1.0)		%
Investment securities	Investment securities	23,269		21,106		Investment securities	16,387			18,744			18,744		(2,357)			(2,357)		(12.6)				(12.6)	%
Loans held for sale		—		200

Loans, net of unearned income	Loans, net of unearned income	1,484,847		1,565,807
Allowance for loan losses		(29,845)		(29,698)
Loans, net of unearned income
Loans, net of unearned income							1,787,340					1,751,459				35,881					2.0		%
Allowance for credit losses						Allowance for credit losses	(32,131)					(31,845)				(286)					0.9		%
Total assets	Total assets	2,136,445		2,078,322		Total assets	2,023,500			1,984,915			1,984,915		38,585			38,585		1.9				1.9	%
Total deposits	Total deposits	1,768,410		1,592,443		Total deposits	1,552,827			1,575,981			1,575,981		(23,154)			(23,154)		(1.5)				(1.5)	%
FHLBNY borrowings	FHLBNY borrowings	78,150		134,650		FHLBNY borrowings	125,000			83,150			83,150		41,850			41,850		50.3				50.3	%
Subordinated debt	Subordinated debt	42,732		42,542		Subordinated debt	43,111			42,921			42,921		190			190		0.4				0.4	%
FRB advances		—		90,026

Total liabilities
Total liabilities
Total liabilities	Total liabilities	1,904,084		1,875,725		1,739,183			1,718,881		1,718,881			20,302		20,302			1.2			1.2		%
Total equity	Total equity	232,361		202,597		Total equity	284,317			266,034			266,034		18,283			18,283		6.9				6.9	%
Total liabilities and equity	Total liabilities and equity	2,136,445		2,078,322		Total liabilities and equity	2,023,500			1,984,915			1,984,915		38,585			38,585		1.9				1.9	%

Cash and cash equivalents

Cash and cash equivalents ~~increased $138.0~~decreased $1.8 million to ~~$596.6~~$180.4 million at December 31, ~~2021,~~2023, from ~~$458.6~~$182.2 million at December 31, ~~2020, an increase~~2022, a decrease of ~~30.1%~~1.0%. ~~The increase was primarily due to cash received from the increase in deposits from the medical-use cannabis businesses and the repayment of loans, partially offset by the reduction of borrowings.~~

Investment securities

Total investment securities ~~increased~~decreased to ~~$23.3~~$16.4 million at December 31, ~~2021,~~2023, from ~~$21.1~~$18.7 million at December 31, ~~2020, an increase~~2022, a decrease of ~~$2.2~~$2.4 million or ~~10.2%~~12.6%. The decrease was primarily due to pay downs of $2.5 million, partially offset by a $0.1 million valuation increase.

Loans, net unearned income

Loans receivable increased to $1.79 billion at December 31, 2023, from $1.75 billion at December 31, 2022. The increase was primarily due to ~~the purchase~~an increase in residential 1 - 4 family of ~~$8.7~~$29.0 million; residential 1 to 4 family investment of $24.0 million; and commercial owner-occupied loans of $15.7 million; partially offset by a decrease of $34.8 million ~~of securities classified as held-to-maturity, net of normal pay downs of mainly mortgage-backed securities.~~

~~Loans~~

~~Loans held for sale (HFS): Loans held for sale are comprised of SBA loans originated for sale. There were no loans held for sale at December 31, 2021 and $200.0 thousand at December 31, 2020.~~

~~Loans, net of unearned income: Loans receivable decreased to $1.48 billion at December 31, 2021, from $1.57 billion at December 31, 2020. The decrease was largely driven by the reduction~~ in ~~the commercial loan portfolio attributed to the payoff of Paycheck Protection Program~~construction loans.

Allowance for ~~loan~~credit losses

Allowance for ~~loan~~credit losses increased ~~$0.1~~$0.3 million, to ~~$29.8~~$32.1 million, or ~~0.5%~~0.90%, at December 31, ~~2021,~~2023, from ~~$29.7~~$31.8 million at December 31, ~~2020.~~2022. The ~~decrease in the provision~~increase was primarily due to ~~the~~an increase in ~~qualitative factors made~~the portfolio balance, net of a decrease in ~~2020 as~~historical loss rates. In 2023, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses, 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 ~~result~~cumulative effect decrease to retained earnings of ~~economic uncertainty associated with~~$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 ~~COVID-19 pandemic.~~Company at the date of adoption.

Deposits

At December 31, ~~2021,~~2023, the Bank’s total deposits ~~increased~~decreased to ~~$1.8~~$1.55 billion from ~~$1.6~~$1.58 billion at December 31, ~~2020, an increase~~2022, a decrease of ~~$176.0~~$23.2 million, or ~~11.1%~~1.5%. The ~~increase~~decrease in deposits was primarily ~~driven by the increase~~attributed to a decrease in ~~noninterest-bearing~~non-interest bearing demand deposits ~~from the medical-use cannabis businesses.~~

of $120.4 million, savings of $105.1 million, time deposits of $42.2 million, and interest checking of $20.1 million

2224

partially offset by an increase in money market of $218.4 million, and brokered CD balances of $46.2 million. Deposits from the cannabis businesses decreased to $96.7 million at December 31, 2023, from $177.3 million at December 31, 2022, a decrease of $80.6 million. The decrease in such deposits is primarily attributable to increased competition from other banks, and the consolidation of the cannabis industry. The Bank expects this trend to continue in the foreseeable future.

Borrowings

At December 31, ~~2021,~~2023, total borrowings ~~decreased $146.3~~increased $42.0 million to ~~$120.9~~$168.1 million at December 31, ~~2021,~~2023, from ~~$267.2~~$126.1 million at December 31, ~~2020.~~2022. The ~~decrease~~increase in borrowings was primarily due to ~~the repayment~~an increase in FHLBNY advances of ~~$90 million in advances from the Federal Reserve Bank's PPPLF for the SBA of PPP loans, and $56.5 million in pay downs of FHLBNY advances.~~$41.9 million.

Equity

Total shareholders’ equity increased to ~~$232.4~~$284.3 million at December 31, ~~2021,~~2023, from ~~$200.9~~$266.0 million at December 31, ~~2020,~~2022, an increase of ~~$31.4~~$18.3 million or ~~15.6%~~6.9%. ~~Total equity increased to $232.4 million at December 31, 2021, from $202.6 million at December 31, 2020.~~ The ~~increases~~increase in total shareholders' equity ~~and total equity were~~was primarily due to the retention of earnings from the ~~period.~~period, partially offset by the recognition of $8.6 million of cash dividends.

2325

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 December 31, ~~2021,~~2023, our cash position was ~~$596.6~~$180.4 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.~~source. The Bank ~~also~~ joined ~~Promontory Inter Financial Network~~the IntraFi network to secure an additional alternative funding source. ~~Promontory~~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 time than brokered deposits.~~process, as well as their ICS® money market product. While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY. At December 31, ~~2021,~~2023, the Company had a ~~$596.5~~$944.4 million line of credit from the FHLBNY, of which ~~$78.2~~$125.0 million was outstanding, ~~$40.0~~$50.0 million was a letter of credit to secure public deposits, and ~~$478.3~~$769.4 million was unused.

Our investment portfolio primarily consists of mortgage-backed available for sale securities issued by US government agency and government sponsored entities. These available for sale securities are readily marketable and are available to meet our additional liquidity needs. At December 31, ~~2021,~~2023, the Company's investment securities portfolio classified as available for sale was ~~$13.4~~$7.1 million.

We had unused loan commitments of ~~$117.7~~$93.8 million at December 31, ~~2021.~~2023. Our loan commitments are normally originated with the full amount of collateral. Such commitments have historically been drawn at only a fraction of the total commitment. 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.

Capital Adequacy

Consistent with the goal to operate a sound and profitable financial organization, the Company and Bank actively seeks to maintain their status as well-capitalized in accordance with regulatory standards. As of December 31, ~~2021,~~2023, the Company and the Bank exceeded all applicable regulatory capital requirements. See Note 13 to our ~~consolidated financial statements~~Consolidated Financial Statements for more information about the Company's and the Bank's regulatory capital compliance.

Interest Rate Sensitivity

Interest rate sensitivity is an important factor in the management of the composition and maturity configurations of earning assets and funding sources. The primary objective of asset/liability management is to ensure the steady growth of our primary earnings component, net interest income. Net interest income can fluctuate with significant interest rate movements. To lessen the impact of interest rate movements, management endeavors to structure the balance sheet so that repricing opportunities exist for both assets and liabilities in roughly equivalent amounts at approximately the same time intervals. Imbalances in these repricing opportunities at any point in time constitute interest rate sensitivity.

The measurement of our interest rate sensitivity, or "gap," is one of the principal techniques used in asset/liability management. Interest sensitive gap is the dollar difference between assets and liabilities that are subject to interest-rate pricing within a given time period, including both floating rate or adjustable rate instruments and instruments that are approaching maturity.

Our management and the Board of Directors oversee the asset/liability management function through the asset/liability committee of the Board that meets periodically to monitor and manage the balance sheet, control interest rate exposure, and evaluate our pricing strategies. The asset mix of the balance sheet is continually evaluated in terms of several variables: yield, credit quality, appropriate funding sources and liquidity. Management of the liability mix of the balance sheet focuses on expanding the various funding sources.

2426

In theory, interest rate risk can be diminished by maintaining a nominal level of interest rate sensitivity. In practice, this is made difficult by a number of factors, including cyclical variation in loan demand, different impacts on interest-sensitive assets and liabilities when interest rates change, and the availability of funding sources. Accordingly, we undertake to manage the interest-rate sensitivity gap by adjusting the maturity of and establishing rates on the earning asset portfolio and certain interest-bearing liabilities commensurate with management's expectations relative to market interest rates. Management generally attempts to maintain a balance between rate-sensitive assets and liabilities as the exposure period is lengthened to minimize our overall interest rate risk.

The interest rate sensitivity position as of December 31, ~~2021~~2023 is presented in the following table. Assets and liabilities are scheduled based on maturity or re-pricing data except for mortgage loans and mortgage-backed securities, which are based on prevailing prepayment assumptions and expected maturities and deposits which are based on recent retention experience of core deposits. The difference between rate-sensitive assets and rate-sensitive liabilities, or the interest rate sensitivity gap, is shown at the bottom of the table.


		As of December 31, 2021																			As of December 31, 2023
		3 Months or Less			Over 3 Months Through 12 Months			Over 1 Year Through 3 Years			Over 3 Years Through 5 Years			Over 5 Years			Total				3 Months or Less		Over 3 Months Through 12 Months		Over 1 Year Through 3 Years		Over 3 Years Through 5 Years			Over 5 Years		Total
		(Dollars in thousands)
	(Dollars in thousands)																												(Dollars in thousands)
Interest-earning assets:	Interest-earning assets:																			Interest-earning assets:
Loans (1)	Loans (1)	$	151,716		$	232,323		$	390,824		$	259,460		$	444,534		$	1,478,857
Investment securities	Investment securities	1,886			4,249			7,842			4,025			5,267			23,269
Cash and cash equivalents	Cash and cash equivalents	571,232			—			—			—			—			571,232
Total interest-earning assets	Total interest-earning assets	$	724,834		$	236,572		$	398,666		$	263,485		$	449,801		$	2,073,358
Interest-bearing liabilities:	Interest-bearing liabilities:																			Interest-bearing liabilities:
NOW, Saving and Money market deposits	NOW, Saving and Money market deposits	$	32,892		$	98,674		$	263,130		$	195,733		$	30,426		$	620,855
Retail time deposits	Retail time deposits	158,434			287,666			91,108			31,579			—			568,787
Brokered time deposits	Brokered time deposits	—			20,341			2,888			1,730			—			24,959
Borrowed funds	Borrowed funds	13,403			20,000			58,150			—			30,000			121,553
Total interest-bearing liabilities	Total interest-bearing liabilities	$	204,729		$	426,681		$	415,276		$	229,042		$	60,426		$	1,336,154
Interest rate sensitive gap	Interest rate sensitive gap	$	520,105		$	(190,109)		$	(16,610)		$	34,443		$	389,375		$	737,204
Cumulative interest rate gap	Cumulative interest rate gap	$	520,105		$	329,996		$	313,386		$	347,829		$	737,204		$	—
Ratio of rate-sensitive assets to rate-sensitive liabilities	Ratio of rate-sensitive assets to rate-sensitive liabilities	354.0		%	55.4		%	96.0		%	115.0		%	744.4		%	155.2		%	Ratio of rate-sensitive assets to rate-sensitive liabilities	136.0	%	110.0	%	165.4	%	104.8	%		93.4	%	132.3	%
Cumulative interest sensitivity gap to total assets	Cumulative interest sensitivity gap to total assets	24.3		%	15.4		%	14.7		%	16.3		%	34.5		%	—

(1) Loan balances exclude nonaccruing loans, deferred fees and costs, and loan discounts.

Off-Balance Sheet Arrangements and Contractual Obligations

In the ordinary course of business, we engage in financial transactions that are not recorded on the balance sheet, or may be recorded on the balance sheet in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements include commitments to extend credit, standby letters of credit and other commitments. These transactions are primarily designed to meet the financial needs of our customers.

We enter into commitments to lend funds to customers, which are usually at a stated interest rate, if funded, and for specific purposes and time periods. When we make commitments, we are exposed to credit risk. However, the maximum credit risk for these commitments will generally be lower than the contractual amount because a significant portion of these commitments is expected to expire without being used by the customer. In addition, we manage the potential risk in commitments to lend by limiting the total amount of commitments, by monitoring maturity structure of these commitments and by applying the same credit standards for these commitments as for all of our credit activities.

2527

For commitments to lend, we generally require collateral or a guarantee. We may require various types of collateral, including accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. Collateral requirements for each loan or commitment may vary based on the commitment type and our assessment of a customer’s credit risk according to the specific credit underwriting, including credit terms and structure.

Commitments to extend credit, or net unfunded loan commitments, represent arrangements to lend funds or provide liquidity subject to specified contractual conditions. These commitments generally have fixed expiration dates, may require payment of a fee, and contain termination clauses in the event the customer’s credit quality deteriorates. At December 31, ~~2021~~2023 and December 31, ~~2020,~~2022, unused commitments to extend credit amounted to approximately ~~$117.7~~$93.8 million and ~~$144.6~~$159.0 million, respectively. Commitments to fund fixed-rate loans were immaterial at December 31, ~~2021.~~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 of the Company.

Standby letters of credit are conditional commitments issued by the Bank 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. At December 31, ~~2021~~2023 and December 31, ~~2020,~~2022, standby letters of credit with customers were $1.5 million and ~~$1.7~~$1.5 million, respectively.

At December 31, ~~2021,~~2023, we had contractual obligations primarily relating to commitments to extent credits, deposits, secured and unsecured borrowings, and operating leases. We have adequate resources to fund all unfunded commitments to the extent required and meet all contractual obligations as they come due. Please refer to Notes 6, 7, 9, and 15 of the Notes to the Consolidated Financial Statements for detailed information regarding our contractual obligations.

Impact of Inflation and Changing Prices

The financial statements included in this document have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Our primary assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturities of our assets and liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation on earnings, as distinct from levels of interest rates, is in the area of non-interest expense. Expense items such as employee compensation, employee benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans that we have made. We are unable to determine the extent, if any, to which properties securing our loans have appreciated in dollar value due to inflation.

Critical Accounting Policies

The Company’s accounting policies are more fully described in Note 1 - Description of Business and Summary of Significant Accounting Policies in the Consolidated Financial Statements. As disclosed in Note 1, the preparation of financial statements in conformity with generally accepted accounting principles in the United States ("GAAP") 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 ~~Loan and Lease~~Credit Losses: Our allowances for ~~loan and lease~~credit losses represents management's best estimate of probable losses inherent in our investment and loan ~~portfolio~~portfolios, excluding those loans accounted for under fair value. ~~Our process for determining~~Refer to N ote 1 in the ~~allowance for loan and lease losses is discussed in Note 1 to~~Notes t o the Consolidated Financial ~~Statements.~~Statements for further information.

~~We maintain the ALLL at levels that we believe to be appropriate to absorb estimated probable credit losses incurred in the loan and lease portfolios as of the balance sheet date.~~ Our determination of the ~~allowances~~allowance for credit losses is based on periodic evaluations of the

loan and lease portfolios and other relevant ~~factors.~~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 ~~loan and lease~~credit losses is comprised of two ~~components. The~~components, a specific allowance ~~covers impaired~~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 ~~calculated on an individual~~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 ~~basis.~~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 ~~incurred~~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 ~~loan and lease~~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. The Company uses valuation techniques that are consistent with the market approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability and developed based on the best information available in the circumstances. In that regard, a fair value hierarchy has been established for valuation inputs that gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

~~Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.~~

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlations or other means.

~~Level 3 Inputs - Significant unobservable inputs that reflect an entity's own assumptions that market participants would use in pricing the assets or liabilities.~~

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 also may have small SBA loans recorded at fair value, which represents the face value of the guaranteed portion of the SBA loans pending settlement. Other real estate owned (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 16 - Fair Value~~ ~~in the Notes to the 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.

~~Current Expected Credit Losses~~: In June 2016, the Financial Accounting Standards Board adopted a new accounting standard, Financial Instruments - Credit Losses, referred to as Current Expected Credit Loss, or CECL, requires financial institutions to make periodic estimates of lifetime expected credit losses on financial instruments measured at amortized cost and recognize the expected credit losses as allowances. This would likely require us to increase our allowance for loan losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for loan and debt securities. For public business entities except smaller reporting entities ("SRCs"), the guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. CECL will be effective for SEC filers which are SRCs and all other nonpublic entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For all entities, early adoption will continue to be allowed. As a small reporting company, CECL is not effective for the Company until after December 15, 2022.

~~Quarterly Financial Data (unaudited)~~

The following represents summarized unaudited quarterly financial data of the Company which, in the opinion of management, reflects adjustments (comprised only of normal recurring accruals) necessary for fair presentation.

Three Months Ended
December 31, September 30, June 30, March 31,
(Amounts in thousands, except per share amounts)
2021
Interest income $ 19,565 $ 20,580 $ 21,366 $ 20,561
Interest expense 2,819 3,099 3,283 3,755
Net interest income 16,746 17,481 18,083 16,806
Provision for loan losses — — — 500
Income before income tax expense 13,434 14,249 14,457 12,773
Income tax expense 3,353 3,705 3,633 3,247
Net income 10,073 10,501 10,757 9,429
Preferred stock dividends 7 7 7 7
Net income available to common shareholders 10,066 10,494 10,750 9,422
Net income per common share:
Basic $ 0.85 $ 0.88 $ 0.90 $ 0.80
Diluted $ 0.83 $ 0.87 $ 0.89 $ 0.77
2020
Interest income $ 21,665 $ 20,873 $ 20,443 $ 21,557
Interest expense 4,550 5,433 5,552 6,358
Net interest income 17,115 15,440 14,891 15,199
Provision for loan losses 1,850 2,400 2,000 1,396
Income before income tax expense 11,060 8,949 8,955 9,922
Income tax expense 2,840 2,306 2,311 2,554
Net income 8,132 6,543 6,541 7,212
Preferred stock dividends 7 7 7 8
Net income available to common shareholders 8,125 6,536 6,534 7,204
Net income per common share:
Basic $ 0.69 $ 0.55 $ 0.55 $ 0.61
Diluted $ 0.68 $ 0.55 $ 0.54 $ 0.60

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

Item 8. Financial Statements and Supplementary Data.

Report On Management’s Assessment Of Internal Control Over Financial Reporting

To The Shareholders Of Parke Bancorp, Inc.

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a- 15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Under supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on our evaluation under the framework in Internal Control - Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, ~~2021.~~

2023.

March ~~21, 2022~~13, 2024


/s/ Vito S. Pantilione						/s/ ~~John S. Kaufman~~Jonathan D. Hill
Vito S. Pantilione						~~John S. Kaufman~~Jonathan D. Hill
President and Chief Executive Officer						Senior Vice President and Chief Financial Officer

2930

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Parke Bancorp, Inc. ~~and Subsidiaries~~

Opinion on the Financial Statements

We have audited the accompanying consolidated balance ~~sheets~~sheet of Parke Bancorp, Inc. and ~~Subsidiaries~~subsidiaries (the ~~Company)~~“Company”) as of December 31, ~~2021~~2023 and ~~2020,~~2022; the related consolidated statements of income, comprehensive income, equity, and cash flows for the years then ~~ended,~~ended; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2021~~2023 and ~~2020,~~2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for credit losses effective January 1, 2023, due to the adoption of Accounting Standards Codification (ASC) Topic 326, Financial Instruments – Credit Losses.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent, with respect to the Company, in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the ~~audit committee~~Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial ~~statements~~statements; and (2) ~~involved~~involve our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter, in any way, our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for ~~Loan~~Credit Losses (ACL) – Qualitative ~~Factors~~Adjustments

The ~~allowance for~~Company’s loan ~~losses~~portfolio totaled $1.8 billion as of December 31, ~~2021~~2023, and the associated ACL was ~~$29.9~~$32.1 million. As ~~described~~discussed in Notes 1 and 4 to the ~~consolidated~~ financial statements, determining the ~~allowance for loan losses is established through a provision for loan losses and represents an~~ amount ~~which, in management’s judgement, will be adequate to absorb losses on existing loans.~~

~~The allowance consists of specific and general components in the amounts of $0.6 million and $29.3 million, respectively.~~

The specific component relates to loans that are classified as impaired. The Company measures impairment and the related asset specific allowance for impaired loans based on the difference between the recorded investment of the ~~loan and the present value of~~ACL requires significant judgment about the expected future ~~cash flows, discounted at the original effective interest rate of the loan. If the loan is collateral dependent, the Company measures impairment based upon the fair value of the underlying collateral,~~losses, which the Company determines based on the current fair value of the collateral less estimated selling costs, instead of discounted cash flows. Loans are identified as collateral dependent if the Company believes that collateral is the sole source of repayment.

~~The general component~~ is based on a base loss projection determined through a historical ~~losses, general economic~~vintage loss rate analysis, which is then adjusted for current qualitative conditions and ~~other~~reasonable and supportable forecasts. Management applies these qualitative ~~risk factors~~adjustments to the base loss projection to reflect changes in the current and forecasted environment, both internal and external, tothat are different from the ~~Company. The~~conditions that existed during the historical loss ~~ratio and valuation allowance are established for each pool of similar loans and updated periodically based on actual charge-off experience and current events.~~calculation period. The qualitative ~~risk factors are generally determined by evaluating, among~~adjustments include analysis of items related to economic conditions, credit quality indicators within the loan portfolio, and other ~~things: (i) lending policies~~internal and ~~procedures, including underwriting standards and collection, charge-off, and recovery practices; (ii) national and local economic trends and conditions; (iii) nature and~~external factors.

~~volume~~We identified these qualitative adjustments within the ACL as critical audit matters because they involve a high degree of subjectivity. While the determination of these qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality and magnitude of adjustments is highly subjective. Auditing these complex judgments and assumptions involved especially challenging auditor judgment due to the nature of audit evidence and the nature and extent of effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

- Testing the design, implementation, and operating effectiveness of internal controls over the

calculation of the ~~portfolio~~allowance for credit losses, including the qualitative factor adjustments.

- Testing the completeness and terms of loans; (iv) experience, ability, and depth of lending management and staff; (v) volume and severity of past due, classified and nonaccrual loans as well as other loan modifications; (vi) qualityaccuracy of the ~~Company's loan review system; (vii) existence and effect of any concentrations of credit and changes~~significant data points that management uses in ~~the level of such concentrations. The~~

their evaluation of the qualitative ~~factor adjustments requires a significant amount of judgement by management and involves a high degree of subjectivity.~~adjustments.

~~We identified~~- Testing the ~~qualitative factor portion~~ anchoring calculation that management completes to properly align the magnitude

of the ~~general reserve component of~~adjustments with the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors required significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.Company's historical loss data.

~~Our audit procedures related to~~- Evaluating the ~~qualitative factors included~~directional consistency and reasonableness of management's conclusions

regarding basis points applied (whether positive or negative) based on the ~~following, among others:~~trends identified in

the underlying data.

–
~~We obtained an understanding~~

- Testing the mathematical accuracy of the ~~relevant controls related to management’s establishment of the factor, assessment, and review~~application of the qualitative factors, and tested such controls for design and operating effectiveness, including controls over management’s establishment, review and approval of the qualitative factors and the data used in determining the qualitative factors.

–~~We obtained an understanding of how management developed the estimates and related assumptions, including:~~

–Testing completeness and accuracy of key data inputs used in forming assumptions or calculations and testing the reliability of the underlying data on which these factors are based by comparing information to source documents and external information sources as well as evaluating the estimated correlation to potential loss.

–~~Evaluating the reasonableness of the qualitative factors established by management as compared~~adjustments to the ~~underlying internal or external information sources.~~loan

segments within the ACL calculation.

~~/s/ RSM US LLP~~

We have served as the ~~Company's~~Company’s auditor since ~~2000.~~2022.

/s/ S.R. Snodgrass, P.C.

~~Blue Bell,~~Cranberry Township, Pennsylvania

March ~~21, 2022~~13, 2024

Parke Bancorp, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, ~~2021~~2023 and ~~2020~~2022

(Dollars in thousands except ~~share and~~ per share data)


			December 31,		December 31,
		December 31,							December 31,		December 31,
			2021		2020			2023		2022
Assets	Assets						Assets
Cash and due from banks	Cash and due from banks		$	25,321	$	20,571
Interest earning deposits with banks	Interest earning deposits with banks		571,232		438,030
Cash and cash equivalents	Cash and cash equivalents		596,553		458,601
Investment securities available for sale, at fair value	Investment securities available for sale, at fair value		13,351		19,882
Investment securities held to maturity (fair value of $10,025 at December 31, 2021 and $1,530 at December 31, 2020)			9,918		1,224
Investment securities held to maturity, net of allowance for credit losses of $0 at December 31, 2023 (fair value of $7,892 at December 31, 2023 and $7,805 at December 31, 2022)
Total investment securities	Total investment securities		23,269		21,106
Loans held for sale			—		200

Loans, net of unearned income	Loans, net of unearned income		1,484,847		1,565,807
Less: Allowance for loan losses			(29,845)		(29,698)
Loans, net of unearned income
Loans, net of unearned income
Less: Allowance for credit losses
Net loans	Net loans		1,455,002		1,536,109
Accrued interest receivable	Accrued interest receivable		7,681		8,772
Premises and equipment, net	Premises and equipment, net		6,265		6,698
Restricted stock	Restricted stock		5,144		7,542
Bank owned life insurance (BOLI)	Bank owned life insurance (BOLI)		27,577		27,002
Deferred tax asset	Deferred tax asset		7,608		8,611
Other real estate owned (OREO)
Other	Other		7,346		3,681
Total Assets	Total Assets		$	2,136,445	$	2,078,322
Liabilities and Equity
Liabilities and Shareholders' Equity							Liabilities and Shareholders' Equity
Liabilities	Liabilities						Liabilities
Deposits	Deposits						Deposits
Noninterest-bearing deposits	Noninterest-bearing deposits		$	553,810	$	428,860
Interest-bearing deposits	Interest-bearing deposits		1,214,600		1,163,583
Total deposits	Total deposits		1,768,410		1,592,443
FHLBNY borrowings	FHLBNY borrowings		78,150		134,650
FRB advances			—		90,026

Subordinated debentures
Subordinated debentures
Subordinated debentures	Subordinated debentures		42,732		42,542
Accrued interest payable	Accrued interest payable		1,603		2,338
Other			13,189		13,726
Accrued expenses and other liabilities
Total liabilities	Total liabilities		1,904,084		1,875,725
Equity
Preferred stock, 1,000,000 shares authorized, $1,000 liquidation value Series B non-cumulative convertible; 445 shares and 480 shares outstanding at December 31, 2021 and 2020, respectively			445		480
Common stock, $0.10 par value; authorized 15,000,000 shares; Issued: 12,182,081 shares and 12,136,567 shares at December 31, 2021 and 2020, respectively			1,218		1,214
Shareholders' Equity							Shareholders' Equity
Preferred stock, 1,000,000 shares authorized, $1,000 liquidation value Series B non-cumulative convertible; 375 shares and 445 shares outstanding at December 31, 2023 and 2022, respectively
Common stock, $0.10 par value; authorized 15,000,000 shares; Issued: 12,240,821 shares and 12,225,097 shares at December 31, 2023 and 2022, respectively
Additional paid-in capital	Additional paid-in capital		135,451		134,989
Retained earnings	Retained earnings		98,017		66,794
Accumulated other comprehensive loss	Accumulated other comprehensive loss		245		463
Treasury stock, 284,522 shares at December 31, 2021 and 2020, at cost			(3,015)		(3,015)
Treasury stock, 284,522 shares at December 31, 2023 and 2022, at cost
Total shareholders’ equity	Total shareholders’ equity		232,361		200,925
Noncontrolling interest in consolidated subsidiaries			—		1,672
Total equity			232,361		202,597
Total liabilities and equity			$	2,136,445	$	2,078,322

Total liabilities and shareholders' equity

Total liabilities and shareholders' equity

Total liabilities and shareholders' equity

See accompanying notes to consolidated financial statements

Parke Bancorp, Inc. and Subsidiaries

Consolidated Statements of Income

Years Ended December 31, ~~2021~~2023 and ~~2020~~2022

(Dollars in thousands except ~~share and~~ per share data)


			2021		2020
		December 31, 2023						December 31, 2023	December 31, 2022
Interest income:	Interest income:						Interest income:
Interest and fees on loans	Interest and fees on loans		$	80,643	$	82,336
Interest and dividends on investments	Interest and dividends on investments		753		1,008
Interest on deposits with banks	Interest on deposits with banks		676		1,194
Total interest income	Total interest income		82,072		84,538
Interest expense:	Interest expense:						Interest expense:
Interest on deposits	Interest on deposits		9,754		17,711
Interest on borrowings	Interest on borrowings		3,202		4,182
Total interest expense	Total interest expense		12,956		21,893
Net interest income	Net interest income		69,116		62,645
Provision for loan losses			500		7,646
Net interest income after provision for loan losses			68,616		54,999
(Recovery of) provision for credit losses
Net interest income after (recovery of) provision for credit losses
Non-interest income	Non-interest income						Non-interest income
Service fees on deposit accounts	Service fees on deposit accounts		5,662		2,521
Other loan fees	Other loan fees		1,346		860
Bank owned life insurance income	Bank owned life insurance income		575		592
Gain on sale of SBA loans	Gain on sale of SBA loans		214		—
Net gain/(loss) on sale and valuation adjustments of OREO			60		(371)
Net gain on OREO
Other	Other		942		581
Total non-interest income	Total non-interest income		8,799		4,183
Non-interest expense	Non-interest expense						Non-interest expense
Compensation and benefits	Compensation and benefits		9,731		10,611
Professional services	Professional services		3,724		1,987
Occupancy and equipment	Occupancy and equipment		2,381		2,031
Data processing	Data processing		1,306		1,290
FDIC insurance and other assessments	FDIC insurance and other assessments		1,104		805
OREO expense	OREO expense		287		271
Other operating expense	Other operating expense		3,970		3,301
Total non-interest expense	Total non-interest expense		22,503		20,296
Income before income tax expense	Income before income tax expense		54,912		38,886
Income tax expense	Income tax expense		13,937		10,011
Net income attributable to Company and noncontrolling interest			40,975		28,875
Less: Net income attributable to noncontrolling interest			(215)		(447)
Net income attributable to Company	Net income attributable to Company		40,760		28,428

Less: Preferred stock dividend

Less: Preferred stock dividend

Less: Preferred stock dividend	Less: Preferred stock dividend		(28)		(29)
Net income available to common shareholders	Net income available to common shareholders		$	40,732	$	28,399
Earnings per common share	Earnings per common share						Earnings per common share
Basic	Basic		$	3.43	$	2.40
Diluted	Diluted		$	3.36	$	2.37
Weighted average common shares outstanding	Weighted average common shares outstanding						Weighted average common shares outstanding
Basic	Basic		11,888,429		11,850,223
Diluted	Diluted		12,120,716		11,989,608

See accompanying notes to consolidated financial statements

Parke Bancorp, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31, ~~2021~~2023 and ~~2020~~2022

For the Year ended December 31,
2021 2020

(Dollars in thousands)
Net income $ 40,975 $ 28,875
Unrealized (losses)/gains on investment securities, net of reclassification into income:
Unrealized (loss) gain on non-OTTI securities (294) 537
Tax impact on unrealized loss/(gain) 76 (132)
Total unrealized (losses)/gains on investment securities (218) 405
Comprehensive income 40,757 29,280
Less: Comprehensive loss attributable to noncontrolling interests (215) (446)
Comprehensive income attributable to the Company $ 40,542 $ 28,833


	For the Year ended December 31,
	2023		2022
	(Dollars in thousands)
Net income	$	28,462	$	41,823
Unrealized gains (losses) on investment securities, net of reclassification into income:
Unrealized gains (losses) on available for sale securities	165		(1,039)
Tax impact on unrealized (loss) gain	(43)		268

Total other comprehensive gain (loss)	122		(771)


Comprehensive income attributable to the Company	$	28,584	$	41,052

See accompanying notes to consolidated financial statements

Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Equity
Years Ended December 31, 2021 and 2020
(Dollars in thousands except share data)
Preferred
Stock Shares of Common Stock issued Common
Stock Additional Paid-In
Capital
Retained
Earnings Accumulated Other Comprehensive Income (Loss) Treasury
Stock Total
Shareholders’ Equity Non-Controlling Interest Total
Equity
Balance, December 31, 2019 $ 500 12,132,855 $ 1,213 $ 134,706 $ 44,143 $ 58 $ (3,015) $ 177,605 $ 1,819 $ 179,424
Earnings distribution to non-controlling interest — — — — — — — — (594) (594)
Net income — — — — 28,428 — — 28,428 447 28,875
Common stock options exercised — 1,021 — . — — — — — —
Preferred stock shares conversion (20) 2,751 1 19 — — — — — —
Other comprehensive loss — — — — — 405 — 405 — 405
Stock compensation expense — — — 265 — — — 265 — 265
Stock dividend — (60) — (1) (2) — — (3) — (3)
Dividend on preferred stock — — — — (29) — — (29) — (29)
Dividend on common stock — — — — (5,746) — — (5,746) — (5,746)
Balance, December 31, 2020 $ 480 12,136,567 $ 1,214 $ 134,989 $ 66,794 $ 463 $ (3,015) $ 200,925 $ 1,672 $ 202,597
Earnings distribution to non-controlling interest — — — — — — — — (1,887) (1,887)
Net income — — — — 40,760 — — 40,760 215 40,975
Common stock options exercised — 40,701 4 197 — — — 201 — 201
Preferred stock shares conversion (35) 4,813 — 35 — — — — — —
Other comprehensive income — — — — — (218) — (218) — (218)
Stock compensation expense — — — 230 — — — 230 — 230
Dividend on preferred stock — — — — (28) — — (28) — (28)
Dividend on common stock — — — — (9,509) — — (9,509) — (9,509)
Balance, December 31, 2021 $ 445 12,182,081 $ 1,218 $ 135,451 $ 98,017 $ 245 $ (3,015) $ 232,361 $ — $ 232,361


Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Equity
Years Ended December 31, 2023 and 2022
(Dollars in thousands except share data)
	Shares of Preferred Stock Outstanding	Preferred Stock		Shares of Common Stock issued	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Equity
Balance, December 31, 2021	445	$	445	12,182,081	$	1,218	$	135,451	$	98,017	$	245	$	(3,015)	$	232,361


Net income	—	—		—	—		—		41,823		—		—		41,823
Stock compensation issued/exercised	—	—		43,016	5		401		—		—		—		406

Other comprehensive loss	—	—		—	—		—		—		(771)		—		(771)
Stock compensation expense	—	—		—	—		349		—		—		—		349

Dividend on preferred stock ($60.00 per share)	—	—		—	—		—		(27)		—		—		(27)
Dividend on common stock ($0.68 per share)	—	—		—	—		—		(8,107)		—		—		(8,107)
Balance, December 31, 2022	445	$	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	—	—		—	—		—		28,462		—		—		28,462
Stock compensation issued/exercised	—	—		6,096	—		33		—		—		—		33
Preferred stock shares conversion	(70)	(70)		9,628	1		69		—		—		—		—
Other comprehensive gain	—	—		—	—		—		—		122		—		122
Stock compensation expense	—	—		—	—		397		—		—		—		397

Dividend on preferred stock ($60.00 per share)	—	—		—	—		—		(26)		—		—		(26)
Dividend on common stock ($0.72 per share)	—	—		—	—		—		(8,603)		—		—		(8,603)
Balance, December 31, 2023	375	$	375	12,240,821	$	1,224	$	136,700	$	149,437	$	(404)	$	(3,015)	$	284,317

See accompanying notes to consolidated financial statements

Parke Bancorp, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, ~~2021~~2023 and ~~2020~~2022

(Dollars in thousands)


		2021		2020			2023	2022
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income	Net income	$	40,975	$	28,875
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	687		586
Provision for loan losses		500		7,646
(Recovery of) provision for credit losses
Increase in value of bank-owned life insurance	Increase in value of bank-owned life insurance	(575)		(592)
Gain on sale of SBA loans	Gain on sale of SBA loans	(214)		—
SBA loans originated for sale	SBA loans originated for sale	(1,650)		—
Proceeds from sale of SBA loans originated for sale	Proceeds from sale of SBA loans originated for sale	1,864		—
Net (gain) loss on sale of OREO and valuation adjustments		(60)		371
Net gain on OREO
Net accretion of purchase premiums and discounts on securities	Net accretion of purchase premiums and discounts on securities	40		45
Stock based compensation	Stock based compensation	230		265
Decrease (increase) in deferred income tax	Decrease (increase) in deferred income tax	1,079		(2,295)
Net changes in:	Net changes in:
Increase in accrued interest receivable and other assets	Increase in accrued interest receivable and other assets	(1,059)		(1,875)
(Decrease) increase in accrued interest payable and other accrued liabilities		(3,176)		3,491
Increase in accrued interest receivable and other assets
Increase in accrued interest receivable and other assets
Increase in accrued interest payable and other accrued liabilities

Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities	Net cash provided by operating activities	38,641		36,517
Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Repayments and maturities of investment securities available for sale	Repayments and maturities of investment securities available for sale	6,139		7,166
Repayments and maturities of investment securities held to maturity	Repayments and maturities of investment securities held to maturity	57		—
Purchases of investment securities held to maturity		(8,693)		—
Net decrease (increase) in loans		78,996		(144,817)
Purchases of bank premises and equipment		(64)		(251)

Net increase in loans
Net increase in loans
Net increase in loans
Sales (purchases) of bank premises and equipment
Proceeds from sale of OREO, net	Proceeds from sale of OREO, net	356		4,217
Redemptions (purchases) of restricted stock		2,398		(102)
Net cash provided by (used in) investing activities		79,189		(133,787)
Proceeds from bank owned life insurance policy
Redemptions of restricted stock
Purchases of restricted stock
Net cash used in investing activities
Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Cash dividends	Cash dividends	(7,633)		(7,444)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	201		—
Net proceeds from issuance of subordinate debt	Net proceeds from issuance of subordinate debt	—		29,052
Earnings distribution from non-controlling interest	Earnings distribution from non-controlling interest	(1,887)		(594)
Net decrease in FHLBNY and short-term borrowings		(56,500)		—
Net (decrease) increase in other borrowed funds		(90,026)		90,026
Net increase in noninterest-bearing deposits		124,950		169,591
(Decrease) increase in FHLBNY short-term borrowings
Increase (decrease) in FHLBNY long-term borrowings
Net decrease in other borrowed funds
Net decrease in noninterest-bearing deposits
Net increase in interest-bearing deposits	Net increase in interest-bearing deposits	51,017		83,633
Net cash provided by financing activities		20,122		364,264
Increase in cash and cash equivalents		137,952		266,994
Net cash provided by (used in) financing activities
Decrease in cash and cash equivalents
Cash and Cash Equivalents, January 1,	Cash and Cash Equivalents, January 1,	458,601		191,607
Cash and Cash Equivalents, December 31,	Cash and Cash Equivalents, December 31,	$	596,553	$	458,601

Supplemental Disclosure of Cash Flow Information:
Supplemental Disclosure of Cash Flow Information:
Supplemental Disclosure of Cash Flow Information:	Supplemental Disclosure of Cash Flow Information:
Interest paid	Interest paid	$	13,691	$	21,815
Income taxes paid	Income taxes paid	$	16,808	$	9,360

Non-cash Investing and Financing Items	Non-cash Investing and Financing Items
Non-cash Investing and Financing Items
Non-cash Investing and Financing Items
Loans transferred to OREO	Loans transferred to OREO	$	1,811	$	—

Accrued dividends payable

See accompanying notes to consolidated financial statements

~~PARKE BANCORP, INC. AND SUBSIDIARIES~~

~~NOTES TO FINANCIAL STATEMENTS~~

Note 1. Description of Business and Summary of Significant Accounting Policies

Business:

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 7seven branch offices with its principal office at 601 Delsea Drive, Sewell, New Jersey, and additional branch office locations; 631 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.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with GAAP. We have reclassified certain prior year amounts to conform to the ~~2021~~2023 presentation, which did not have a material impact on our consolidated financial condition or results of operations. The accounting policies that materially affect the determination of financial position, results of operations and cash flows are summarized below.

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank. Also included are the accounts of Parke Direct Lending LLC ("PDL"), a joint venture formed in 2018 to originate short-term alternative real estate loan products. Parke Bank had a 51% ownership interest in the joint venture. The joint venture was liquidated in 2021.Parke Capital Trust I, Parke Capital Trust II and Parke Capital Trust III are wholly-owned subsidiaries but are not consolidated because they do not meet the requirements for consolidation under applicable accounting guidance. All material inter-company balances and transactions have been eliminated.

Cash and cash equivalents: Consists of cash and due from banks, and interest-bearing deposits and other-short term investments, all of which, if applicable, have stated maturities of three months or less when acquired.

Investment Securities: Debt securities are recorded on a trade-date basis. We classify debt securities as held to maturity if we have the positive intent and ability to hold the securities to maturity. We report securities held to maturity on our consolidated balance sheets at carrying value, which generally equals amortized cost. Amortized cost reflects historical cost adjusted for amortization of premiums, accretion of discounts and any previously recorded impairments. Debt securities not classified as held to maturity or trading are designated as securities available for sale ("AFS") and carried at fair value with unrealized gains and losses, net of income taxes, reflected in accumulated other comprehensive income (loss). We did not have any securities classified as trading securities during ~~2021~~2023 or ~~2020.~~2022.

Interest on debt securities, including amortization of premiums and accretion of discounts, is included in interest income. Premiums and discounts are amortized or accreted to interest income at a constant effective yield over the contractual lives of the securities. Realized gains and losses from the sales of debt securities are determined on a specific security basis. These securities gains/(losses) are included in other noninterest income.

On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for Other Than Temporary Impairment ("OTTI"). An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. If the present value of the cash flows expected to be collected, discounted at the security’s effective yield, is less than the security’s amortized cost, OTTI is considered to have occurred. For a debt security for which there has been a decline in the fair value below the amortized cost basis, if we intend to sell the security, or if it is more likely than not we will be required to sell the security before recovery of the amortized cost basis, an OTTI write-down is recognized in earnings equal to the entire difference between the amortized cost basis and fair value of the security. For debt securities that are considered OTTI and that we do not intend to sell and will not be required to sell prior to recovery of our amortized cost basis, we separate the amount of the impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings and is the difference between the security’s amortized cost basis and the present value

of its expected future cash flows discounted at the security’s effective yield. The remaining difference between the security’s fair value and the present value of expected future cash flows is due to factors that are not credit-related and, therefore, is recognized in other comprehensive income.

Restricted Stock: Restricted stock includes investments in the common stock of the ~~Federal Home Loan Bank of New York (“FHLBNY”)~~FHLBNY and the Atlantic Central Bankers Bank for which no readily available market exists and, accordingly, is carried at cost. The stocks have no quoted market value and are subject to redemption restrictions. Management reviews these stocks for ~~impairment~~credit loss based on the ultimate recoverability of the cost basis in the stock. The stocks’ values are determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. Management considers such criteria as the significance of the decline in net assets, if any, the length of time this situation has persisted and the financial performance of the issuers. In addition, management considers any commitments by the FHLBNY to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLBNY and the liquidity position of the FHLBNY.

Loans: We classify loans as held for investment or held for sale based on our investment strategy and management’s intent and ability with regard to the loans which may change over time. The accounting and measurement framework for loans differs depending on the loan classification. Loans that we have the ability and intent to hold for the foreseeable future or until maturity or pay-off are classified as held for investment. Loans classified as held for investment are reported at their amortized cost, which is the outstanding principal balance, adjusted for any unearned income, unamortized deferred fees and costs, unamortized premiums and discounts and charge-offs. Interest income on the loans is recognized as earned based on contractual interest rates

applied to daily principal amounts outstanding. Loan origination fees, direct loan origination costs, and loan premiums and discounts are deferred and accreted or amortized into net interest income using the constant effective yield method, over the contractual life of the loan.

Loans originated with the intent to sell or for which we do not have the ability and intent to hold for the foreseeable future are classified as held for sale. Interest on these loans is recognized on an accrual basis. These loans are recorded at the lower of cost or fair value. Our Small Business Administration ("SBA") loans that management has the intention to sell are designated as held for sale and are reported at fair value. Fair value represents the face value of the guaranteed portion of SBA loans pending settlement. Loan origination fees and direct loan origination costs are deferred until the loan is sold and are recognized as part of the total gain or loss on sale. We calculate the gross gain or loss on loan sales as the difference between the proceeds received and the carrying value of the loans sold.

Loan Fees: Loan fees and direct costs associated with loan originations are netted and deferred. The deferred amount is recognized as an adjustment to loan interest over the term of the related loan using the interest method. Prepayment penalties on loans are recognized in loan interest. Loan brokerage fees represent commissions earned for facilitating loans between borrowers and other companies and is recorded as other loan fee income.

Non-accrual Loans: Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet contractual 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.

~~Troubled Debt Restructurings~~: Troubled debt restructurings (“TDRs”) are loans for which the Company, for legal or economic reasons related to a debtor’s financial difficulties, has granted a concession to the debtor that it otherwise would not have considered in the normal course of business. Concessions that result in the categorization of a loan as a TDR include but are not limited to:

•~~Reduction (absolute or contingent) of the stated interest rate;~~

•~~Extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk;~~

•~~Reduction (absolute or contingent) of the face amount or maturity amount of the debt as stated in the instrument or other agreement; or~~

•~~Reduction (absolute or contingent) of accrued interest.~~

~~TDRs are reported as impaired loans. Interest income on TDR loans is recognized consistent with the Company’s non-accrual loan policy stated above.~~

Allowance for ~~Loan~~Credit Losses on Loans and ~~Lease Losses~~Leases: The allowance for ~~loan and lease~~credit losses represents management’s estimate of ~~probable~~expected losses inherent in the Company’s lending activities excluding loans accounted for under fair value. The allowance for ~~loan~~credit losses is maintained through charges to the provision for ~~loan~~credit losses in the Consolidated Statements of Income as expected losses are ~~estimated to have occurred.~~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 ~~loan~~credit losses includes a general ~~based~~ component and ~~a specific component. The specific~~an asset-specific component ~~of the allowance relates to loans considered to be impaired, which includes performing TDRs as well as nonperforming~~for collateral-dependent loans. To determine the ~~specific~~asset-specific component of the allowance, the loans are evaluated individually based on the ~~borrower's ability to repay amounts owed, collateral, relative risk grade~~fair value of the ~~loans, and other factors given current events and conditions.~~underlying collateral. The Company generally measures the ~~specific~~asset-specific allowance as the difference between the ~~fair~~net realizable value ~~(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 ~~and lease~~ portfolio collectively. It incorporates a historical valuation allowance and ~~general valuation~~qualitative allowance. The historical valuation utilizes a vintage loss ~~experience~~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 ~~measured by type~~prescribed to a pool of ~~credit and internal risk grade, loss severity, specific homogeneous risk pools. A historical loss ratio and valuation allowance~~loans that were originated in a particular year. The actual charge-offs as a percent of total loans are ~~established~~calculated for each ~~pool~~historical year, and projected for future years for each year within the average life time horizon. The sum of ~~similar loans~~the actual charge-offs and ~~updated periodically based on actual~~projected charge-offs are divided by the average amortized origination amount for each respective year. Those charge-off ~~experience and current events.~~ 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 ~~general valuation~~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 ~~loan~~lending policies, procedures and internal controls;(iii) ~~changes in asset~~volume and severity of loan credit quality; (iv) ~~changes in loan~~nature and volume of portfolio ~~volume;~~and term of loans (v) the composition and concentrations of credit; (vi) the ~~impact of competition on loan structuring and pricing; (vii) the~~ effectiveness of the internal loan review ~~function; (viii) the impact of environmental risks on portfolio risks;~~system; and ~~(ix)~~(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.

~~Impaired Loans~~

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 Lending-Related Commitments: ~~A loan is considered impaired when, based on current information and events,~~Parke estimates expected credit losses over the contractual period in which it is ~~probable that~~exposed to credit risk on contractual obligations to extend credit, unless the ~~Company will be unable to collect~~obligation is unconditionally cancellable by the ~~scheduled payments of principal or interest when due according to~~Company. The allowance for credit losses on lending-related commitments is recorded in other liabilities in the ~~contractual terms~~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 ~~agreement.~~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 are those that are on non-accrual at the reporting date, and include collateral dependent loans.

Collateral Dependent Loans ~~that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on~~

Parke considers a ~~case-by-case basis, taking into consideration all~~loan to be collateral dependent when foreclosure of the ~~circumstances surrounding~~underlying collateral is probable. Parke has also elected to apply the ~~loan and the borrower, including the length~~practical expedient to measure expected credit losses of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Factors considered by management when evaluating impaired loans include payment status,a collateral value, and the probability of collecting scheduled principal and interest payments when due. Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loans effective interest rate, the loan’s obtainable market price, ordependent asset using the fair value of the collateral, ifless 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, ~~dependent.~~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.

~~Generally, we report loans as impaired~~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 ~~method~~most recent data from ratings agencies depending on the availability of data for ~~measuring impairment~~the security. Credit ratings of held-to-maturity debt securities, which are a significant input in ~~accordance with applicable accounting guidance. Loans held~~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 ~~sale are~~credit loss on the held-to-maturity portfolio is not ~~reported~~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 ~~impaired, as these loans are recorded at lower~~a reduction to non-interest income in the Consolidated Statements of ~~cost~~Income.

For debt securities available-for-sale which the Company does not intend to sell, or ~~fair value. Loans classified as nonperforming and loans that have been modified in a troubled debt restructuring are reported as impaired. Loans modified in a TDR continue~~it is not likely the security would be required to be ~~reported~~sold before recovery, we evaluate whether a decline in fair value has resulted from credit losses or other adverse factors, such as ~~impaired. The majority of impaired loans are evaluated for an asset-specific allowance. We generally measure impairment and~~a change in the ~~related asset-specific allowance for impaired loans based on~~security's credit rating. In assessing whether a credit loss exists, the ~~difference between the recorded investment of the loan and~~Company compares the present value of ~~the expected future~~ cash flows ~~discounted at~~expected to be collected from the ~~original effective interest rate~~security with the amortized cost basis of the ~~loan.~~security. If the ~~loan~~present value of cash flows expected to be collected is ~~collateral dependent, we measure impairment based upon~~less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the underlying collateral, which we determine based on the current fair value of the collateral less estimated selling costs, instead of discounted cash flows. Loans are identified as collateral dependent if we believe that collateral is the sole source of repayment.security.

Charge-Offs: We charge off loans as a reduction to the allowance for ~~loan and lease~~credit losses when we determine the loan is uncollectible and record subsequent recoveries of previously charged off amounts as an increase to the allowance for ~~loan and lease~~credit losses.

Concentration of Credit Risk: The Company’s loans are generally to customers in Southern New Jersey, ~~and~~ the Philadelphia area of ~~Pennsylvania.~~Pennsylvania, and New York, New York. Loans to general building contractors, general merchandise stores, restaurants, motels, warehouse space, and real estate ventures (including construction loans) constitute a majority of commercial loans. The ~~concentrations of credit~~

concentrations of credit by type of loan are set forth in Note 4. Generally, loans are collateralized by assets of the borrower and are expected to be repaid from the borrower’s cash flow or proceeds from the sale of selected assets of the borrower.

Other Real Estate Owned (“OREO”): Real estate acquired through foreclosure or other proceedings is carried at the lower of cost or estimated fair value, less estimated costs to sell. When a property is acquired, the excess of the loan balance over the estimated fair value is charged to the allowance for ~~loan~~credit losses. Costs of improving OREO are capitalized to the extent that the carrying value does not exceed its fair value less estimated selling costs. Subsequent valuation adjustments, declines, if any, are recognized as a charge against current earnings. Holding costs are charged to expense. Gains and losses on sales are recognized in noninterest income as they occur. The OREO balance is included in other assets on the balance sheets.

Interest Rate Risk: The Company is principally engaged in the business of attracting deposits from the general public and using these deposits, together with other borrowed and brokered funds, to make commercial, commercial mortgage, residential mortgage, and consumer loans, and to invest in overnight and term investment securities. Inherent in such activities is interest rate risk that results from differences in the maturities and repricing characteristics of these assets and liabilities. For this reason, management regularly monitors the level of interest rate risk and the potential impact on net income.

Bank Premises and Equipment: Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed and charged to expense using the straight-line method over the estimated useful lives of the assets, generally three years for computers and software, five to ten years for equipment and forty years for buildings. Leasehold improvements are amortized to expense over the shorter of the term of the respective lease or the estimated useful life of the improvements.

Lease: Lease classification is determined at inception for all lease transactions with an initial term greater than one year. ~~At adoption of ASU 2016-02, we elected the practical expedient approach, which allows us to not reassess the lease classification for any existing leases.~~ Operating leases are included as right-of-use (“ROU”) assets within other assets, and operating lease liabilities are classified as other liabilities on our consolidated balance sheets. Our operating lease expense is included in occupancy and equipment within non-interest expense in our consolidated statements of income.

Stock-Based Compensation: Stock-based compensation expense is based on the grant date fair value, which is estimated using a Black-Scholes option pricing model. The fair value of stock-based compensation used in determining compensation expense generally equals the fair market value of our common stock on the date of grant. We generally recognize compensation expense on a straight-line basis over the award’s requisite service period based on the fair value of the award at grant date. Stock-based compensation expense is included in ~~salaries~~compensation and ~~associate~~ benefits in the consolidated statements of income.

Revenue recognition: Our revenue includes net interest income on financial instruments and non-interest income. Interest income and fees on loans, investment securities, and other financial instruments are recognized based on the contractual provisions of the underlying arrangements according to applicable accounting guidance. Deposit-related-fee-based revenue within the scope of ASC Topic 606 - Revenue from Contracts with Customers (Topic 606) is included in non-interest income in our consolidated statements of income.

Our deposit-related-fee-based revenues are recognized when or as those services are transferred to the customer and are generally recognized either immediately upon the completion of our service or over time as we perform services. Any services performed over time generally require that we render services each period and therefore we measure our progress in completing these services based upon the passage of time. Deposit-related fees are recognized over the period in which the related service is provided. Service charges on deposit accounts are earned on depository accounts for customers and include fees for account and overdraft services. Account services include fees for event-driven services and fees for periodic account maintenance activities. Our obligation for event-driven services is satisfied at the time of the event when the service is delivered, while our obligation for maintenance services is satisfied over the course of each month. Our obligation for overdraft services is satisfied at the time of the overdraft.

Income Taxes: We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded for the current period. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Thus, at the enactment date, deferred taxes are remeasured and the change is recognized in income tax expense. The recognition of deferred tax assets requires an assessment to determine the realization of such assets. Realization refers to the incremental benefit achieved through the reduction in future taxes payable or refunds receivable. We establish a valuation allowance for tax assets when it is more likely than not that they will not be realized, based

upon all available evidence. Realization of deferred tax assets is dependent on generating sufficient taxable income in the future.

When tax returns are filed, it is highly certain that some positions taken will be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits would be recognized in income tax expense on the income statement.

The Company did not recognize any interest or penalties related to income tax during the years ended December 31, ~~2021~~2023 and ~~2020.~~2022, respectively. The Company does not have an accrual for uncertain tax positions as of December 31, ~~2021~~2023 and ~~2020,~~2022, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law. ~~The Company is currently under IRS audit for the tax year ending December 31, 2016 and as a result the statute of limitations for tax years 2016 and 2017 have been extended until December 31, 2022.~~ All years after ~~2017~~2019 are open under the original federal ~~statue~~statute of limitations. For state tax returns, the Company is subject to income tax examinations by local tax authorities for years ~~2018~~2019 and after, except for the State of New Jersey which is still subject to income tax examinations for years ~~2017~~2018 and after.

Fair value: Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. Fair value measurement of a financial asset or liability is assigned to a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The accounting guidance for fair value requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value.

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. Our most significant estimates pertain to our allowances for loan and lease losses, fair value measurements, individually evaluated loans, the carrying value of OREO, and the valuation of deferred income taxes. Actual results may differ from the estimates and the differences may be material to the consolidated financial statements.

Segment Reporting: The Company operates 1one reportable segment of business, “community banking”. Through its community banking segment, the Company provides a broad range of retail and community banking services.

Other Comprehensive Income: Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under GAAP, are excluded from net income, including unrealized gains and losses on available for sale securities.

For year ~~2021~~2023 and ~~2020,~~2022, we did not reclassify any amounts from accumulated other comprehensive income (loss) to income. The following table provides the components of other comprehensive income, reclassifications to net income and the related tax effect for the year ended December 31, ~~2021~~2023 and ~~2020:~~2022:

Year ended December 31, 2021 2020
(Dollars in thousands)
Investment securities:
Net unrealized (losses) gains arising during the period $ (294) $ 537
Tax effect related to the unrealized loss during the periods 76 (132)
Change in other comprehensive income $ (218) $ 405


Year ended December 31,	2023		2022
	(Dollars in thousands)
Investment securities:
Net unrealized gain (loss)	$	165	$	(1,039)
Tax effect related to the unrealized (gain) loss	(43)		268

Accumulated other comprehensive income	$	122	$	(771)

Earnings Per Common Share: Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share considers common stock equivalents (when dilutive) outstanding during the period such as options outstanding and

convertible preferred stock. To the extent that stock equivalents are anti-dilutive, they have been excluded from the earnings per share calculation. Earnings per common share have been computed based on the following for ~~2021~~2023 and ~~2020:~~2022:


		2021		2020			2023	2022
		(Dollars in thousands, except share data)					(Dollars in thousands, except per share data)
Basic earnings per common share	Basic earnings per common share					Basic earnings per common share
Net income available to common shareholders	Net income available to common shareholders	$	40,732	$	28,399
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	11,888,429		11,850,223
Basic earnings per common share	Basic earnings per common share	$	3.43	$	2.40
Diluted earnings per common share	Diluted earnings per common share
Net income available to common shareholders	Net income available to common shareholders	$	40,732	$	28,399
Net income available to common shareholders
Net income available to common shareholders
Dividend on Preferred Series B	Dividend on Preferred Series B	28		29
Net income attributable to diluted common shares	Net income attributable to diluted common shares	$	40,760	$	28,428
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	11,888,429		11,850,223
Dilutive potential common shares	Dilutive potential common shares	232,287		139,385
Total diluted weighted-average common shares outstanding	Total diluted weighted-average common shares outstanding	12,120,716		11,989,608
Diluted earnings per common share	Diluted earnings per common share	$	3.36	$	2.37

For ~~2021~~2023 and ~~2020,~~2022, there were ~~67,994~~330,536 and ~~253,495~~125,938 weighted average option shares outstanding, respectively, that were not included in the computation of diluted EPS because these shares were anti-dilutive.

Contingent loss: Included in other operating expense is the one-time recognition of a $9.5 million contingent loss related to cash that was stolen from a third-party armored car carrier facility that was used by the Company.

Statement of Cash Flows: Cash and cash equivalents include cash and due from financial institutions and federal funds sold. For the purposes of the statement of cash flows, changes in loans and deposits are shown on a net basis.

Recently Issued Accounting Pronouncements:

~~ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):~~ ~~During June 2016, the Financial Accounting Standard Board (FASB) issued ASU 2016-13,~~ ~~Financial Instruments-Credit Losses.~~ ~~ASU 2016-13~~ ~~(Topic 326)~~, replaces the incurred loss impairment methodology in current GAAP with an expected credit loss (CECL) methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. The ASU was amended in some aspects by subsequent Accounting Standards Updates. The guidance of the ~~Financial Instruments-Credit Losses~~ is scheduled to be effective for public entities except small reporting companies ("SRCs") for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all entities, early adoption will continue to be allowed. As a small reporting company, the CECL is not effective for us until after December 15, 2022. As the result, we are not required to estimate expected credit losses until year 2023.

ASU 2020-04, Reference Rate Reform (Topic 848): 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 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		(794)		8,587
Residential - Multifamily	1,347		(128)		1,219
Consumer	63		53		116
Total ACL on loans	31,845		1,858		33,703
Deferred Tax Assets	9,184		716		9,900
Liabilities
ACL for unfunded commitments	—		960		960
Equity
Retained Earnings	$	131,706	$	(2,102)	$	129,604

Note 2. Cash and Due from Banks

The Company maintains various deposit accounts with other banks to meet normal funds transaction requirements, to satisfy deposit reserve requirements, and to compensate other banks for certain correspondent services. Management is responsible for assessing the credit risk of its correspondent banks. At December 31, ~~2021 or 2020,~~2023 and 2022, the vast majority of the Company's cash deposits with other banks were due from the Federal Reserve Bank of Philadelphia and the Federal Home Loan Bank of New York.

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 December 31, ~~2021~~2023 and ~~2020:~~

As of December 31, 2021 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 12,513 372 42 12,843
Collateralized mortgage obligations 8 — — 8
Total available for sale $ 13,021 $ 372 $ 42 $ 13,351

Held to maturity:
States and political subdivisions $ 3,761 $ 241 $ 16 $ 3,986
Residential mortgage-backed securities 6,157 — 118 6,039
Total held to maturity $ 9,918 $ 241 $ 134 $ 10,025

As of December 31, 2020 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 18,736 646 23 19,359
Collateralized mortgage obligations 22 1 — 23
Total available for sale $ 19,258 $ 647 $ 23 $ 19,882

Held to maturity:
States and political subdivisions $ 1,224 $ 306 $ — $ 1,530

2022:


As of December 31, 2023	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Credit Losses
	(Dollars in thousands)
Available for sale:

Residential mortgage-backed securities	$	7,639	$	3	$	547	$	7,095	$	—

Total available for sale	$	7,639	$	3	$	547	$	7,095	$	—

Held to maturity:
States and political subdivisions	$	3,886	$	38	$	384	$	3,540	$	—
Residential mortgage-backed securities	5,406		—		1,054		4,352		—
Total held to maturity	$	9,292	$	38	$	1,438	$	7,892	$	—


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:
States and political subdivisions	$	3,822	$	56	$	533	$	3,345
Residential mortgage-backed securities	5,556		—		1,096		4,460
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 December 31, ~~2021,~~2023, are as follows:


		Amortized Cost		Fair Value			Amortized Cost	Fair Value
		(Dollars in thousands)					(Dollars in thousands)
Available for sale:	Available for sale:					Available for sale:
Due within one year	Due within one year	$	10	$	9
Due after one year through five years	Due after one year through five years	610		611
Due after five years through ten years	Due after five years through ten years	7,223		7,388
Due after ten years	Due after ten years	5,178		5,343
Total available for sale	Total available for sale	$	13,021	$	13,351

Held to maturity:	Held to maturity:
Held to maturity:
Held to maturity:
Due within one year
Due within one year
Due within one year	Due within one year	$	—	$	—
Due after one year through five years	Due after one year through five years	—		—
Due after five years through ten years	Due after five years through ten years	1,283		1,524
Due after ten years	Due after ten years	8,635		8,501
Total held to maturity	Total held to maturity	$	9,918	$	10,025

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.

During the year ending December 31, ~~2021~~2023 and ~~2020,~~2022, the Company did not sell any investment securities. ~~Also, at December 31, 2021 and 2020, the Company used a letter of credit of $40.0 million as collateral to secure public deposits.~~

The following tables show the gross unrealized losses and fair value of the Company's ~~investments~~available for sale securities which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, ~~2021~~2023 and December 31, ~~2020.~~

As of December 31, 2021 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 $ 168 $ 1 $ 1,418 $ 41 $ 1,586 $ 42
Total available for sale $ 168 $ 1 $ 1,418 $ 41 $ 1,586 $ 42
Held to maturity:
States and political subdivisions $ 2,462 $ 16 $ — $ — $ 2,462 $ 16
Residential mortgage-backed securities 6,039 118 — — 6,039 118
Total held to maturity $ 8,501 $ 134 $ — $ — $ 8,501 $ 134
2022.


As of December 31, 2020		Less Than 12 Months				12 Months or Greater				Total
As of December 31, 2023														As of December 31, 2023	Less Than 12 Months		12 Months or Greater			Total
Description of Securities	Description of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Description of Securities	Fair Value	Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
		(Dollars in thousands)													(Dollars in thousands)
Available for sale:	Available for sale:													Available for sale:
Residential mortgage-backed securities	Residential mortgage-backed securities	$	2,142	$	20	$	215	$	3	$	2,357	$	23
Total available for sale	Total available for sale	$	2,142	$	20	$	215	$	3	$	2,357	$	23


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:
States and political subdivisions	$	—	$	—	$	1,943	$	533	$	1,943	$	533
Residential mortgage-backed securities	—		—		4,460		1,096		4,460		1,096
Total held to maturity	$	—	$	—	$	6,403	$	1,629	$	6,403	$	1,629

The Company’s unrealized loss for the ~~debt~~available for sale securities is comprised of 53 securities in the less than 12 months loss position and 316 securities in the 12 months or greater loss position at December 31, ~~2021 and 2 securities in the less than 12 months loss position and 2 securities in the 12 months or greater loss position at December 31, 2020.~~2023. The mortgage-backed securities that had unrealized losses were issued or guaranteed by the US government or government sponsored entities. The unrealized losses

associated with those mortgage-backed securities are generally driven by changes in interest rates and not due to credit losses given the explicit or implicit guarantees provided by the U.S. government. The states and political ~~subsdivisions~~subdivisions securities shown in the 2022 table that had unrealized losses were issued by a school district, and therefore the loss is attributed to changes in interest rates and not due to credit losses. Additionally, these securities are classified as held to maturity. 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 ~~OTTI~~a credit loss at December 31, ~~2021.~~2023.

~~Other Than Temporarily Impaired~~Impairment of Debt Securities ~~(OTTI)~~

On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for ~~OTTI.~~a credit loss. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. Amortized cost includes adjustments (if any) made to the cost basis of an investment for accretion, amortization, and previous other-than-temporary impairments. ~~After an investment security is determined to be impaired,~~For individual debt securities classified as available for sale, we ~~evaluate~~determine whether a decline in fair value below the amortized cost has resulted from a credit loss or other factors. If the decline in fair value is ~~other-than-temporary.~~due to credit, we will record the portion of the impairment loss relating to credit through an allowance for credit losses. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes. Please refer to Note 1 - Description of Business and Summary of Significant Accounting Policies for a detailed description of our accounting policy for ~~OTTI.~~the impairment of securities.

Note 4. Loans Receivable and Allowance for ~~Loan and Lease~~Credit Losses

~~As of December 31, 2021, the Company had $1.48 billion in loans receivable outstanding.~~ Loans held for sale was zero at December 31, 2021. Outstanding balances include a total net increase of $1.7 million and a net decrease of $0.4 million at December 31, 2021 and 2020 for unearned income, net deferred loan fees, and unamortized discounts and premiums. The portfolios of loans receivable at December 31, 2021, and December 31, 2020, consist of the following:

December 31, 2021 December 31, 2020
(Dollars in thousands)
Commercial and Industrial $ 57,151 $ 121,808
Construction 154,077 211,013
Real Estate Mortgage:
Commercial – Owner Occupied 123,672 132,207
Commercial – Non-owner Occupied 306,486 324,840
Residential – 1 to 4 Family 750,525 670,827
Residential – Multifamily 84,964 94,748
Consumer 7,972 10,364
Total Loans $ 1,484,847 $ 1,565,807
Receivable

~~An age analysis of past due loans by class at December 31, 2021 and December 31, 2020 as follows:~~

December 31, 2021 30-59
Days Past
Due 60-89
Days Past
Due Greater
than 90
Days and
Not
Accruing Total Past
Due Current Total
Loans Loans >
90 Days
and Accruing

(Dollars in thousands)
Commercial and Industrial $ — $ 349 $ 224 $ 573 $ 56,578 $ 57,151 $ —
Construction — — 1,139 1,139 152,938 154,077 —
Real Estate Mortgage:
Commercial – Owner Occupied — — 2,170 2,170 121,502 123,672 —
Commercial – Non-owner Occupied — — 242 242 306,244 306,486 —
Residential – 1 to 4 Family 81 — 533 614 749,911 750,525 —
Residential – Multifamily — — — — 84,964 84,964 —
Consumer — — — — 7,972 7,972 —
Total Loans $ 81 $ 349 $ 4,308 $ 4,738 $ 1,480,109 $ 1,484,847 $ —

December 31, 2020 30-59
Days Past
Due 60-89
Days Past
Due Greater
than 90
Days and
Not
Accruing Total Past
Due Current Total Loans Loans >
90 Days
and Accruing
(Dollars in thousands)
Commercial and Industrial $ — $ — $ 50 $ 50 $ 121,758 $ 121,808 $ —
Construction — — 1,365 1,365 209,648 211,013 —
Real Estate Mortgage:
Commercial – Owner Occupied — 1,171 5,521 6,692 125,515 132,207 —
Commercial – Non-owner Occupied — 872 69 941 323,899 324,840 —
Residential – 1 to 4 Family — 662 1,669 2,331 668,496 670,827 —
Residential – Multifamily — — — — 94,748 94,748 —
Consumer 45 — 55 100 10,264 10,364 —
Total Loans $ 45 $ 2,705 $ 8,729 $ 11,479 $ 1,554,328 $ 1,565,807 $ —

~~Allowance For Loan~~As of December 31, 2023, the Company had $1.79 billion in loans receivable outstanding. Outstanding balances include $2.7 million and ~~Lease Losses (ALLL)~~

~~We maintain the ALLL~~$1.9 million at ~~a level that we believe to be appropriate to absorb estimated probable credit losses incurred in the~~December 31, 2023 and 2022, respectively, for net deferred loan ~~portfolios as of the balance sheet date. The Company’s accounting policy for ALLL is more fully described in Note 1 - Description of Business~~costs, and ~~Summary of Significant Accounting Policies.~~unamortized discounts.

The portfolios of loans receivable at December 31, 2023, and December 31, 2022, consist of the following, ~~tables present the information regarding the allowance for loan and lease losses and associated loan data:~~

Twelve Months Ended December 31, 2021
As of December 31, 2021 Real Estate Mortgage
(Dollars in thousands) Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential Multifamily Consumer Total
December 31, 2020 $ 492 $ 3,359 $ 3,078 $ 8,398 $ 12,595 $ 1,639 $ 137 $ 29,698
    Charge-offs — (226) (152) — (49) — — (427)
    Recoveries 18 — 52 4 — — — 74
    Provisions (credit) (93) (471) 19 (926) 2,424 (424) (29) 500
Ending Balance December 31 2021 $ 417 $ 2,662 $ 2,997 $ 7,476 $ 14,970 $ 1,215 $ 108 $ 29,845
Allowance for loan losses
Individually evaluated for impairment $ 8 $ 300 $ 5 $ 218 $ 60 $ — $ — $ 591
Collectively evaluated for impairment 409 2,362 2,992 7,258 14,910 1,215 108 29,254
Balance at December 31, 2021 $ 417 $ 2,662 $ 2,997 $ 7,476 $ 14,970 $ 1,215 $ 108 $ 29,845
Loans
Individually evaluated for impairment $ 224 $ 1,139 $ 2,369 $ 5,577 $ 993 $ — $ — $ 10,302
Collectively evaluated for impairment 56,927 152,938 121,303 300,909 749,532 84,964 7,972 1,474,545
Balance at December 31, 2021 $ 57,151 $ 154,077 $ 123,672 $ 306,486 $ 750,525 $ 84,964 $ 7,972 $ 1,484,847
by portfolio segment:

Twelve Months Ended December 31, 2020
As of December 31, 2020 Real Estate Mortgage
(Dollars in thousands) Commercial and Industrial Construction Commercial Owner Occupied Commercial Non-owner Occupied Residential 1 to 4 Family Residential Multifamily Consumer Total
December 31, 2019 $ 964 $ 2,807 $ 2,023 $ 5,860 $ 9,151 $ 819 $ 187 $ 21,811
    Charge-offs — — — — (59) — — (59)
    Recoveries 23 — 11 266 — — — 300
    Provisions (495) 552 1,044 2,272 3,503 820 (50) 7,646
Ending Balance December 31 2020 $ 492 $ 3,359 $ 3,078 $ 8,398 $ 12,595 $ 1,639 $ 137 $ 29,698
Allowance for loan losses
Individually evaluated for impairment $ 12 $ 301 $ 200 $ 350 $ 141 $ — $ — $ 1,004
Collectively evaluated for impairment 480 3,058 2,878 8,048 12,454 1,639 137 28,694
Balance at December 31, 2020 $ 492 $ 3,359 $ 3,078 $ 8,398 $ 12,595 $ 1,639 $ 137 $ 29,698
Loans
Individually evaluated for impairment $ 49 $ 4,840 $ 5,735 $ 10,109 $ 1,875 $ — $ 55 $ 22,663
Collectively evaluated for impairment 121,759 206,173 126,472 314,731 668,952 94,748 10,309 1,543,144
Balance at December 31, 2020 $ 121,808 $ 211,013 $ 132,207 $ 324,840 $ 670,827 $ 94,748 $ 10,364 $ 1,565,807

~~Impaired Loans:~~

A loan is considered impaired when, based on the current information and events, it is probable that the Company will be unable to collect the payments of principal and interest as of the date such payments were due. Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when a loan is 90 days past due, unless the loan is well secured and in the process of collection, as required by regulatory provisions. 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.

All our impaired loans are assessed for recoverability based on an independent third-party full appraisal to determine the net realizable value (“NRV”) based on the fair value of the underlying collateral, less cost to sell and other costs or the present value of discounted cash flows in the case of certain impaired loans that are not collateral dependent.


	December 31, 2023		December 31, 2022
	(Dollars in thousands)
Commercial and Industrial	$	35,451	$	32,383
Construction	157,556		192,357
Real Estate Mortgage:
Commercial – Owner Occupied	141,742		125,950
Commercial – Non-owner Occupied	369,909		377,452
Residential – 1 to 4 Family	449,682		444,820
Residential - 1 to 4 Family Investment	524,167		476,210
Residential – Multifamily	103,324		95,556
Consumer	5,509		6,731
Total Loan receivable	1,787,340		1,751,459
Allowance for credit losses on loans	(32,131)		(31,845)
Total loan receivable, net of allowance for credit losses on loans	$	1,755,209	$	1,719,614

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


December 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	$	—	$	—	$	712	$	712	$	34,739	$	35,451
Construction	—		—		1,091		1,091		156,465		157,556
Real Estate Mortgage:
Commercial – Owner Occupied	—		—		1,117		1,117		140,625		141,742
Commercial – Non-owner Occupied	—		1,549		3,107		4,656		365,253		369,909
Residential – 1 to 4 Family	58		1,793		1,211		3,062		446,620		449,682
Residential - 1 to 4 Family Investment	—		440		—		440		523,727		524,167
Residential – Multifamily	—		—		—		—		103,324		103,324
Consumer	66		—		—		66		5,443		5,509
Total Loans	$	124	$	3,782	$	7,238	$	11,144	$	1,776,196	$	1,787,340


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:


	December 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	$	277	$	435	$	712	$	—	$	712
Construction	1,091		—		1,091		—		1,091
Commercial - Owner Occupied	717		400		1,117		—		1,117
Commercial - Non-owner Occupied	3,107		—		3,107		—		3,107
Residential - 1 to 4 Family	1,211		—		1,211		—		1,211
Residential - 1 to 4 Family Investment	—		—		—		—		—
Residential - Multifamily	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	6,403	$	835	$	7,238	$	—	$	7,238


	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 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:


	Twelve Months Ended December 31, 2023
As of December 31, 2023					Real Estate Mortgage
(Dollars in thousands)	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
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		(794)		(128)		53		1,858
Charge-offs	—		—		—		—		—		—		—		—		—
Recoveries	15		—		3		—		—		—		—		—		18
Provisions (benefits)	353		(1,133)		(335)		(1,650)		1,203		196		(170)		(54)		(1,590)
Ending Balance December 31 2023	$	926	$	3,347	$	1,795	$	7,108	$	9,061	$	8,783	$	1,049	$	62	$	32,131

The increase in allowance for credit losses for construction is due to an increase in the vintage loss rate upon the implementation of CECL, partially offset by a decrease in loan balance during the year. The increase in the allowance for credit losses for residential 1 to 4 family is due to an increase in the vintage loss rate upon the implementation of CECL, as well as an increase in loan balance during the year. The decrease in allowance for credit losses for residential 1 to 4 family investment, and residential multifamily is due to lower vintage loss rates upon the implementation of CECL, partially offset by increases in loan balances during the year. The decrease in allowance for credit losses for commercial non-owner occupied is due to lower vintage loss rates upon the implementation of CECL, a decrease in loan balance, and a decrease in loss rates due to a decrease in non-performing loans.

The following tables ~~provide further detail on impaired loans~~present the information regarding the allowance for loan losses and associated loan data by portfolio

segment under the ~~associated ALLL at December 31, 2021 and December 31, 2020:~~

December 31, 2021 Recorded
Investment Unpaid
Principal
Balance Related
Allowance
(Dollars in thousands)
With no related allowance recorded:
Commercial and Industrial $ 216 $ 216 $ —
Construction — — —
Real Estate Mortgage:
Commercial – Owner Occupied 2,170 2,170 —
Commercial – Non-owner Occupied 242 242 —
Residential – 1 to 4 Family 465 599 —
Residential – Multifamily — — —
Consumer — — —
3,093 3,227 —
With an allowance recorded:
Commercial and Industrial 8 16 8
Construction 1,139 5,856 300
Real Estate Mortgage:
Commercial – Owner Occupied 199 199 5
Commercial – Non-owner Occupied 5,335 5,335 218
Residential – 1 to 4 Family 528 528 60
Residential – Multifamily — — —
Consumer — — —
7,209 11,934 591
Total:
Commercial and Industrial 224 232 8
Construction 1,139 5,856 300
Real Estate Mortgage:
Commercial – Owner Occupied 2,369 2,369 5
Commercial – Non-owner Occupied 5,577 5,577 218
Residential – 1 to 4 Family 993 1,127 60
Residential – Multifamily — — —
Consumer — — —
$ 10,302 $ 15,161 $ 591

incurred loss model:

December 31, 2020 Recorded Investment Unpaid
Principal
Balance Related
Allowance
(Dollars in thousands)
With no related allowance recorded:
Commercial and Industrial $ 37 $ 37 $ —
Construction: — — —
Real Estate Mortgage:
Commercial – Owner Occupied 2,853 2,853 —
Commercial – Non-owner Occupied 69 69 —
Residential – 1 to 4 Family 899 899 —
Residential – Multifamily — — —
Consumer 55 55 —
3,913 3,913 —
With an allowance recorded:
Commercial and Industrial 12 19 12
Construction: 4,840 9,330 301
Real Estate Mortgage:
Commercial – Owner Occupied 2,882 2,882 200
Commercial – Non-owner Occupied 10,040 10,040 350
Residential – 1 to 4 Family 976 976 141
Residential – Multifamily — — —
Consumer — — —
18,750 23,247 1,004
Total:
Commercial and Industrial 49 56 12
Construction: 4,840 9,330 301
Real Estate Mortgage:
Commercial – Owner Occupied 5,735 5,735 200
Commercial – Non-owner Occupied 10,109 10,109 350
Residential – 1 to 4 Family 1,875 1,875 141
Residential – Multifamily — — —
Consumer 55 55 —
$ 22,663 $ 27,160 $ 1,004

~~The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the years ended December 31, 2021 and 2020:~~

Year Ended December 31,
2021 2020
Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized
(Dollars in thousands)
Commercial and Industrial $ 48 $ 1 $ 234 $ 7
Commercial 1,275 — 4,984 157
Real Estate Mortgage:
Commercial – Owner Occupied 2,378 13 6,080 47
Commercial – Non-owner Occupied 5,644 365 10,263 472
Residential – 1 to 4 Family 937 28 2,226 105
Residential – Multifamily — — — 2
Consumer — — 11 —
Total $ 10,282 $ 407 $ 23,798 $ 790

~~Troubled Debt Restructuring (TDRs)~~

We reported performing TDR loans (not reported as non-accrual loans) of $6.0 million and $13.9 million, respectively, at December 31, 2021 and December 31, 2020. Non-performing TDRs were zero and $274,000 at December 31, 2021 and December 31, 2020. There were no new loans modified as a TDR and no additional commitments to lend additional funds to debtors whose loans have been modified in TDRs for the year ended December 31, 2021 and the year ended December 31, 2020, respectively.

A TDR is a loan the terms of which have been restructured in a manner that grants a concession to a borrower experiencing financial difficulty. TDRs result from our loss mitigation activities that include rate reductions, extension of maturity, or a combination of both, which are intended to minimize economic loss and to avoid foreclosure or repossession of collateral. TDRs are classified as impaired loans and are included in the impaired loan disclosures. TDRs are also evaluated to determine whether they should be placed on non-accrual status. Once a loan becomes a TDR, it will continue to be reported as a TDR until it is repaid in full, foreclosed, sold or it meets the criteria to be removed from TDR status.

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

•~~Whether there is a period of current payment history under the current terms, typically 6 months;~~

•~~Whether the loan is current at the time of restructuring; and~~

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

TDRs are generally included in nonaccrual loans and may return to performing status after a minimum of six consecutive monthly payments under restructured terms and also meeting other performance indicators. We review the financial performance of the borrower over the past year to be reasonably assured of repayment and performance according to the modified terms. This review consists of an analysis of the borrower’s historical results; the borrower’s projected results over the next four quarters; and current financial information of the borrower and any guarantors. The projected repayment source needs to be reliable, verifiable, quantifiable and sustainable. At the time of restructuring, the amount of the loan principal for which we are not reasonably assured of repayment is charged-off, but not forgiven.

All TDRs are also reviewed quarterly to determine the amount of any impairment. The nature and extent of impairment of TDRs, including those that have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for loan losses. For the TDR loans, we had specific reserves of $254,000 and $420,000 in the allowance at December 31, 2021 and December 31, 2020, respectively. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and result in potential incremental losses. These potential incremental losses have been factored into our overall allowance for loan losses estimate.


	Twelve Months Ended December 31, 2022
As of December 31, 2022					Real Estate Mortgage
(Dollars in thousands)	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
December 31, 2021	$	417	$	2,662	$	2,997	$	7,476	$	7,045	$	7,925	$	1,215	$	108	$	29,845
Charge-offs	—		—		—		—		(66)		—		—		—		(66)
Recoveries	14		100		18		—		134		—		—		—		266
Provisions	(41)		(181)		(717)		2,233		(1,037)		1,456		132		(45)		1,800
Ending Balance December 31 2022	$	390	$	2,581	$	2,298	$	9,709	$	6,076	$	9,381	$	1,347	$	63	$	31,845

Allowance for loan losses
Individually evaluated for impairment	$	—	$	—	$	31	$	500	$	18	$	—	$	—	$	—	$	549
Collectively evaluated for impairment	390		2,581		2,267		9,209		6,058		9,381		1,347		63		31,296
Balance at December 31, 2022	$	390	$	2,581	$	2,298	$	9,709	$	6,076	$	9,381	$	1,347	$	63	$	31,845

Loans
Individually evaluated for impairment	$	—	$	1,091	$	587	$	19,568	$	417	$	—	$	—	$	70	$	21,733
Collectively evaluated for impairment	32,383		191,266		125,363		357,884		444,403		476,210		95,556		6,661		1,729,726
Balance at December 31, 2022	$	32,383	$	192,357	$	125,950	$	377,452	$	444,820	$	476,210	$	95,556	$	6,731	$	1,751,459

On March 22, 2020, the federal bank regulatory agencies issued the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus,” which encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act provided that a qualified loan modification is exempt by law from classification as a troubled debt restructuring (“TDR”) as defined by generally accepted accounting principles, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States terminates. The CAA extended this relief to the earlier of January 1, 2022 or the first day of a bank’s fiscal year that begins after the national emergency ends. In accordance with the CARES Act’s TDR relief provisions, as extended by the CAA, the Bank will not classify qualified loan modifications made through the end of 2021 as TDRs.Collateral-Dependent Loans

~~Credit Quality Indicators~~The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2023:


(amounts in thousands)	Real Estate		Business Assets		Other
Commercial and Industrial	$	712	$	—	$	—
Construction	1,091		—		—
Commercial - Owner Occupied	1,117		—		—
Commercial - Non-owner Occupied	3,107		—		—
Residential - 1 to 4 Family	1,211		—		—
Residential - 1 to 4 Family Investment	—		—		—
Residential - Multifamily	—		—		—
Consumer	—		—		—
Total	$	7,238	$	—	$	—

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.~~individually evaluated. The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure. Includes loans ~~which~~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~~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 December 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 December 31, 2023	2023		2022		2021		2020		2019				Prior		Total
Commercial and Industrial
Pass	$	4,724	$	1,269	$	87	$	759	$	598	$	7,154	$	20,148	$	34,739
OAEM	—		—		—		—		—		—		—		—
Substandard	—		435		—		—		—		—		277		712
Doubtful	—		—		—		—		—		—		—		—
	$	4,724	$	1,704	$	87	$	759	$	598	$	7,154	$	20,425	$	35,451
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass	$	323	$	3,335	$	4,499	$	195	$	—	$	—	$	148,113	$	156,465
OAEM	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		1,091		—		1,091
Doubtful	—		—		—		—		—		—		—		—
	$	323	$	3,335	$	4,499	$	195	$	—	$	1,091	$	148,113	$	157,556
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial – Owner Occupied
Pass	$	19,842	$	36,030	$	21,536	$	7,104	$	8,346	$	45,249	$	2,518	$	140,625
OAEM	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		1,117		—		1,117
Doubtful	—		—		—		—		—		—		—		—
	$	19,842	$	36,030	$	21,536	$	7,104	$	8,346	$	46,366	$	2,518	$	141,742
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial – Non-owner Occupied
Pass	$	19,123	$	93,805	$	37,002	$	33,316	$	54,484	$	112,471	$	1,180	$	351,381
OAEM	—		—		—		—		—		15,421		—		15,421
Substandard	—		—		—		250		2,586		271		—		3,107
Doubtful	—		—		—		—		—		—		—		—
	$	19,123	$	93,805	$	37,002	$	33,566	$	57,070	$	128,163	$	1,180	$	369,909
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential – 1 to 4 Family
Performing	$	58,358	$	117,044	$	61,580	$	33,037	$	25,623	$	148,124	$	4,705	$	448,471
Nonperforming	155		—		—		285		771		—		—		1,211
	$	58,513	$	117,044	$	61,580	$	33,322	$	26,394	$	148,124	$	4,705	$	449,682
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential – 1 to 4 Family Investment
Performing	$	87,734	$	138,884	$	116,487	$	50,119	$	54,576	$	76,367	$	—	$	524,167
Nonperforming	—		—		—		—		—		—		—		—
	$	87,734	$	138,884	$	116,487	$	50,119	$	54,576	$	76,367	$	—	$	524,167
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential – Multifamily
Pass	$	2,292	$	23,030	$	27,006	$	12,159	$	9,989	$	28,848	$	—	$	103,324
OAEM	—		—		—		—		—		—		—		$	—
Substandard	—		—		—		—		—		—		—		$	—
Doubtful	—		—		—		—		—		—		—		—
	$	2,292	$	23,030	$	27,006	$	12,159	$	9,989	$	28,848	$	—	$	103,324
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Performing	$	—	$	—	$	—	$	—	$	—	$	5,493	$	16	$	5,509
Nonperforming	—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—	$	5,493	$	16	$	5,509
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, ~~2021 and 2020,~~2022 is as follows:


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	920,868		—		162		—		921,030
Residential – Multifamily	95,556		—		—		—		95,556
Consumer	6,661		—		70		—		6,731
Total	$	1,732,156	$	3,027	$	16,276	$	—	$	1,751,459

At December 31, 2021 Pass OAEM Substandard Doubtful Total
(Dollars in thousands)
Commercial and Industrial $ 56,927 $ — $ 224 $ — $ 57,151
Construction 152,938 — 1,139 — 154,077
Real Estate Mortgage:
Commercial – Owner Occupied 118,473 3,029 2,170 — 123,672
Commercial – Non-owner Occupied 291,864 14,380 242 — 306,486
Residential – 1 to 4 Family 749,904 — 621 — 750,525
Residential – Multifamily 84,964 — — — 84,964
Consumer 7,972 — — — 7,972
Total $ 1,463,042 $ 17,409 $ 4,396 $ — $ 1,484,847

At December 31, 2020 Pass OAEM Substandard Doubtful Total
(Dollars in thousands)
Commercial and Industrial $ 121,715 $ 43 $ 50 $ — $ 121,808
Construction: 209,648 — 1,365 — 211,013
Real Estate Mortgage:
Commercial – Owner Occupied 123,657 3,029 5,521 — 132,207
Commercial – Non-owner Occupied 324,649 — 191 — 324,840
Residential – 1 to 4 Family 668,593 462 1,772 — 670,827
Residential – Multifamily 94,748 — — — 94,748
Consumer 10,309 — 55 — 10,364
Total $ 1,553,319 $ 3,534 $ 8,954 $ — $ 1,565,807

Modifications to Borrowers Experiencing Financial Difficulty

At December 31, 2023, the Company did not make any modifications to borrowers experiencing financial difficulty.

The following table provides detail on impaired loans and the associated ALLL at December 31, 2022:


December 31, 2022	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded:
Commercial and Industrial	$	—	$	—	$	—
Construction	1,091		5,808		—
Real Estate Mortgage:
Commercial – Owner Occupied	—		—		—
Commercial – Non-owner Occupied	11,116		11,116		—
Residential – 1 to 4 Family	162		162		—
Residential – Multifamily	—		—		—
Consumer	70		70		—
	12,439		17,156		—
With an allowance recorded:
Commercial and Industrial	—		—		—
Construction	—		—		—
Real Estate Mortgage:
Commercial – Owner Occupied	587		587		31
Commercial – Non-owner Occupied	8,452		8,452		500
Residential – 1 to 4 Family	255		255		18
Residential – Multifamily	—		—		—
Consumer	—		—		—
	9,294		9,294		549
Total:
Commercial and Industrial	—		—		—
Construction	1,091		5,808		—
Real Estate Mortgage:
Commercial – Owner Occupied	587		587		31
Commercial – Non-owner Occupied	19,568		19,568		500
Residential – 1 to 4 Family	417		417		18
Residential – Multifamily	—		—		—
Consumer	70		70		—
	$	21,733	$	26,450	$	549

The following table presents by loan portfolio class, the average recorded investment and interest income recognized on impaired loans for the year ended December 31, 2022:


	2022
	Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
Commercial and Industrial	$	114	$	—
Construction	1,129		—
Real Estate Mortgage:
Commercial – Owner Occupied	1,772		31
Commercial – Non-owner Occupied	11,108		645
Residential – 1 to 4 Family	541		20
Residential – Multifamily	—		—
Consumer	42		1
Total	$	14,706	$	697

At December 31, 2022, we reported performing TDR loans (not reported as non-accrual loans) of $5.5 million. Non-performing TDRs were zero at December 31, 2022. There were no new loans modified as a TDR and no additional commitments to lend additional funds to debtors whose loans have been modified in TDRs for the year ended December 31, 2022.

Loans to Related Parties: In the normal course of business, the Company has granted loans to its executive officers, directors and their affiliates (related parties). All loans to related parties were made in the ordinary course of business; were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable loans with persons not related to the Bank; and did not involve more than the normal risk of collectability or present other unfavorable features.business.

An analysis of the activity of such related party loans for ~~2021~~2023 is as follows:


	~~2021~~2023
	(Dollars in thousands)
Balance, beginning of year	$	~~10,942~~843
Advances	~~499~~301
Less: repayments	~~(3,159)~~(448)
Balance, end of year	$	~~8,282~~696

Pledged Loans: At December 31, ~~2021~~2023 and ~~2020,~~2022, approximately $~~751.1 million~~1.3 billion and ~~$703.5~~$923.0 million, respectively, of unpaid principal balance of loans were pledged to the FHLBNY on borrowings (Note 7). This pledge consists of a blanket lien on residential mortgages and certain qualifying commercial real estate loans.

Concentrations of Credit: Most of the Company's lending activity occurs within the areas of southern New Jersey and southeastern Pennsylvania, as well as other markets. We maintain discipline in our lending with a focus on portfolio diversification. In our underwriting process, we have limits on loans to one borrower, one industry as well as product concentrations. Our loan portfolio consists of residential, commercial real estate loans, construction loans, commercial and industry loans as well as consumer loans.

Note 5. OREO

Other real estate owned (OREO) at December 31, ~~2021~~2023 was ~~$1.7~~$1.6 million, compared to ~~$139,000~~$1.6 million at December 31, ~~2020, an increase of $1.5 million. The OREO balances for 2021 and 2020 are included in the other assets in the balance sheets.~~2022. The real estate owned at December 31, ~~2021,~~2023, consisted of ~~1 property.~~two properties. During ~~2021,~~2023, the Company disposed of ~~$356,000~~$161.0 thousand of OREO, recognizing a gain of ~~$60,000,~~$38.0 thousand, compared to ~~$4.2~~$2.4 million of OREO sold in ~~2020,~~2022, recognizing a ~~loss~~gain of ~~$331,000.~~$328.0 thousand. The Company did not write-down any OREO property during ~~2021, compared to $40,000 of write-downs in 2020, based on a decline in appraised values.~~2023 or 2022. Operating expenses related to OREO, net of related income, for ~~2021~~2023 and ~~2020,~~2022, were ~~$287,000~~$839.0 thousand and ~~$271,000,~~$493.0 thousand, respectively.

An analysis of OREO activity for the years ended December 31, ~~2021~~2023 and ~~2020~~2022 is as follows:


		For the Year Ended December 31,				For the Year Ended December 31,
		2021		2020		2023	2022
		(Dollars in thousands)				(Dollars in thousands)
Balance at beginning of period	Balance at beginning of period	$	139	$	4,727
Real estate acquired in settlement of loans	Real estate acquired in settlement of loans	1,811		—
Sales of OREO, net	Sales of OREO, net	(356)		(4,217)
Valuation adjustments	Valuation adjustments	60		(371)
Balance at end of period	Balance at end of period	$	1,654	$	139

Note 6. Deposits

Deposits at December 31, ~~2021~~2023 and ~~2020,~~2022, consisted of the following:


		2021		2020		2023	2022
		(Dollars in thousands)				(Dollars in thousands)
Noninterest-bearing demand	Noninterest-bearing demand	$	553,810	$	428,860
NOWs	NOWs	93,189		66,506
Money market deposits	Money market deposits	348,427		313,142
Savings deposits	Savings deposits	179,238		116,605
Time deposits over $250,000	Time deposits over $250,000	163,916		122,481
Other time deposits	Other time deposits	420,710		473,797
Brokered time deposits	Brokered time deposits	9,120		71,052
Total deposits	Total deposits	$	1,768,410	$	1,592,443

Scheduled maturities of certificates of deposit at December 31, ~~2021~~2023 are as follows:

Years Ending December 31, (Dollars in thousands)
2022 $ 466,442
2023 58,259
2024 35,737
2025 13,115
2026 20,193
Total $ 593,746


Years Ending December 31,	(Dollars in thousands)
2024	$	567,442
2025	28,327
2026	8,363
2027	2,723
2028	216

Total	$	607,071

The following table is a summary of interest expense on deposits by category:


		2021		2020
		(Dollars in thousands)
	2023					2023		2022
	(Dollars in thousands)						(Dollars in thousands)
NOWs	NOWs	$	324	$	328
Money market deposits	Money market deposits	2,140		3,670
Savings deposits	Savings deposits	664		711
Time deposits	Time deposits	6,398		11,016
Brokered time deposits	Brokered time deposits	228		1,986
Total	Total	$	9,754	$	17,711

Note 7. Borrowings

An analysis of borrowings at December 31, ~~2021~~2023 and ~~2020~~2022 is as follows:


			2021				2020								2023								2022
		Maturity Date or Range	Amount		Weighted Average Rate		Amount		Weighted Average Rate			Maturity Date or Range			Amount					Weighted Average Rate					Amount					Weighted Average Rate
			(Dollars in thousands, except rates)												(Dollars in thousands, except rates)
Borrowed funds:	Borrowed funds:										Borrowed funds:
Federal Home Loan Bank advances	Federal Home Loan Bank advances	Less than one year	$	20,000	0.45	%	$	56,500	1.65	%	Federal Home Loan Bank advances	Less than one year			$	30,000		5.61			5.61	%				$	83,150		1.84		1.84	%
		One to three years	58,150		0.51	%	78,150		0.49	%		One to three years			95,000			4.93			4.93	%				—			—		—	%

		Total	$	78,150			$	134,650
Federal Reserve Bank Advances		One to three years	$	—	—	%	$	72,618	0.35	%

												Total			$	125,000									$	83,150

Subordinated debentures, capital trusts

Subordinated debentures, capital trusts
		Three to five years	—		—	%	17,408		0.35	%
		Total	$	—			$	90,026
Subordinated debentures, capital trusts	Subordinated debentures, capital trusts	November 2035	$	5,155	1.82	%	$	5,155	1.87	%	November 2035		$	5,155			7.30		7.30		%			$	5,155			6.35		6.35	%
		November 2035	5,155		1.82	%	5,155		1.87	%		November 2035			5,155			7.30			7.30	%				5,155			6.35		6.35	%
		September 2037	3,093		1.70	%	3,093		1.72	%		September 2037			3,093			7.15			7.15	%				3,093			6.27		6.27	%
		Total	$	13,403			$	13,403				Total			$	13,403											$	13,403
Subordinated debentures notes, net	Subordinated debentures notes, net	July 15, 2030	29,329		6.50	%	$	29,139	6.50	%	Subordinated debentures notes, net	July 15, 2030			$	29,708		6.50			6.50	%				$	29,518		6.50		6.50	%

At December 31, ~~2021,~~2023, the Company had a ~~$596.5~~$944.4 million line of credit from the FHLBNY, of which ~~$78.2~~$125.0 million, as detailed above, was outstanding, ~~$40.0~~$50.0 million was a letter of credit to secure public deposits, and ~~$478.3~~$769.4 million was unused.

Subordinated Debentures – Capital Trusts: On August 23, 2005, Parke Capital Trust I, a Delaware statutory business trust and a wholly-owned subsidiary of the Company, issued $5,000,000 of variable rate capital trust pass-through securities to investors. The variable interest rate re-prices quarterly at the three-month ~~LIBOR~~SOFR plus a spread adjustment of 0.26161% plus 1.66% and was ~~1.82%~~7.30% at December 31, ~~2021.~~2023. Parke Capital Trust I purchased $5,155,000 of variable rate junior subordinated deferrable interest debentures from the Company. The debentures are the sole asset of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The Company has also fully and unconditionally guaranteed the obligations of the Trust under the capital securities. The capital securities are redeemable by the Company on or after November 23, 2010, at par. The capital securities must be redeemed upon final maturity of the subordinated debentures on November 23, 2035. Proceeds of approximately $4.2 million were contributed to paid-in capital at the Bank. The remaining $955,000 was retained at the Company for future use.

On August 23, 2005, Parke Capital Trust II, a Delaware statutory business trust and a wholly-owned subsidiary of the Company, issued $5,000,000 of fixed/variable rate capital trust pass-through securities to investors. Currently, the interest rate is variable at ~~1.82%~~7.30%. The variable interest rate re-prices quarterly at the three-month ~~LIBOR~~SOFR plus a spread adjustment of 0.26161% plus 1.66% beginning November 23, 2010. Parke Capital Trust II purchased $5,155,000 of variable rate junior subordinated deferrable interest debentures from

the Company. The debentures are the sole asset of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The Company has also fully and unconditionally guaranteed the obligations of the Trust under the capital securities. The capital securities are redeemable by the Company on or after November 23, 2010, at par. The capital securities must be redeemed upon final maturity of the subordinated debentures on November 23, 2035. Proceeds of approximately $4.2 million were contributed to paid-in capital at the Bank. The remaining $955,000 was retained at the Company for future use.

On June 21, 2007, Parke Capital Trust III, a Delaware statutory business trust and a wholly-owned subsidiary of the Company, issued $3,000,000 of variable rate capital trust pass-through securities to investors. The variable interest rate re-prices quarterly at the three-month ~~LIBOR~~SOFR plus a spread adjustment of 0.26161% plus 1.50% and was ~~1.70%~~7.15% at December 31, ~~2021.~~2023. Parke Capital Trust III purchased $3,093,000 of variable rate junior subordinated deferrable interest debentures from the Company. The debentures are the sole asset of the Trust. The terms of the junior subordinated debentures are the same as the terms of the capital securities. The Company has also fully and unconditionally guaranteed the obligations of the Trust under the capital securities. The capital securities are redeemable by the Company on or after December 15, 2012, at par. The capital securities must be redeemed upon final maturity of the subordinated debentures on September 15, 2037. The proceeds were contributed to paid-in capital at the Bank.

Subordinated Debentures – Notes: On July 15, 2020, Parke Bancorp, Inc. (the “Company”) issued and sold $30 million in aggregate principal amount of its 6.50% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “Notes”) to certain qualified

institutional buyers and accredited investors (the “Purchasers”). The Notes were offered and sold by the Company to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and the provisions of Regulation D promulgated thereunder (the “Private Placement”). The Company intends to use the net proceeds from the offering for general corporate purposes. The Notes have a ten-year term and, from and including the date of issuance to but excluding July 15, 2025, will bear interest at a fixed annual rate of 6.50%, payable semi-annually in arrears. From and including July 15, 2025 to but excluding the maturity date or earlier redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then-current three-month SOFR (provided, that in the event the three-month SOFR is less than zero, the three-month SOFR will be deemed to be zero) plus 644 basis points, payable quarterly in arrears. The Notes are redeemable, in whole or in part, at the Company’s option, on any scheduled interest payment date on or after July 15, 2025, and at any time upon the occurrence of certain events. Any redemption of the Notes will be subject to prior regulatory approval to the extent required. There were approximately $948,000 in costs associated with the issuance of this debt.

Note 8. Premises and Equipment

A summary of the cost and accumulated depreciation and amortization of Company premises and equipment as of December 31, ~~2021~~2023 and ~~2020~~2022 is as follows:




		2021		2020		2023		2022
		(Dollars in thousands)					(Dollars in thousands)
Land	Land	$	1,044	$	1,044
Building and improvements	Building and improvements	7,250		7,242
Furniture and equipment	Furniture and equipment	3,926		3,869
Total premises and equipment	Total premises and equipment	12,220		12,155
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(5,955)		(5,457)
Premises and equipment, net	Premises and equipment, net	$	6,265	$	6,698

Depreciation and amortization expense was ~~$496,000~~$401,000 and ~~$498,000~~$457,000 in ~~2021~~2023 and ~~2020,~~2022, respectively.

Note 9. Leases

We lease 3three retail branches, a loan office, and a parcel of land for a retail branch location. These leases generally have remaining terms of 510 years or less except the land lease, which has a remaining lease term of ~~eighty-four~~eighty-two years. Some of the leases may include options to renew the leases. The exercise of lease renewal is at our sole discretion.

Our right-of-use assets and lease liabilities for operating leases are included in other assets and other liabilities on our consolidated balance sheets. We use the interest rate implicit in the lease or incremental borrowing rate in determining the present value of lease payments. At December 31, ~~2021,~~2023, we had future minimum lease payments of ~~$26.9~~$27.3 million and imputed interest of $24.9 million and lease liability of ~~$2.1~~$2.5 million. The weighted average remaining lease term was ~~57.7~~48.1 years and weighted average discount rate was ~~7.39%~~7.21% at December 31, ~~2021,~~2023, respectively. Our operating lease expense is included in occupancy expenses within non-interest expense in our consolidated statements of income. Total operating lease expense consists of operating lease cost, which is recognized on a straight-line basis over the lease term, and variable lease cost, which is recognized based on actual amounts incurred.

The following table presents information about our operating leases at the year ended December 31, ~~2021.~~2023.


Dollars in thousands	~~2021~~2023
Lease right of use assets (ROU)	$	~~2,062~~2,455
Lease liabilities	$	~~2,062~~2,455

The following table presents future undiscounted cash flows on our operating leases:

Years Ending December 31, (Dollars in thousands)
2022 $ 290
2023 250
2024 262
2025 262
2026 188
Thereafter 25,688
Total undiscounted lease payments $ 26,940


Years Ending December 31,	(Dollars in thousands)
2024	$	360
2025	365
2026	283
2027	187
2028	192
Thereafter	25,922
Total undiscounted lease payments	$	27,309
Impact of present value discount	$	(24,854)

Note 10. Shareholders’ Equity

Common Stock Dividend: The Company paid a ~~$0.16~~$0.18 per share ~~quarterly cash~~ dividend each quarter ~~of 2021.~~2023. During ~~2021,~~2023, the Company paid a total of ~~$7.6~~$8.6 million in common stock cash dividends. The Company paid a $0.16 per share quarterly dividend for the first and second quarters, and a $0.18 per share quarterly dividend for the third and fourth quarters of 2022. During 2022, the Company paid a total of $7.9 million in common stock cash dividends.

The timing and amount of future dividends will be within the discretion of the Board of Directors and will depend on the consolidated earnings, financial condition, liquidity, and capital requirements of the Company and its subsidiaries, applicable governmental regulations and policies, and other factors deemed relevant by the Board.

Treasury Stock: No treasury stock was repurchased during ~~2021~~2023 and ~~2020.~~2022.

Stock Options: After shareholder approval in 2020, the 2020 Equity Incentive Plan (the “2020 Plan”) became effective. In addition, the Company also has the 2015 Equity Incentive Plan (the “2015 Plan”). No future awards are being granted under the 2015 Plan. The 2020 Plan will terminate on the tenth anniversary of its effective date, after which no awards may be granted. Collectively, the 2015 Plan and the 2020 Plan are referred to as Stock Option Plans. Under the 2020 Plan, the Company may grant options to purchase up to 935,000 shares of Company's common stock and award up to 55,000 of restricted stock. At December 31, ~~2021,~~2023, there were ~~628,000~~455,000 shares remaining for future option grants, and ~~51,794~~48,482 shares remaining for future restricted stock awards under the plan.

During ~~2020,~~2022, options to purchase ~~307,000~~202,500 shares of common stock at ~~$12.29~~$21.66 per share were awarded and will expire no later than ten years following the grant date. The options granted vest over a five-year service period, with 20% of the awards vesting on each anniversary of the date of grant. The fair value of the options granted, as computed using the Black-Sholes option-pricing model, was determined to be~~$1.76~~ $4.96 per option based upon the following underlying assumptions: a risk-free interest rate, expected option life, expected stock price volatility, and dividend yield of ~~0.60%~~3.25%, 6.5 years, ~~65.21%~~27.07%, and ~~4.85%,~~2.95%. respectively. ~~The Company did not grant any options in 2021.~~

The risk-free interest rate was based on the U.S. Treasury yield at the option grant date for securities with a term matching the expected life of the options granted. The expected life was calculated using the "simplified" method provided for under Staff

Accounting Bulletin No. 110. Expected volatility was calculated based upon the actual price history of the Company's common stock up until the date of the option grants. The dividend yield was calculated using the previous four quarter payment history.

The Company did not grant any options in 2023.

Compensation expense for stock options was $397.8 thousand, and $348.7 thousand at December 31, 2023 and 2022, respectively.

A summary of stock options at December 31, ~~2021~~2023 and ~~2020~~2022 was as follows:


		Year Ended December 31, 2021		Year Ended December 31, 2020
		Year Ended December 31, 2023
		Year Ended December 31, 2023
		Year Ended December 31, 2023
Stock Options:
Stock Options:
Stock Options:	Stock Options:	Shares	Weighted Average Exercise Price	Shares	Weighted Average Exercise Price
Outstanding at beginning of period	Outstanding at beginning of period	602,335	$12.87	270,676	$14.80
Outstanding at beginning of period
Outstanding at beginning of period
Granted
Granted
Granted	Granted	—	$—	307,000	$12.29
Exercised	Exercised	(49,048)	$7.81	(176)	$7.81
Exercised
Exercised
Forfeited	Forfeited	(20,826)	$12.91	(2,233)	$7.81
10% assumed Stock dividend adjustment		—	$—	27,068	$—
Forfeited
Forfeited

Outstanding at end of period	Outstanding at end of period	532,461	$13.34	602,335	$12.87
Non-vested at end of period		282,700	$13.79	422,646	$13.43

Outstanding at end of period

Outstanding at end of period

Exercisable at end of period	Exercisable at end of period	249,761	$12.83	179,689	$11.55

Exercisable at end of period

Exercisable at end of period

The total amount of compensation cost remaining to be recognized relating to unvested employees and directors option grants as of December 31, ~~2021~~2023 was ~~$516,600.~~$0.9 million. The weighted-average period over which the expense is expected to be recognized is ~~2.8~~3.4 years. At December 31, ~~2021,~~2023, the intrinsic value of options exercisable and all options outstanding was approximately ~~$2.0~~$2.7 million and ~~$4.0~~$3.1 million, respectively. The aggregate intrinsic value of options exercised in 2023 was $45.0 thousand.

The total amount of compensation cost remaining to be recognized relating to unvested option grants as of December 31, ~~2020~~2022 was ~~$719,600.~~$1.3 million. The weighted-average period over which the expense is expected to be recognized was ~~3.9~~4.2 years. At December 31, ~~2020,~~2022, the intrinsic value of options exercisable and all options outstanding was approximately ~~$1.0~~$1.7 million and ~~$2.3~~$3.3 million, respectively. The aggregate intrinsic value of options exercised in 2022 was $508.6 thousand.

Under the 2020 Plan, the Company was authorized to issue 55,000 shares of restricted stock upon the grant of awards. All restricted stocks vests over five years. The ~~Company granted 3,206 shares and 1,982 shares~~table below presents the status of the restricted stock ~~in 2021 and 2020, respectively, in which 1,880 shares and 1,241 shares of restricted stock were vested and exercised in 2021 and 2020. Non-vested restricted shares were 4,693 shares and 3,367~~units at December 31, ~~2021~~2023, and ~~2020. The weighted average of~~ the ~~grant date fair values were $15.60 and $25.23 per share for~~changes during the ~~awards of 2021 and 2020, respectively.~~ year ended December 31, 2023.


	Restricted Stock Units	Weighted Average Grant-Date Fair Value
Outstanding and unvested at December 31, 2022	5,691	19.69
Granted	—
Vested	(2,022)	19.77
Outstanding and unvested at December 31, 2023	3,669	19.64

The Company recognized ~~$32,006~~$40,006 and ~~$21,300~~$46,007 compensation costs of the restricted shares during year ~~2021~~2023 and ~~2020.~~2022. The total amount of restricted stock expense remaining to be recognized is $72.0 thousand at December 31, 2023.

Preferred Stock: In December of 2013, the Company completed a private placement of newly designated 6% Non-Cumulative Perpetual Convertible Preferred Stock, Series B, with a liquidation preference of $1,000 per share. The Company sold 20,000 shares in the placement for gross proceeds of $20.0 million. Each share of Series B Preferred Stock is convertible, at the option of the holder into approximately 137.6 shares of Common Stock at December 31, ~~2021.~~2023. There were ~~445~~375 shares of Series B Preferred Stock outstanding at December 31, ~~2021.~~2023. Upon full conversion of the outstanding shares of the Series B Preferred Stock, the Company will issue approximately ~~61,232~~51,600 shares of Common Stock assuming that the conversion rate does not change. The conversion rate and the total number of shares to be issued would be adjusted for future stock dividends, stock splits and other corporate actions. The conversion rate was set using a conversion price for the common stock of $10.64, which was approximately 20% over the closing price of the Common Stock on October 10, 2013, the day the Series B Preferred Stock was priced.

During ~~2021 and 2020,~~2023, preferred stockholders converted ~~35 and 20~~70 shares of preferred shares into ~~4,813 and 2,751~~9,628 shares of common stock, respectively.

There were no preferred shares converted to common stock during 2022.

The Company has recorded dividends on preferred stock in the approximate amount of ~~$28,000~~$26,000 and ~~$29,000~~$27,000 for the years ended December 31, ~~2021~~2023 and ~~2020,~~2022, respectively. The Company paid quarterly cash dividends of $15 per share on the

preferred stock for year ~~2021.~~2023. The preferred stock qualifies for and is accounted for as equity securities and is included in the Company’s Tier I capital since issued.

~~Non-controlling interests:~~ The Company had a joint venture with Bridgestone Capital LLC in PDL LLC, a joint venture formed in 2018 to originate short-term alternative real estate loan products. In 2021, the joint venture was liquidated and all earnings in the joint venture were distributed. Prior to liquidation, the Company had a 51% ownership interest in the joint venture. At December 31, 2021, the Company's interest in PDL LLC was zero.

Note 11. Income Taxes

Income tax expense for ~~2021~~2023 and ~~2020~~2022 consisted of the following:

2021 2020
(Dollars in thousands)
Current tax expense:
Federal $ 9,906 $ 9,648
State 2,952 2,658
12,858 12,306
Deferred tax expense/(benefit) 1,079 (2,295)
Income tax expense $ 13,937 $ 10,011


	2023		2022
	(Dollars in thousands)
Current tax expense:
Federal	$	6,886	$	12,696
State	2,336		2,865
	9,222		15,561
Deferred tax expense/(benefit)	6		(1,308)
Income tax expense	$	9,228	$	14,253

The components of the net deferred tax asset at December 31, ~~2021~~2023 and ~~2020~~2022 were as follows:


		2021		2020			2023	2022
		(Dollars in thousands)					(Dollars in thousands)
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Allowance for loan losses		$	7,398	$	7,255
Allowance for credit losses
Supplemental Executive Retirement Plan ("SERP")	Supplemental Executive Retirement Plan ("SERP")	1,512		1,583
OREO write-downs		—		158
Deferred Loan Fees

Nonaccrued interest
Nonaccrued interest
Nonaccrued interest	Nonaccrued interest	79		612
Non-qualified stock options and restricted stock	Non-qualified stock options and restricted stock	167		117
Write-down on partnership investment	Write-down on partnership investment	135		133
Unrealized loss on securities
PPP Deferred Loan Fees	PPP Deferred Loan Fees	185		509

Other
Other
Other	Other	61		84
		9,537		10,451
Valuation allowance	Valuation allowance	(135)		(133)
Total gross deferred tax assets	Total gross deferred tax assets	9,402		10,318
Deferred tax liabilities:	Deferred tax liabilities:
Depreciation	Depreciation	(107)		(158)
Depreciation
Depreciation
Partnership income	Partnership income	(35)		(28)
Unrealized gain		(85)		(161)

Deferred loan costs
Deferred loan costs
Deferred loan costs	Deferred loan costs	(1,567)		(1,360)
Total gross deferred tax liabilities	Total gross deferred tax liabilities	(1,794)		(1,707)
Net deferred tax asset	Net deferred tax asset	$	7,608	$	8,611

6264

A reconciliation of the Company’s effective income tax rate with the statutory federal rate for ~~2021~~2023 and ~~2020~~2022 is as follows:


		2021		2020			2023	2022
		(Dollars in thousands)					(Dollars in thousands)
At Federal statutory rate	At Federal statutory rate	$	11,531	$	8,166
Adjustments resulting from:	Adjustments resulting from:					Adjustments resulting from:
State income taxes, net of Federal tax benefit	State income taxes, net of Federal tax benefit	2,372		1,783
Non-controlling interest	Non-controlling interest	(46)		(94)
Tax exempt income	Tax exempt income	(15)		(11)
BOLI	BOLI	(121)		(124)
Stock compensation	Stock compensation	(94)		(1)
Nondeductible expenses	Nondeductible expenses	8		1
Nondeductible compensation under 162m		87		125
Nondeductible executive compensation

Other	Other	215		166
		$	13,937	$	10,011
Other

Other

Management has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustments to the financial statements. With few exceptions, the Company is no longer subject to income tax examinations by federal and local tax authorities for years before ~~2018,~~2020, and by the State of New Jersey for years before ~~2017.~~2019. The ~~Company’s 2016 federal tax return is currently under audit and has extended the statute of limitations until 2022. For 2018 and after, the~~ Company is still subject to ~~examination. The Company recorded a valuation allowance relating to the write down of a partnership investment. Management has concluded that these capital losses will not be realizable once incurred.~~examination for 2020 and after.

The Company recorded income tax expense of ~~$13.9~~$9.2 million on income before taxes of ~~$54.9~~$37.7 million on for the year ended December 31, ~~2021,~~2023, resulting in an effective tax rate of ~~25.4%~~24.5%, compared to income tax expense of ~~$10.0~~$14.3 million on income before taxes of ~~$38.9~~$56.1 million for the same period of ~~2020,~~2022, resulting in an effective tax rate of ~~25.7%~~25.4%.

Note 12. Retirement Plans

The Company has a Supplemental Executive Retirement Plan (“SERP”) covering certain members of management.

The net SERP pension ~~benefit~~cost was approximately $~~148,000~~367.0 thousand in ~~2021~~2023 and ~~cost was approximately $697,000~~$449.0 thousand in ~~2020.~~2022. The unfunded benefit obligation, which was included in other liabilities, was approximately ~~$6.1~~$6.4 million at December 31, ~~2021~~2023 and ~~$6.5~~$6.3 million at December 31, ~~2020.~~2022.

The benefit obligation at December 31, ~~2021~~2023 and December 31, ~~2020~~2022 was calculated as follows:


		2021		2020		2023	2022
		(Dollars in thousands)				(Dollars in thousands)
Benefit obligation, January 1	Benefit obligation, January 1	$	6,482	$	5,949
Service (benefit)/cost		(498)		361
Service cost/(benefit)
Interest cost	Interest cost	350		336
Benefits paid	Benefits paid	(233)		(164)
Accrued liability at December 31	Accrued liability at December 31	$	6,101	$	6,482

The net SERP pension cost for 2023 and benefit for ~~2021 and cost for 2020~~2022 was calculated as follows:


		2021		2020		2023	2022
		(Dollars in thousands)				(Dollars in thousands)
Service (benefit)/cost		$	(498)	$	361
Service cost
Interest cost	Interest cost	350		336
		$	(148)	$	697

The service ~~costs~~cost for ~~2021~~2023 and ~~2020~~2022 are included in the compensation cost in the income statement. The discount rate used in determining the actuarial present value of the projected benefit obligation was 5.5% for ~~2021~~2023 and ~~2020.~~2022. Annual benefit

payments are estimated at ~~$480,228 for 2022, $721,410 for 2023, $721,410~~$525,696 for 2024, ~~$721,410~~$812,346 for ~~2024, $721,410~~2025, $812,346 for ~~2025~~2026, $812,346 for 2027, $812,346 for 2028 and $4.9 million thereafter.

The Company has a 401(k) Plan covering substantially all employees. Under the Plan, the Company is required to contribute 3% of all qualifying employees’ eligible salary to the Plan. The Plan expense in ~~2021~~2023 was ~~$222,000~~$243.0 thousand and ~~$238,000~~$246.0 thousand in ~~2020.~~2022.

Note 13. Regulatory Matters

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can result in regulatory action. Under the Basel III rules, the Company must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is 2.50%. The Bank made a one-time election to opt-out the net unrealized gain or loss on available for sale securities in computing regulatory capital. At December 31, ~~2021,~~2023, the Bank was considered “well capitalized" under the regulatory framework for prompt corrective action.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end ~~2021~~2023 and ~~2020~~2022 the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution's category.

Community Bank Leverage Ratio

The Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), enacted in May 2018, introduced an optional simplified measure of capital adequacy for qualifying community banking organizations with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a single “Community Bank Leverage Ratio” of tangible equity capital divided by average consolidated assets (“CBLR”) of between 8 and 10 percent. Under the statute, any qualifying depository institution or holding company that maintains a leverage ratio exceeding the CBLR will be considered to satisfy the generally applicable leverage and risk-based regulatory capital requirements.

Under final regulations adopted by the federal banking agencies under the EGRRCPA, a community banking organization may opt into the CBLR framework if it has a Tier 1 leverage ratio of at least 9%, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. A qualifying community banking organization that opts into the CBLR framework will not be required to report or calculate compliance with risk-based capital requirements and will also be considered to have met the well-capitalized ratio requirements under the prompt corrective action regulations. We have elected to use the CBLR framework and is presented as of December 31, ~~2021.~~2023.

On April 6, 2020, federal banking regulators issued two interim final rules that make changes to the CBLR ratio framework and implement certain directives of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The first of the April 2020 interim final rules reduced the minimum ratio from 9% to 8% as well as establishing a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall below the 8% CBLR requirement, so long as the banking organization maintains a leverage ratio of 7% or greater. The second interim final rule provides a transition from the temporary 8% CBLR requirement to a 9% requirement. It establishes a minimum CBLR of 8% for the second through

6466

fourth quarters of 2020, an 8.5% minimum for 2021 and 9% thereafter, while maintaining a two-quarter grace period for qualifying community banking organizations whose leverage ratios fall no more than 100 basis points below the applicable CBLR requirement.

The Company and Bank's regulatory capital as of December 31, ~~2021~~2023 and ~~2020,~~2022, is presented in the following table.

As of December 31, 2021 Actual For Capital Adequacy Purpose*
Company Amount Ratio Amount Ratio
(Dollars in thousands except ratios)
Total risk-based capital $ 290,965 22.57% $ 103,151 8.00%
Tier 1 risk-based capital 245,519 19.04% 77,363 6.00%
Tier 1 leverage 245,519 11.49% 85,494 4.00%
Tier 1 common equity 231,671 17.97% 58,023 4.50%
Parke Bank
Community Bank Leverage Ratio 273,884 12.82% 181,640 8.50%


As of December 31, 2023	Actual			For Capital Adequacy Purpose*
Company	Amount		Ratio	Amount		Ratio
	(Dollars in thousands except ratios)
Total risk-based capital	$	345,607	24.19%	$	114,291	8.00%
Tier 1 risk-based capital	297,749		20.84%	85,718		6.00%
Tier 1 leverage	297,749		15.04%	79,207		4.00%
Tier 1 common equity	284,346		19.90%	64,289		4.50%
Parke Bank


Community Bank Leverage Ratio	326,465		16.49%	178,233		9.00%

As of December 31, 2020

Actual

For Capital Adequacy Purpose

As of December 31, 2022

Company

Amount

Ratio

Amount

Ratio

(Dollars in thousands except ratios)

Company

(Dollars in thousands except ratios)

Total risk-based capital

261,143

20.61%

101,365

8.00%

Tier 1 risk-based capital

215,134

16.98%

76,024

6.00%

Tier 1 risk-based capital

Tier 1 leverage

215,134

10.90%

157,968

4.00%

Tier 1 common equity

200,003

15.78%

57,018

4.50%

Tier 1 common equity

Parke Bank

Community Bank Leverage Ratio

243,899

12.35%

157,936

4.00%

Community Bank Leverage Ratio

* Combination of both community bank leverage approach and the regular rule of capital adequacy.

~~Note 14. Other Related Party Transactions~~

A member of the Board of Directors is a principal of an employee benefits insurance agency that provides all the medical, life and disability insurance coverage for the Company. The cost of these employee benefits for the Company and its employees totaled $1,187,000 in 2021 and $946,000 in 2020.

Note ~~15.~~14. 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 ~~$70.6 million~~immaterial at December 31, ~~2021.~~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 December 31, ~~2021~~2023 and ~~2020,~~2022, unused commitments to extend credit amounted to approximately ~~$117.7~~$93.8 million and ~~$144.6~~$159.0 million, respectively.

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 December 31, ~~2021~~2023 and ~~2020,~~2022, standby letters of credit with customers were $1.5 million and ~~$1.7~~$1.5 million, respectively.

On January 1, 2023, upon the adoption of ASU 2016-13, we recognized $1.0 million cumulative effect decrease to retained earnings for the allowance for credit losses of unfunded lending commitments. At December 31, 2023 and December 31, 2022, the allowance for credit losses of unfunded lending commitments was $0.5 million and zero, respectively. A provision recovery for unfunded lending commitments of $0.5 million was recognized during the year ended December 31, 2023, while there was no provision expense recognized in during the year ended December 31, 2022.

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 into 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 ~~medical-use~~ cannabis industry as growers, processors and dispensaries. ~~Medical-use cannabis~~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.

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 ~~$336,000 and $465,000~~$1.7 million. The matter is in the early stages of ~~interest income~~discovery so it is difficult to determine whether that amount accurately reflects the claimed damages, or whether the Company is in ~~2021 and 2020, respectively, related to these loans. The fee incomes~~any way culpable for the ~~year ended December 31, 2021~~damages. At this time it is too early to predict whether an unfavorable outcome will result. The Company is vigorously defending this matter.

Mori Restaurant LLC v. Parke Bank Matter

On May 20, 2014, Parke Bank (the "Bank") loaned Voorhees Diner Corporation ("VDC") the original principal sum of $1.0 million for purposes of tenant fit out, and ~~2020~~operation, of the Voorhees Diner situated at 320 Route 73, Voorhees, New Jersey 08043. VDC leased the Diner property under that certain Lease with Mori Restaurant LLC ("Mori") dated May 20, 2014. In connection with the loan from the ~~commercial deposit accounts~~Bank and as security therefor, VDC pledged its leasehold interest to the Bank. On March 6, 2015, the loan was modified, and the principal amount of ~~depositors who do business~~the loan was increased to $1.4 million. On January 8, 2020, the Bank declared VDC in default of its loan obligations. Judgment was entered against VDC and in favor of the Bank, and the court appointed Alan I. Gould, Esquire, as the Receiver for the Voorhees Diner Corporation. Mr. Gould subsequently caused VDC's leasehold interest in the ~~medical-use cannabis industry were $5.1 million~~Diner property to be sold at sheriffs sale. The Bank's REO subsidiary, 320 Route 73 LLC, was the successful bidder and ~~$2.2 million~~took title thereto. Mori Restaurant has filed counterclaims against 320 Route 73 LLC and ~~are included~~the Bank for rent allegedly accruing due during the period that the Receiver was in ~~service fees on deposit accounts,~~possession of the premises. As to all of Mori Restaurant’s claims, the Bank defendants’ primary, but not exclusive, defense in this matter is that, pursuant to that certain Fee Owner Consent executed by and between Mori Restaurant and the ~~accompanying consolidated statements~~Bank, in November 2014, the lease between VDC and Mori Restaurant was terminated as a matter of ~~income.~~ law and neither the Bank nor 320 Route 73 LLC have liability to Mori Restaurant

under the lease or otherwise. The Bank believes this suit is without merit, denies any and all liability and intends to vigorously defend against 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.

Note ~~16.~~15. Fair Value

Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures (Topic 820) of FASB Accounting Standards Codification, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value is a market-based measurement, not an entity-specific measurement. The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:

Level 1 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 and Loans Held 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. ~~For loans held for sale, the fair value represents the face value of the guaranteed portion of the SBA loans pending settlement.~~ Securities ~~and loans~~ in Level 2 include mortgage-backed securities, corporate debt obligations, and collateralized mortgage-backed ~~securities, and SBA loans held for sale.~~securities.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis at December 31, ~~2021~~2023 and ~~2020.~~2022.


Financial Assets	Financial Assets	Level 1		Level 2		Level 3		Total		Financial Assets	Level 1	Level 2	Level 3	Total
		(Dollars in thousands)									(Dollars in thousands)
Investment securities and loans held for sale
As of December 31, 2021
Investment securities available for sale										Investment securities available for sale
As of December 31, 2023										As of December 31, 2023

Residential mortgage-backed securities
Residential mortgage-backed securities
Residential mortgage-backed securities

Total

Total

Total
As of December 31, 2022										As of December 31, 2022
Corporate debt obligations	Corporate debt obligations	$	—	$	500	$	—	$	500
Residential mortgage-backed securities	Residential mortgage-backed securities	—		12,843		—		12,843
Collateralized mortgage-backed securities	Collateralized mortgage-backed securities	—		8		—		8
Loans held for sale				—				—

Total	Total	$	—	$	13,351	$	—	$	13,351
As of December 31, 2020
Corporate debt obligations		$	—	$	500	$	—	$	500
Residential mortgage-backed securities		—		19,359		—		19,359
Collateralized mortgage-backed securities		—		23		—		23
Loans held for sale				200				200
Total	Total	$	—	$	20,082	$	—	$	20,082
Total

For the year ended December 31, ~~2021,~~2023, there were no transfers between the levels within the fair value hierarchy.

There were no level 3 assets or liabilities held for the year ended at December 31, ~~2021~~2023 and December 31, ~~2020.~~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 December 31, 2021
Collateral dependent impaired loans $ — $ — $ 4,087 $ 4,087
OREO $ — $ — $ 1,654 $ 1,654
As of December 31, 2020
Collateral dependent impaired loans $ — $ — $ 11,558 $ 11,558
OREO $ — $ — $ 139 $ 139


Financial Assets	Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
As of December 31, 2023
Collateral dependent loans	$	—	$	—	$	1,655	$	1,655
OREO	$	—	$	—	$	1,550	$	1,550
As of December 31, 2022
Collateral dependent loans	$	—	$	—	$	1,091	$	1,091
OREO	$	—	$	—	$	1,550	$	1,550

All collateral dependent ~~impaired~~individually evaluated 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. 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 which are recorded at fair value. All properties have an independent third-party full appraisal to determine the fair value, less cost to sell (a range of 5% to 10%) and other costs, such as unpaid real estate taxes, that have been identified. 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.

~~Fair Value of Financial Instruments~~

~~The Company discloses estimated fair values for its significant financial instruments in accordance with FASB ASC (Topic 825),~~ ~~Disclosures about Fair Value of Financial Instruments. The methodologies for estimating the fair value of financial assets~~

and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above. The methodologies for estimating the fair value of other financial assets and liabilities are discussed below.

~~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, demand and other non-maturity deposits and accrued interest payable.~~

~~The Company used the following methods and assumptions in estimating the fair value of the following financial instruments:~~

~~Investment Securities:Fair value of securities available for sale is described above. Fair value of held to maturity securities is based upon quoted market prices for identical or similar assets.~~

~~Loans Held for Sale: Fair value represents the face value of the guaranteed portion of SBA loans pending settlement.~~

Loans Receivable: For residential mortgages loans, fair value is estimated using the quoted market prices for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value of other types of loans is estimated by discounting the future cash flows using the risk adjusting current interest rates at which similar loans would be made to borrowers with similar credit ratings and same remaining maturities, adjusted for the liquidity discount and underwriting uncertainty.

Restricted stock: Carrying value of FHLBNY and the Atlantic Central Bankers Bank stocks represent the par values of the stocks and is adjusted for impairments if any. The carrying value approximated fair value.

Time deposits: The fair value of time deposits is based on the discounted value of contractual cash flows, where the discount rate is estimated using the market rates currently offered for deposits of similar remaining maturities.

Borrowings: The fair values of FHLBNY borrowings, other borrowed funds and subordinated debt are based on the discounted value of estimated cash flows. The discounted rate is estimated using market rates currently offered for debts with similar credit rating, terms and remaining maturities.

For a further discussion of the Company’s valuation methodologies for financial instrument measured at fair value, see the Note 1 - Description of Business and Summary of Significant Accounting Policies of the Consolidated Financial Statements.

Bank premises and equipment, customer relationships, deposit base and other information required to compute the Company’s aggregate fair value are not included in the above information. Accordingly, the above fair values are not intended to represent the aggregate fair value of the Company.

The following table summarizes the carrying amounts and fair values for financial instruments at December 31, ~~2021~~2023 and December 31, ~~2020:~~2022:


December 31, 2021		Carrying Amount		Fair Value
				Total		Level 1		Level 2		Level 3
December 31, 2023												December 31, 2023	Carrying Amount	Fair Value
														Total	Level 1	Level 2	Level 3
		(Dollars in thousands)											(Dollars in thousands)
Financial Assets:	Financial Assets:											Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	596,553	$	596,553	$	596,553	$	—	$	—
Investment securities AFS	Investment securities AFS	13,351		13,351		—		13,351		—
Investment securities HTM	Investment securities HTM	9,918		10,025		—		10,025		—
Restricted stock	Restricted stock	5,144		5,144		—		—		5,144
Loans held for sale		—		—		—		—		—

Loans, net
Loans, net
Loans, net	Loans, net	1,455,002		1,440,398		—		1,430,686		9,712
Accrued interest receivable	Accrued interest receivable	7,681		7,681		—		7,681		—

Financial Liabilities:
Financial Liabilities:
Financial Liabilities:	Financial Liabilities:
Non-time deposits	Non-time deposits	$	1,174,664	$	1,174,664	$	—	$	1,174,664	$	—
Time deposits	Time deposits	593,746		597,791		—		597,791		—
Borrowings	Borrowings	120,882		117,636		—		117,636		—
Accrued interest payable	Accrued interest payable	1,603		1,603		—		1,603		—


December 31, 2020		Carrying Amount		Fair Value
				Total		Level 1		Level 2		Level 3
December 31, 2022												December 31, 2022	Carrying Amount	Fair Value
														Total	Level 1	Level 2	Level 3
		(Dollars in thousands)											(Dollars in thousands)
Financial Assets:	Financial Assets:											Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	458,601	$	458,601	$	458,601	$	—	$	—
Investment securities AFS	Investment securities AFS	19,882		19,882		—		19,882		—
Investment securities HTM	Investment securities HTM	1,224		1,530		—		1,530		—
Restricted stock	Restricted stock	7,542		7,542		—		—		7,542
Loans held for sale		200		200		—		200		—

Loans, net
Loans, net
Loans, net	Loans, net	1,536,109		1,555,509		—		1,533,850		21,659
Accrued interest receivable	Accrued interest receivable	8,772		8,772		—		8,772		—

Financial Liabilities:
Financial Liabilities:
Financial Liabilities:	Financial Liabilities:
Non-time deposits	Non-time deposits	$	925,113	$	925,113	$	—	$	925,113	$	—
Time deposits	Time deposits	667,330		672,385		—		672,385		—
Borrowings	Borrowings	267,218		265,119		—		265,119		—
Accrued interest payable	Accrued interest payable	2,338		2,338		—		2,338		—

7071

Note ~~17.~~16. Parent Company Only Financial Statements

Condensed financial information of the parent company only is presented in the following two tables:


Balance Sheets	Balance Sheets	December 31,				Balance Sheets	December 31,

		2021		2020
		2023
		2023
		2023						2022
		(Dollars in thousands)					(Dollars in thousands)
Assets:	Assets:					Assets:
Cash	Cash	$	3,394	$	1,284
Investments in subsidiaries	Investments in subsidiaries	274,532		243,093
Other assets		—		3

Total assets
Total assets
Total assets	Total assets	$	277,926	$	244,380
Liabilities and Equity:	Liabilities and Equity:					Liabilities and Equity:
Subordinated debentures	Subordinated debentures	$	42,732	$	42,542
Other liabilities	Other liabilities	2,833		913
Equity	Equity	232,361		200,925
Total liabilities and equity	Total liabilities and equity	$	277,926	$	244,380

Statements of Income

Statements of Income

Statements of Income	Statements of Income	Years ended December 31,				Years ended December 31,
		2021		2020			2023	2022
		(Dollars in thousands)					(Dollars in thousands)
Income:	Income:					Income:
Dividends from bank subsidiary	Dividends from bank subsidiary	$	12,008	$	5,212
Total income	Total income	12,008		5,212
Expense:	Expense:					Expense:
Interest on subordinated debentures	Interest on subordinated debentures	$	2,394	$	1,321
Salary	Salary	160		160
Other expenses	Other expenses	142		139
Total expenses	Total expenses	2,696		1,620
Net Income	Net Income	9,312		3,592
Equity in undistributed income of subsidiaries	Equity in undistributed income of subsidiaries	31,448		24,836
Net income	Net income	40,760		28,428
Preferred stock dividend and discount accretion	Preferred stock dividend and discount accretion	(28)		(29)
Net income available to common shareholders	Net income available to common shareholders	$	40,732	$	28,399

7172


Statements of Cash Flows	Statements of Cash Flows					Statements of Cash Flows
		Years ended December 31,					Years ended December 31,
		2021		2020			2023		2022
		(Dollars in thousands)					(Dollars in thousands)
Cash Flows from Operating Activities	Cash Flows from Operating Activities
Net income	Net income	$	40,760	$	28,428
Net income
Net income
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries
Equity in undistributed earnings of subsidiaries	Equity in undistributed earnings of subsidiaries	(31,448)		(24,836)
Amortization of subordinate debt issuance costs	Amortization of subordinate debt issuance costs	190		87		Amortization of subordinate debt issuance costs	190	190		190
Changes in	Changes in
Decrease (increase) in other assets		3		(1)
(Increase) decrease in other assets
(Increase) decrease in other assets
(Increase) decrease in other assets
Increase in accrued interest payable and other accrued liabilities	Increase in accrued interest payable and other accrued liabilities	16		882
Other		21		30

Net cash provided by operating activities	Net cash provided by operating activities	9,542		4,590
Cash Flows from Investing Activities
Capital Contribution		—		(27,000)
Net cash used in investing activities		—		(27,000)
Net cash provided by operating activities
Net cash provided by operating activities

Cash Flows from Financing Activities	Cash Flows from Financing Activities
Issuance of subordinate debt		—		29,052
Subordinate debt interest payment		—		—

Cash Flows from Financing Activities

Cash Flows from Financing Activities

Proceeds from exercise of stock options

Proceeds from exercise of stock options

Proceeds from exercise of stock options	Proceeds from exercise of stock options	201		—
Payment of dividend on preferred stock and common stock	Payment of dividend on preferred stock and common stock	(7,633)		(7,444)
Net cash (used) provided in financing activities		(7,432)		21,608
Increase (decrease) in cash and cash equivalents		2,110		(802)
Net cash used in financing activities
Increase in cash and cash equivalents
Cash and Cash Equivalents, January 1,	Cash and Cash Equivalents, January 1,	1,284		2,086
Cash and Cash Equivalents, December 31,	Cash and Cash Equivalents, December 31,	$	3,394	$	1,284

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures.

(a) Disclosure Controls and Procedures

Based on their evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), the Company’s principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Annual Report on Form 10-K such disclosure controls and procedures are effective.

(b) Internal Control Over Financial Reporting

1. Management’s Annual Report on Internal Control Over Financial Reporting.

Management’s report on the Company’s internal control over financial reporting appears in the Company’s financial statements that are contained in this Annual Report on Form 10-K immediately following Item 8. Such report is incorporated herein by reference.

2. Changes in Internal control over financial reporting

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

Item 9B. Other Information.

Not applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information contained under the headings “Proposal I - Election of Directors,” and “Corporate Governance” ~~and “Delinquent Section 16(a) Reports”~~ in the Company’s Proxy Statement for its ~~2022~~2024 Annual Meeting of Stockholders (the “Proxy Statement”) is incorporated herein by reference.

The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of the Code of Ethics will be furnished without charge upon written request to the Chief Financial Officer, Parke Bancorp, Inc., 601 Delsea Drive, Washington Township, New Jersey, 08080.

There have been no material changes to the procedures by which security holders may recommend nominees to the Registrant’s Board of Directors since the date of the Registrant’s last proxy statement mailed to its stockholders.

Item 11. Executive Compensation.

The information contained in the sections captioned “Executive Compensation,” and “Director Compensation,” in the Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

(a) Security Ownership of Certain Beneficial Owners

The information contained in the section captioned “Principal Holders of our Common Stock” in the Proxy Statement is incorporated herein by reference.

(b) Security Ownership of Management

The information contained in the sections captioned “Principal Holders of our Common Stock” and “Proposal I – Election of Directors” in the Proxy Statement is incorporated herein by reference.

(c) Management of the Registrant knows of no arrangements, including any pledge by any person of securities of the Registrant, the operation of which may at a subsequent date result in a change in control of the Registrant.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

Set forth below is information as of December 31, ~~2021,~~2023, with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.

7374


Equity compensation plans approved by security holders	Equity compensation plans approved by security holders	( a ) Number of Securities to be issued upon exercise of outstanding options	( b ) Weighted-average exercise price of outstanding options	( c ) Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a))	Equity compensation plans approved by security holders	( a ) Number of Securities to be issued upon exercise of outstanding options	( b ) Weighted-average exercise price of outstanding options	( c ) Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a))
2020 Equity Incentive Plan	2020 Equity Incentive Plan	310,206	$12.29	679,794	2020 Equity Incentive Plan	461,146	$16.23	455,000
2015 Equity incentive plan	2015 Equity incentive plan	246,461	$14.65	253,539	2015 Equity incentive plan	220,199	$15.33	—
Equity compensation plans not approved by security holders	Equity compensation plans not approved by security holders
None	None
None
None
Total	Total	532,461	$13.34	933,333
Total
Total						681,345	$15.94	675,199

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information contained in the sections captioned “Related Party Transactions” and “Corporate Governance” in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

The information contained in the section captioned “Independent Auditors” in the Proxy Statement is incorporated herein by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedules


(a)	Listed below are all financial statements, schedules and exhibits filed as part of this Form 10-K:
	1	The consolidated balance sheets of Parke Bancorp, Inc. and subsidiary as of December 31, ~~2021~~2023 and ~~2020,~~2022, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, ~~2021,~~2023, together with the related notes and the independent registered public accounting firm reports of ~~RSM US, LLP,~~S.R. Snodgrass, P.C., independent registered public accounting firm (PCAOB ID:~~49)~~74).
	2	Schedules omitted as they are not applicable.
	3	The following exhibits are included in this Report or incorporated herein by reference:
	3.1	Certificate of Incorporation of Parke Bancorp, Inc. (1)
	3.2	Bylaws of Parke Bancorp, Inc. ~~(8)~~(7)
	3.3	Certificate of Amendment setting forth the terms of the Registrant’s 6.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series B (2)
	4.1	Specimen stock certificate of Parke Bancorp, Inc. (1)
	4.2	Description of Capital Stock of Parke Bancorp, Inc. ~~(8)~~(7)
	10.1	Amended Employment Agreement Between Bancorp, Bank and Vito S. Pantilione (3)
	10.2	Supplemental Executive Retirement Plan (1)
	10.7	2015 Equity Incentive Plan (4)
	10.9	~~SERP~~Management Change in Control Severance Agreement with ~~John F. Hawkins (5)~~Nicholas J. Pantilione
	10.12	Management Change in Control Severance Agreement with Paul Palmieri (3)
	10.13	Management Change in Control Severance Agreement with Ralph Gallo (3)
	10.14	~~Management Change in Control Severance Agreement with John S. Kaufman (8)~~
	~~10.15~~	2020 Equity Incentive Plan (6)


			21			Subsidiaries of the Registrant


	2323.1	Consent of ~~RSM US LLP~~S.R. Snodgrass, P.C.

	31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	Certification of CEO and CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	97	Incentive Based Compensation Recovery Policy
	99.1	Consent Order with the Federal Deposit Insurance Corporation dated October 8, ~~2020.~~2020 (6) ~~(7)~~
	99.2	Consent Order with the New Jersey Department of Banking and ~~Insurance.~~Insurance (6) ~~(7)~~

101	The following materials from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2023, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the 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 with 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 Current Report on Form 8-K filed with the SEC on December 24, 2013 (File No. 000-51338).
(3) Incorporated by Reference to Company’s Current Report on Form 8-K filed with the SEC on July 20, 2016 (File No. 000-51338).
(4) Incorporated by Reference to Company's Registration Statement on Form S-8 filed with the SEC on November 16, 2015 (File No. 333-208051).
(5) Incorporated by Reference to Company's ~~Current Report on Form 8-K filed with the SEC on January 22, 2016 (File No. 000-51338).~~
~~(6) Incorporated by Reference to Company's~~ Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed with the SEC on May 8, 2020 (File No. 000-51338).
~~(7)~~(6) Incorporated by Reference to Company's Current Report on Form 8-K filed with the SEC on October 9, 2020 (File No. 000-51338).
~~(8)~~(7) Incorporated by Reference to Company's Annual Report on Form 10-K filed with the SEC on March 31, 2021 (File No. 000-51338).

7576

Item 16. Form 10-K Summary

Not applicable

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: March ~~21, 2022~~13, 2024

/s/ Vito S. Pantilione

By:

Vito S. Pantilione

President, Chief Executive Officer and Director

Pursuant to the requirement of the Securities Exchange Act of 1934, this ~~Report~~report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March ~~21, 2022.~~13, 2024.

/s/ ~~Celestino R. Pennoni~~Daniel J. Dalton

/s/ Vito S. Pantilione

~~Celestino R. Pennoni~~Daniel J. Dalton

Vito S. Pantilione

Chairman of the Board and Director

President, Chief Executive Officer and Director

/s/ Arret F. Dobson

/s/ Anthony Jannetti

Arret F. Dobson

Anthony Jannetti

Director

/s/ Jack C. Sheppard, Jr.

/s/ ~~Daniel J. Dalton~~Fred G. Choate

Jack C. Sheppard, Jr.

~~Daniel J. Dalton~~

Fred G. Choate

Director

/s/ ~~Fred G. Choate~~Jeffrey H. Kripitz

/s/ Edward Infantolino

~~Fred G. Choate~~Jeffrey H. Kripitz

Edward Infantolino

Director

/s/ ~~Jeffrey H. Krippitz~~Jonathan D. Hill

/s/ Elizabeth Milavsky

~~Jeffrey H. Krippitz~~

Jonathan D. Hill

Elizabeth Milavsky

~~Director~~

~~/s/ John S. Kaufman~~

~~John S. Kaufman~~

Senior Vice President and Chief Financial Officer

Director

(Principal Financial and Accounting Officer)

7677


Parke Bancorp, Inc. and Subsidiaries
Consolidated Statements of Equity
Years Ended December 31, 2021 and 2020
(Dollars in thousands except share data)
	Preferred Stock		Shares of Common Stock issued	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders’ Equity		Non-Controlling Interest		Total Equity
Balance, December 31, 2019	$	500	12,132,855	$	1,213	$	134,706	$	44,143	$	58	$	(3,015)	$	177,605	$	1,819	$	179,424

Earnings distribution to non-controlling interest	—		—	—		—		—		—		—		—		(594)		(594)
Net income	—		—	—		—		28,428		—		—		28,428		447		28,875
Common stock options exercised	—		1,021	—		.		—		—		—		—		—		—
Preferred stock shares conversion	(20)		2,751	1		19		—		—		—		—		—		—
Other comprehensive loss	—		—	—		—		—		405		—		405		—		405
Stock compensation expense	—		—	—		265		—		—		—		265		—		265
Stock dividend	—		(60)	—		(1)		(2)		—		—		(3)		—		(3)
Dividend on preferred stock	—		—	—		—		(29)		—		—		(29)		—		(29)
Dividend on common stock	—		—	—		—		(5,746)		—		—		(5,746)		—		(5,746)
Balance, December 31, 2020	$	480	12,136,567	$	1,214	$	134,989	$	66,794	$	463	$	(3,015)	$	200,925	$	1,672	$	202,597
Earnings distribution to non-controlling interest	—		—	—		—		—		—		—		—		(1,887)		(1,887)
Net income	—		—	—		—		40,760		—		—		40,760		215		40,975
Common stock options exercised	—		40,701	4		197		—		—		—		201		—		201
Preferred stock shares conversion	(35)		4,813	—		35		—		—		—		—		—		—
Other comprehensive income	—		—	—		—		—		(218)		—		(218)		—		(218)
Stock compensation expense	—		—	—		230		—		—		—		230		—		230

Dividend on preferred stock	—		—	—		—		(28)		—		—		(28)		—		(28)
Dividend on common stock	—		—	—		—		(9,509)		—		—		(9,509)		—		(9,509)
Balance, December 31, 2021	$	445	12,182,081	$	1,218	$	135,451	$	98,017	$	245	$	(3,015)	$	232,361	$	—	$	232,361


	Twelve Months Ended December 31, 2021
As of December 31, 2021					Real Estate Mortgage
(Dollars in thousands)	Commercial and Industrial		Construction		Commercial Owner Occupied		Commercial Non-owner Occupied		Residential 1 to 4 Family		Residential Multifamily		Consumer		Total
December 31, 2020	$	492	$	3,359	$	3,078	$	8,398	$	12,595	$	1,639	$	137	$	29,698
Charge-offs	—		(226)		(152)		—		(49)		—		—		(427)
Recoveries	18		—		52		4		—		—		—		74
Provisions (credit)	(93)		(471)		19		(926)		2,424		(424)		(29)		500
Ending Balance December 31 2021	$	417	$	2,662	$	2,997	$	7,476	$	14,970	$	1,215	$	108	$	29,845

Allowance for loan losses
Individually evaluated for impairment	$	8	$	300	$	5	$	218	$	60	$	—	$	—	$	591
Collectively evaluated for impairment	409		2,362		2,992		7,258		14,910		1,215		108		29,254
Balance at December 31, 2021	$	417	$	2,662	$	2,997	$	7,476	$	14,970	$	1,215	$	108	$	29,845

Loans
Individually evaluated for impairment	$	224	$	1,139	$	2,369	$	5,577	$	993	$	—	$	—	$	10,302
Collectively evaluated for impairment	56,927		152,938		121,303		300,909		749,532		84,964		7,972		1,474,545
Balance at December 31, 2021	$	57,151	$	154,077	$	123,672	$	306,486	$	750,525	$	84,964	$	7,972	$	1,484,847


	Twelve Months Ended December 31, 2020
As of December 31, 2020					Real Estate Mortgage
(Dollars in thousands)	Commercial and Industrial		Construction		Commercial Owner Occupied		Commercial Non-owner Occupied		Residential 1 to 4 Family		Residential Multifamily		Consumer		Total
December 31, 2019	$	964	$	2,807	$	2,023	$	5,860	$	9,151	$	819	$	187	$	21,811
Charge-offs	—		—		—		—		(59)		—		—		(59)
Recoveries	23		—		11		266		—		—		—		300
Provisions	(495)		552		1,044		2,272		3,503		820		(50)		7,646
Ending Balance December 31 2020	$	492	$	3,359	$	3,078	$	8,398	$	12,595	$	1,639	$	137	$	29,698

Allowance for loan losses
Individually evaluated for impairment	$	12	$	301	$	200	$	350	$	141	$	—	$	—	$	1,004
Collectively evaluated for impairment	480		3,058		2,878		8,048		12,454		1,639		137		28,694
Balance at December 31, 2020	$	492	$	3,359	$	3,078	$	8,398	$	12,595	$	1,639	$	137	$	29,698

Loans
Individually evaluated for impairment	$	49	$	4,840	$	5,735	$	10,109	$	1,875	$	—	$	55	$	22,663
Collectively evaluated for impairment	121,759		206,173		126,472		314,731		668,952		94,748		10,309		1,543,144
Balance at December 31, 2020	$	121,808	$	211,013	$	132,207	$	324,840	$	670,827	$	94,748	$	10,364	$	1,565,807


December 31, 2020	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded:
Commercial and Industrial	$	37	$	37	$	—
Construction:	—		—		—
Real Estate Mortgage:
Commercial – Owner Occupied	2,853		2,853		—
Commercial – Non-owner Occupied	69		69		—
Residential – 1 to 4 Family	899		899		—
Residential – Multifamily	—		—		—
Consumer	55		55		—
	3,913		3,913		—
With an allowance recorded:
Commercial and Industrial	12		19		12
Construction:	4,840		9,330		301
Real Estate Mortgage:
Commercial – Owner Occupied	2,882		2,882		200
Commercial – Non-owner Occupied	10,040		10,040		350
Residential – 1 to 4 Family	976		976		141
Residential – Multifamily	—		—		—
Consumer	—		—		—
	18,750		23,247		1,004
Total:
Commercial and Industrial	49		56		12
Construction:	4,840		9,330		301
Real Estate Mortgage:
Commercial – Owner Occupied	5,735		5,735		200
Commercial – Non-owner Occupied	10,109		10,109		350
Residential – 1 to 4 Family	1,875		1,875		141
Residential – Multifamily	—		—		—
Consumer	55		55		—
	$	22,663	$	27,160	$	1,004


At December 31, 2020	Pass		OAEM		Substandard		Doubtful		Total
	(Dollars in thousands)
Commercial and Industrial	$	121,715	$	43	$	50	$	—	$	121,808
Construction:	209,648		—		1,365		—		211,013
Real Estate Mortgage:
Commercial – Owner Occupied	123,657		3,029		5,521		—		132,207
Commercial – Non-owner Occupied	324,649		—		191		—		324,840
Residential – 1 to 4 Family	668,593		462		1,772		—		670,827
Residential – Multifamily	94,748		—		—		—		94,748
Consumer	10,309		—		55		—		10,364
Total	$	1,553,319	$	3,534	$	8,954	$	—	$	1,565,807