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What changed in PARKE BANCORP, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PARKE BANCORP, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+168 added−169 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-15)

Top changes in PARKE BANCORP, INC.'s 2023 10-K

168 paragraphs added · 169 removed · 130 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

68 edited+17 added−9 removed116 unchanged
Biggest changeAt December 31, 2022 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 (Dollars in thousands) Securities Held to Maturity : State and political subdivisions $ — $ 1,346 $ — $ 2,476 $ 3,822 $ 3,345 Yield — % 4.76 % — % 1.91 % 2.90 % Residential mortgage-backed securities — — — 5,556 5,556 4,460 Yield — % — % — % 1.79 % 1.79 % Total securities held to maturity — 1,346 — 8,032 9,378 7,805 Weighted Average Yield — % 4.76 % — % 1.83 % 2.23 % Securities Available for Sale : Corporate debt obligations $ — $ 500 $ — $ — $ 500 $ 500 Yield — % 4.38 % — % — % 4.38 % Residential mortgage-backed securities — 1,756 3,641 4,178 9,575 8,866 Yield — % 1.83 % 2.33 % 2.47 % 2.29 % Total securities available for sale — 2,256 3,641 4,178 10,075 9,366 Weighted Average Yield — % 2.32 % 2.33 % 2.47 % 2.38 % Total Investment Securities $ — $ 3,602 $ 3,641 $ 12,210 $ 19,453 $ 17,171 Total Weighted Average Yield — % 3.14 % 2.33 % 2.06 % 2.31 % As of December 31, 2022, Parke does not have any tax-exempt securities within the investment portfolio.
Biggest changeAt December 31, 2023 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 (Dollars in thousands) Securities Held to Maturity : State and political subdivisions $ — $ 1,412 $ — $ 2,474 $ 3,886 $ 3,540 Yield — % 4.76 % — % 1.91 % 2.93 % Residential mortgage-backed securities — — — 5,406 5,406 4,352 Yield — % — % — % 1.92 % 1.92 % Total securities held to maturity — 1,412 — 7,880 9,292 7,892 Weighted Average Yield — % 4.76 % — % 1.91 % 2.34 % Securities Available for Sale : Residential mortgage-backed securities — 2,996 1,008 3,635 7,639 7,095 Yield — % 2.22 % 2.29 % 2.70 % 2.45 % Total securities available for sale — 2,996 1,008 3,635 7,639 7,095 Weighted Average Yield — % 2.22 % 2.29 % 2.70 % 2.45 % Total Investment Securities $ — $ 4,408 $ 1,008 $ 11,515 $ 16,931 $ 14,987 Total Weighted Average Yield — % 2.93 % 2.29 % 2.17 % 2.39 % Yields are calculated on a weighted average basis using the investments amortized cost and respective average yields for each investment category.
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: 9 • 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.
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; 9 • 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.
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, 13 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.
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.
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.
In addition, it is the policy 10 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.
Risk weightings range 12 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.
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.
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").
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 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").
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.
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 4 on the property, and generally have maximum terms of ten years.
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 to maintain the Deposit Insurance Fund (the “DIF”).
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 to maintain the Deposit Insurance Fund (the “DIF”).
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.
Finally, if the Bank does not maintain the capital conservation buffer required by applicable regulatory capital rules, 11 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. 11 Regulation of the Bank The Bank operates in a highly regulated industry.
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.
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. Dividends . The Company is subject to various restrictions relating to the payment of dividends.
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 interest rates on second mortgages are generally fixed, while interest rates on home equity lines of credit are variable. 4 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.
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.
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.
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 5 disposal costs.
Generally, this provision provides that a bank may not extend credit, lease or 10 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.
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.
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.
The Company will evaluate the impact of the 14 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 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, 2022, the Bank’s investment policy allowed investments in instruments such as: (i) U.S.
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, 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, 2022, no one issuer of investment securities represented 10% or more of the Company’s stockholders’ equity.
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, 2023, no one issuer of investment securities represented 10% or more of the Company’s stockholders’ equity.
The following table sets forth the allocation of the Bank’s allowance for loan losses by loan category at the dates indicated and the related percentage of the loans in the portfolio.
The following table sets forth the allocation of the Bank’s allowance for credit losses by loan category at the dates indicated and the related percentage of the loans in the portfolio.
At December 31, 2022, 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.
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.
A provision for loan losses is charged to operations based on management’s evaluation of the inherent losses estimated to have occurred in the Bank’s loan portfolio.
A provision for 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.
As of December 31, 2022, the Bank was in compliance with all regulatory capital standards and qualified as “well capitalized.” See Note 13 of Notes to Consolidated Financial Statements. 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.
As of December 31, 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. 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.
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 5 operations. Real estate owned at December 31, 2022 was $1.6 million.
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, 2023 and December 31, 2022, was $1.6 million.
At December 31, 2022, 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.
At December 31, 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.
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 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.
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 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.
At December 31, 2022, 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.
At December 31, 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.
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, 2022, which have predetermined interest rates and which have floating or adjustable interest rates at December 31, 2022.
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, 2023, which have predetermined interest rates and which have floating or adjustable interest rates at December 31, 2023.
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, 2022, by contractual maturity.
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, 2023, by contractual maturity.
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. Federal Deposit Insurance.
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.
Real estate owned consisted of two commercial owner occupied properties as of December 31, 2022. Allowance for Losses on Loans. It is the policy of management to estimate for possible losses on all loans in its portfolio, whether classified or not.
Real estate owned consisted of two commercial owner occupied properties as of December 31, 2023. Allowance for Credit Losses. It is the policy of management to estimate for possible losses on all loans in its portfolio, whether classified or not.
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.
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.
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 subsidiary of the Company is the Bank.
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 Company's only significant subsidiary is the Bank.
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.
Pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act (“EGRRCPA”), the FDIC has amended its brokered deposit rule to exempt reciprocal deposits in an amount not exceeding the lesser of $5 billion or 20% of a bank’s total liabilities from the definition of brokered deposits.
Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required. Allocation of Allowance for Loan Losses.
Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for credit losses or that additional increases in the allowance for credit losses will not be required. Allocation of Allowance for Credit Losses on Loans.
An unsatisfactory Community Reinvestment Act examination rating may be used as the basis for the denial of an application. The Bank received a “satisfactory” rating in its most recent Community Reinvestment Act examination.
An unsatisfactory Community Reinvestment Act examination rating may be used as the basis for the denial of an application. The Bank received a “needs to improve” rating in its most recent Community Reinvestment Act examination.
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.
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.
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. 3 The Bank provides interim real estate acquisition development and construction loans to builders and developers.
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.
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).
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).
To mitigate the potential negative impact associated with brokered deposits, the Bank joined the IntraFi network ("IntraFi") to secure an additional alternative funding source. IntraFi provides the Bank an additional source of external funds through their weekly CDARS ™ settlement process.
To mitigate the potential negative impact associated with brokered deposits, the Bank joined the IntraFi network ("IntraFi") to secure an additional alternative funding source. IntraFi provides the Bank an additional source of external funds through their weekly CDARS ™ settlement process and their overnight ICS ™ money market product.
Impaired loans 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 loans is the same as for non-accrual loans discussed above.
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 individually evaluated loans is the same as for non-accrual loans discussed above.
As of December 31, 2022, there was $3.0 million in loans which were not then on non-accrual status or a TDR but where there is a potential weakness or pose unwarranted financial risk to the Bank, even though the asset value is not currently impaired.
As of December 31, 2023, there was $15.4 million in loans which were not then on non-accrual status or 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.
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. Transactions with Related Parties.
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.
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 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.
At December 31, 2022, the Bank’s loan to one borrower limit was approximately $51.0 million and the Bank had no borrowers with loan balances in excess of this amount. At December 31, 2022, the Bank’s largest loan to one borrower was a commercial owner occupied real estate loan with a balance of $22.1 million that was secured by the property.
At December 31, 2023, the Bank’s loan to one borrower limit was approximately $53.8 million and the Bank had no borrowers with loan balances in excess of this amount. At December 31, 2023, the Bank’s largest loan to one borrower was a commercial owner occupied real estate loan with a balance of $21.5 million that was secured by the property.
A loan is considered impaired when it has been modified in a troubled debt restructuring 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.
A loan is considered 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.
At December 31, 2022 and 2021, deposit balances from cannabis customers were approximately $177.3 million and $375.2 million, or 11.3% and 21.2% of total deposits, respectively, with two customers accounting for 36.9% and 19.3% of the 2 total at December 31, 2022 and 2021.
At December 31, 2023 and 2022, deposit balances from cannabis customers were approximately $96.7 million and $177.3 million, or 6.2% and 11.3% of total deposits, respectively, with two customers accounting for 60.6% and 36.9% of the total at December 31, 2023 and 2022.
These proposed rules have not been finalized. 14 In October 2022, the SEC adopted a final rule directing national securities exchanges, including Nasdaq, to establish 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.
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.
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.
Market Area Substantially all of the Bank’s business is with customers in its market areas of Southern New Jersey, the Philadelphia area of Pennsylvania, and New York, New York. We have carefully expanded our lending footprint in other areas also. Most of 1 the Bank’s customers are individuals and small to medium-sized businesses which are dependent upon the regional economy.
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.
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.
Under the 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; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets.
The 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 not subject to the Federal Reserve Small Bank Holding Company Policy Statement. 12 Under the 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; (2) a common equity Tier 1 capital ratio equal to 4.5% of risk-weighted assets; (3) a Tier 1 risk-based ratio equal to 6% of risk-weighted assets; and (4) a total capital ratio equal to 8% of total risk-weighted assets.
December 31, 2022 December 31, 2021 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) Commercial and Industrial $ 390 1.8 % $ (14) — % $ 417 3.8 % $ (18) — % Construction 2,581 11.0 (100) (0.01) % 2,662 10.4 226 0.01 % Real Estate Mortgage: Commercial – Owner Occupied 2,298 7.2 (18) — % 2,997 8.3 100 0.01 % Commercial – Non-owner Occupied 9,709 21.6 — — % 7,476 20.6 (4) — % Residential – 1 to 4 Family 15,457 52.6 (68) — % 14,970 50.7 49 — % Residential – Multifamily 1,347 5.5 — — % 1,215 5.7 — — % Consumer 63 0.4 — — % 108 0.5 — — % Total allowance for loan losses $ 31,845 100.0 % $ (200) (0.01) % $ 29,845 100.0 % $ 353 0.02 % Period-end loans outstanding (net of deferred costs/fees) $ 1,751,459 $ 1,484,847 Average loans outstanding $ 1,580,318 $ 1,513,959 Total non-accrual loans $16,276 $4,308 Allowance as a percentage of period end loans 1.82 % 2.01 % Non-accrual loans as a percentage of period end loans 0.93 % 0.29 % Allowance as a percentage of non-performing loans 195.66 % 692.78 % 6 Investment Activities General .
December 31, 2023 December 31, 2022 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) Commercial and Industrial $ 926 2.0 % $ (15) — % $ 390 1.8 % $ (14) — % Construction 3,347 8.8 — — % 2,581 11.0 (100) (0.01) % Real Estate Mortgage: Commercial – Owner Occupied 1,795 7.9 (3) — % 2,298 7.2 (18) — % Commercial – Non-owner Occupied 7,108 20.7 — — % 9,709 21.6 — — % Residential – 1 to 4 Family 9,061 25.2 — — % 6,076 25.3 (68) — % Residential - 1 to 4 Family Investment 8,783 29.3 9,381 27.2 Residential – Multifamily 1,049 5.8 — — % 1,347 5.5 — — % Consumer 62 0.3 — — % 63 0.4 — — % Total allowance for credit losses $ 32,131 100.0 % $ (18) — % $ 31,845 100.0 % $ (200) (0.01) % Period-end loans outstanding (net of deferred costs/fees) $ 1,787,340 $ 1,751,459 Average loans outstanding $ 1,782,055 $ 1,580,318 Total non-accrual loans $7,238 $16,276 Allowance as a percentage of period end loans 1.80 % 1.82 % Non-accrual loans as a percentage of period end loans 0.40 % 0.93 % Allowance as a percentage of non-performing loans 443.92 % 195.66 % 6 Investment Activities General .
We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries and who participate in retail sales of cannabis in New Jersey. Cannabis businesses are legal under the laws of these States and now in New Jersey, although it is not legal under federal law. The U.S.
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 cannabis industry as growers, processors and dispensaries and who participate in retail sales of cannabis in New Jersey.
Maturity Period Certificates of Deposit Portion in Excess of FDIC Insurance Limit ( Dollars in thousands) Within three months $ 15,118 $ 4,118 Over three through six months 6,279 3,029 Over six through twelve months 41,243 26,493 Over twelve months 56,369 26,119 Total $ 119,009 $ 59,759 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.
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.
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.
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.
The Bank’s CDARS ™ deposits included within the brokered deposit total amounted to $106.6 million and $4.5 million at December 31, 2022 and 2021, respectively. 2022 Average Balance Yield/Rate Percent of Total ( Dollars in thousands) NOWs $ 92,535 0.44% 5.75 % Money markets 352,339 1.01% 21.89 % Savings 195,029 0.44% 12.12 % Time deposits 514,421 0.96% 31.96 % Brokered CDs 26,785 1.88% 1.66 % Total interest-bearing deposits 1,181,109 0.89% Non-interest bearing demand deposits 428,549 26.62 % Total deposits $ 1,609,658 100.00 % Uninsured deposits at the end of the period $ 622,966 2021 Average Balance Yield/Rate Percent of Total ( Dollars in thousands) 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 8 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, 2022.
The Bank’s CDARS ™ and ICS ™ deposits included within the brokered deposit total amounted to $216.9 million and $106.6 million at December 31, 2023 and 2022, respectively. 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 2022 Average Balance Yield/Rate Percent of Total ( Dollars in thousands) NOWs $ 92,535 0.45% 5.75 % Money markets 352,339 1.11% 21.89 % Savings 195,029 0.46% 12.12 % Time deposits 514,421 0.95% 31.96 % Brokered CDs 26,785 3.48% 1.66 % Total interest-bearing deposits 1,181,109 0.94% Non-interest bearing demand deposits 428,549 26.62 % Total deposits $ 1,609,658 100.00 % Uninsured deposits at the end of the period $ 622,966 8 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, 2023.
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.
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 3 completion.
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.
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.
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.
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.
At December 31, 2022 and 2021, there were cannabis-related loans in the amounts of $3.8 million and $5.4 million, respectively. Lending Activities Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing primarily in and around southern New Jersey, southeastern Pennsylvania, and the Brooklyn and Bronx sections of New York, New York.
Lending Activities Our lending relationships are primarily with small to mid-sized businesses and individual consumers residing primarily in and around southern New Jersey, southeastern Pennsylvania, and the Brooklyn and Bronx sections of New York, New York. 2 We focus our lending efforts primarily in four lending areas: residential mortgage loans, commercial mortgage loans, commercial and industrial loans, and construction loans.
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. 7 Deposits.
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. 7 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.
The new law also clarifies 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.
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.
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.
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.
In 2021, PDL LLC was fully liquidated and all earnings were distributed to the Company and Bridgestone Capital, LLC. Personnel At December 31, 2022, the Bank had 104 full-time and 7 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.
Personnel At December 31, 2023, the Bank had 101 full-time and 5 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.
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.
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.
Deposits are obtained primarily from communities that the Bank serves, however, the Bank held brokered deposits of $140.8 million and $9.1 million at December 31, 2022, and 2021, respectively. Brokered deposits are a more volatile source of funding than core deposits and do not increase the deposit franchise of the Bank.
Total deposits were $1.55 billion at December 31, 2023. Deposits are obtained primarily from communities that the Bank serves, however, the Bank held brokered deposits of $223.4 million and $140.8 million at December 31, 2023, and 2022, respectively. At December 31, 2023, the Bank held brokered deposit balances in NOW, money market, and time deposit categories.
The SEC final rule will require us to adopt a clawback policy within 60 days after the Nasdaq listing standard becomes effective. Item 1A. Risk Factors. Not applicable Item 1B. Unresolved Staff Comments. None.
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.
Total impaired loans, which include non-accrual loans and performing troubled debt restructurings (“TDRs”), were $21.7 million and $10.3 million at December 31, 2022 and 2021, respectively. Included in impaired loans at December 31, 2022 and 2021 were $5.5 million and $6.0 million, respectively, of loans classified as TDRs as defined within accounting guidance and regulatory literature.
Total non-performing loans, which include non-accrual loans, were $7.2 million and $21.7 million at December 31, 2023 and 2022, respectively. Included in individually evaluated loans at December 31, 2023 and 2022 were zero and $5.5 million, respectively, of loans modified to borrowers in financial distress.
Investors are encouraged to access these reports and other information about our business on our website.
Investors are encouraged to access these reports and other information about our business on our website. At December 31, 2023, we had total assets of $2.02 billion, including loans of $1.79 billion, total deposits of $1.55 billion and total equity of $284.3 million.
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. 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.
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.
Removed
At December 31, 2022, we had total assets of $1.98 billion, including loans of $1.75 billion, total deposits of $1.58 billion and total equity of $266.0 million. 1 Market Area Substantially all of the Bank’s business is with customers in its market areas of Southern New Jersey, the Philadelphia area of Pennsylvania, and New York, New York.
Added
Cannabis businesses are legal under the laws of these States, as well as in New Jersey, although it is not legal under federal 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.
Removed
Cannabis Related Business In 2021, cannabis in the State of New Jersey became legal for recreational use. An amendment legalizing cannabis became part of the New Jersey State Constitution, and enabling legislation and related bills were signed into law in 2021. The new law legalized and regulated cannabis use and possession for adults 21 years and older.
Added
At December 31, 2023 and 2022, the Bank had cannabis-related loans in the amounts of $27.1 million and $3.8 million, respectively.
Removed
We focus our lending efforts primarily in four lending areas: residential mortgage loans, commercial mortgage loans, commercial and industrial loans, and construction loans. Loan Maturity.
Added
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 $ 16,240 $ 9,524 $ 9,687 $ — $ 35,451 Construction 143,889 13,344 323 — 157,556 Commercial Real Estate Mortgage: Commercial - Owner Occupied 5,035 31,448 103,558 1,701 141,742 Commercial - Non-Owner Occupied 28,071 100,409 241,429 — 369,909 Residential - 1 to 4 family 2,189 43,718 89,886 313,889 449,682 Residential - 1 to 4 family investment — — 10,514 513,653 524,167 Residential - multifamily 1,951 17,158 84,215 — 103,324 Consumer — 220 2,276 3,013 5,509 Total $ 197,375 $ 215,821 $ 541,888 $ 832,256 $ 1,787,340 Loans at fixed interest rates $ 9,342 $ 38,680 $ 54,560 $ 28,445 $ 131,027 Loans at floating/variable interest rates 188,033 177,141 487,328 803,811 1,656,313 Total $ 197,375 $ 215,821 $ 541,888 $ 832,256 $ 1,787,340 Commercial and Industrial Loans.
Removed
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 $ 19,222 $ 3,468 $ 9,693 $ — $ 32,383 Construction 139,856 52,501 — — 192,357 Commercial Real Estate Mortgage: Commercial - Owner Occupied 13,583 24,164 86,413 1,790 125,950 Commercial - Non-Owner Occupied 33,838 96,063 247,551 — 377,452 Residential - 1 to 4 family 4,531 29,107 126,625 760,767 921,030 Residential - multifamily 5,230 12,131 78,195 — 95,556 Consumer 5 242 2,616 3,868 6,731 Total $ 216,265 $ 217,676 $ 551,093 $ 766,425 $ 1,751,459 Loans at fixed interest rates $ 27,530 $ 35,404 $ 241,701 $ 32,319 $ 336,954 Loans at floating/variable interest rates 188,735 182,272 309,392 734,106 1,414,505 Total $ 216,265 $ 217,676 $ 551,093 $ 766,425 $ 1,751,459 Commercial and Industrial Loans.
Added
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.
Removed
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 $1.58 billion at December 31, 2022.
Added
These loans are typically secured by residential real estate or personal property, including automobiles.
Removed
The rates are comparable to brokered deposits and can be obtained within a shorter period of time than brokered deposits.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeJimmy Leeds Road Galloway Township, NJ 08205 Collingswood Branch 2016 Leased 1150 Haddon Avenue Collingswood, NJ 08108 Arch Street Branch 2016 Leased 1032 Arch Street Philadelphia, PA 19108 15
Biggest changeJimmy 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
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.
(a) 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. 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.
Biggest changeItem 3. Legal Proceedings. Absecon Gardens Condominium Association v. Parke Bank Matter Absecon Gardens Condominium Association v. Parke Bank, One Mechanic Street, et al, Superior Court of New Jersey, Law Division, Atlantic County, Docket No. ATL-L-2321-21. The Company is the successor to the interests of the developer of the Absecon Gardens Condominium project in Absecon NJ.
Removed
Commitments and Contingencies" in the Notes to the Consolidated Financial Statements.
Added
Commitments and Contingencies" in the Notes to the Consolidated Financial Statements. 17 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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The Bank believes this suit is without merit, denies any and all liability and intends to vigorously defend against this matter.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 16 PART II Item 5. Market for Common Equity, Related stockholder Matters and Issuer Purchases of Equity Securities 16 Item 6. [Reserved] 17 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Biggest changeItem 4. Mine Safety Disclosures 18 PART II Item 5. Market for Common Equity, Related stockholder Matters and Issuer Purchases of Equity Securities 18 Item 6. [Reserved] 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 29 Item 8. Financial Statements and Supplementary Data 29

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeUpon full conversion of the outstanding shares of the Series B Preferred Stock, the Company will issue approximately 61,232 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.
Biggest changeEach 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, 2023. Upon full conversion of the outstanding shares of the Series B Preferred Stock, the Company will issue approximately 51,600 shares of Common Stock assuming that the conversion rate does not change.
There were no repurchases of the Company’s Common Stock during the twelve months ended December 31, 2022. 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.
There were no repurchases of the Company’s Common Stock during the twelve months ended December 31, 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.
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, 2022, was approximately 246.
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, 2023, was approximately 238.
Under current regulations, the Bank's ability to pay dividends is restricted as well. 16 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.
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.
The Company's ability to pay dividends is substantially dependent upon the dividends it receives from the Bank and is subject to other restrictions.
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.
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 14, 2023, there were 11,946,671 shares of our common stock issued and outstanding.
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, 2024, there were 11,958,321 shares of our common stock issued and outstanding. The Company paid a $0.18 per share quarterly common stock cash dividend during each quarter of 2023.
The Company also has 445 shares of 6% non-Cumulative Series B Preferred Stock outstanding at December 31, 2022. 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, 2022.
During 2023, the Company paid a total of $8.6 million in common stock cash dividends. The Company also has 375 shares of 6% non-Cumulative Series B Preferred Stock outstanding at December 31, 2023. The preferred stock has a liquidation preference of $1,000 per share.
The Company has recorded dividends on preferred stock in the approximate amount of $26,700 and $28,200 for the years ended December 31, 2022 and 2021, respectively. The Company paid quarterly cash dividends of $15 per share on the preferred stock for the years 2022 and 2021.
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 $26,000 and $27,000 for the years ended December 31, 2023 and 2022, respectively.
The preferred stock qualifies, and is accounted, as equity securities and is included in the Company’s Tier I capital since issued.
The Company paid quarterly cash dividends of $15 per share on the preferred stock for the years 2023 and 2022. During 2023, preferred stockholders converted 70 shares of preferred shares into 9,628 18 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.
Removed
The Company paid a $0.16 per share quarterly common stock cash dividend in the 1st and 2nd quarters of 2022, and $0.18 per share quarterly common stock cash dividend in the 3rd and 4th quarters of 2022. During 2022, the Company paid a total of $7.9 million in common stock cash dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. 18 For the Years Ended December 31, 2022 2021 Average Balance Interest Income/ Expense Yield/ Cost Average Balance Interest Income/ Expense Yield/ Cost ( Dollars in thousands) Assets Loans (1) (2) $ 1,580,318 $ 82,900 5.25 % $ 1,513,959 $ 80,643 5.33 % Investment securities 25,922 772 2.98 % 26,000 753 2.90 % Deposits with banks 338,277 3,811 1.13 % 523,491 676 0.13 % Total interest-earning assets 1,944,517 $ 87,483 4.50 % 2,063,450 $ 82,072 3.98 % Non-interest earning assets 79,869 77,370 Allowance for loan losses (30,449) (30,019) Total assets $ 1,993,937 $ 2,110,801 Liabilities and Equity Interest bearing deposits NOWs $ 92,535 $ 417 0.45 % $ 75,502 $ 323 0.43 % Money markets 352,339 3,927 1.11 % 322,201 2,140 0.66 % Savings 195,029 905 0.46 % 146,585 664 0.45 % Time deposits 514,421 4,890 0.95 % 632,874 6,399 1.01 % Brokered certificates of deposit 26,785 932 3.48 % 34,292 228 0.66 % Total interest-bearing deposits 1,181,109 11,071 0.94 % 1,211,454 9,754 0.81 % Borrowings 119,422 3,085 2.58 % 158,943 3,202 2.01 % Total interest-bearing liabilities 1,300,531 $ 14,156 1.09 % 1,370,397 $ 12,956 0.95 % Non-interest bearing deposits 428,549 506,645 Other liabilities 14,389 15,030 Total liabilities 1,743,469 1,892,072 Equity 250,468 218,729 Total liabilities and equity $ 1,993,937 $ 2,110,801 Net interest income $ 73,327 $ 69,116 Interest rate spread 3.41 % 3.03 % Net interest margin 3.77 % 3.35 % (1) Interest income includes $5.0 million and $7.5 million of net fee income for the years ended 2022 and 2021, respectively.
Biggest changeThe yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. 20 For the Years Ended December 31, 2023 2022 Average Balance Interest Income/ Expense Yield/ Cost Average Balance Interest Income/ Expense Yield/ Cost ( Dollars in thousands) Assets Loans (1) (2) $ 1,782,055 $ 106,061 5.95 % $ 1,580,318 $ 82,900 5.25 % Investment securities 25,168 1,048 4.16 % 25,922 772 2.98 % Deposits with banks 114,880 5,595 4.87 % 338,277 3,811 1.13 % Total interest-earning assets 1,922,103 $ 112,704 5.86 % 1,944,517 $ 87,483 4.50 % Non-interest earning assets 78,253 79,869 Allowance for credit losses (31,965) (30,449) Total assets $ 1,968,391 $ 1,993,937 Liabilities and Equity Interest bearing deposits NOWs $ 86,932 $ 1,377 1.58 % $ 92,535 $ 417 0.45 % Money markets 403,292 17,120 4.25 % 352,339 3,927 1.11 % Savings 127,442 1,486 1.17 % 195,029 905 0.46 % Time deposits 498,089 15,232 3.06 % 514,421 4,890 0.95 % Brokered certificates of deposit 121,702 6,044 4.97 % 26,785 932 3.48 % Total interest-bearing deposits 1,237,457 41,259 3.33 % 1,181,109 11,071 0.94 % Borrowings 170,093 7,231 4.25 % 119,422 3,085 2.58 % Total interest-bearing liabilities 1,407,550 $ 48,490 3.44 % 1,300,531 $ 14,156 1.09 % Non-interest bearing deposits 265,148 428,549 Other liabilities 16,802 14,389 Total liabilities 1,689,500 1,743,469 Equity 278,891 250,468 Total liabilities and equity $ 1,968,391 $ 1,993,937 Net interest income $ 64,214 $ 73,327 Interest rate spread 2.42 % 3.41 % 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.
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.
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 19 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.
The interest rate sensitivity position as of December 31, 2022 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 interest rate sensitivity position as of December 31, 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 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. 24 In theory, interest rate risk can be diminished by maintaining a nominal level of interest rate sensitivity.
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. 26 In theory, interest rate risk can be diminished by maintaining a nominal level of interest rate sensitivity.
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 losses requires a high degree of judgment.
Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower, projected industry outlook, and economic conditions. The process of determining the level of the allowance for credit losses requires a high degree of judgment.
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, 2022, the Company and the Bank exceeded all applicable regulatory capital requirements.
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, 2023, the Company and the Bank exceeded all applicable regulatory capital requirements.
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. 25 For commitments to lend, we generally require collateral or a guarantee.
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. 27 For commitments to lend, we generally require collateral or a guarantee.
At December 31, 2022, 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.
At December 31, 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.
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, 2022 and 2021.
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, 2023 and 2022.
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, 2022 and December 31, 2021, standby letters of credit with customers were $1.5 million and $1.5 million, respectively.
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, 2023 and December 31, 2022, standby letters of credit with customers were $1.5 million and $1.5 million, respectively.
The increase in total shareholders' equity was primarily due to the retention of earnings from the period, partially offset by the recognition of $8.1 million of cash dividends. 23 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.
The increase in total shareholders' equity was primarily due to the retention of earnings from the period, partially offset by the recognition of $8.6 million of cash dividends. 25 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.
The general based component covers loans and leases on which there are incurred losses that are not yet individually identifiable. The allowance calculation and determination process is dependent on the use of key assumptions.
The general based component covers loans and leases on which there are expected credit losses that are not yet individually identifiable. The allowance calculation and determination process is dependent on the use of key assumptions.
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.
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.
At December 31, 2022, our cash position was $182.2 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.
At December 31, 2023, our cash position was $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 fee income for the year ended December 31, 2022 from the commercial deposit accounts of depositors who do business in the cannabis industry totaled $4.4 million and is included in service fees on deposit accounts in the accompanying consolidated statements of income. Such deposit fee income totaled $5.1 million during the year ended December 31, 2021.
The fee income for the year ended December 31, 2023 from the commercial deposit accounts of depositors who do business in the cannabis industry totaled $3.4 million and is included in service fees on deposit accounts in the accompanying consolidated statements of income. Such deposit fee income totaled $4.4 million during the year ended December 31, 2022.
At December 31, 2022 and December 31, 2021, unused commitments to extend credit amounted to approximately $159.0 million and $117.7 million, respectively. Commitments to fund fixed-rate loans were immaterial at December 31, 2022. Variable-rate commitments are generally issued for less than one year and carry market rates of interest.
At December 31, 2023 and December 31, 2022, unused commitments to extend credit amounted to approximately $93.8 million and $159.0 million, respectively. Commitments to fund fixed-rate loans were immaterial at December 31, 2023. Variable-rate commitments are generally issued for less than one year and carry market rates of interest.
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.
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.
These available for sale securities are readily marketable and are available to meet our additional liquidity needs. At December 31, 2022, the Company's investment securities portfolio classified as available for sale was $9.4 million. We had unused loan commitments of $159.0 million at December 31, 2022. Our loan commitments are normally originated with the full amount of collateral.
These available for sale securities are readily marketable and are available to meet our additional liquidity needs. At December 31, 2023, the Company's investment securities portfolio classified as available for sale was $7.1 million. We had unused loan commitments of $93.8 million at December 31, 2023. Our loan commitments are normally originated with the full amount of collateral.
Loans, net unearned income Loans receivable increased to $1.75 billion at December 31, 2022, from $1.48 billion at December 31, 2021.
Loans, net unearned income Loans receivable increased to $1.79 billion at December 31, 2023, from $1.75 billion at December 31, 2022.
At December 31, 2022, the Company had a $693.7 million line of credit from the FHLBNY, of which $83.2 million was outstanding, $50.0 million was a letter of credit to secure public deposits, and $560.5 million was unused. Our investment portfolio primarily consists of mortgage-backed available for sale securities issued by US government agency and government sponsored entities.
At December 31, 2023, the Company had a $944.4 million line of credit from the FHLBNY, of which $125.0 million was outstanding, $50.0 million was a letter of credit to secure public deposits, and $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.
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. 17 As of December 31, 2022, we had total assets of $1.98 billion, total liabilities of $1.72 billion, and total shareholders' equity of $266.0 million.
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, 2023, we had total assets of $2.02 billion, total liabilities of $1.74 billion, and total shareholders' equity of $284.3 million.
We recorded a provision for loan losses of $1.8 million and $0.5 million in 2022 and 2021, respectively. The provision for loan losses as a percentage of interest income was 2.06% and 0.61% in 2022 and 2021, respectively.
We recorded a recovery for credit losses of $2.1 million and a provision for loan losses of $1.8 million in 2023 and 2022, respectively. The (recovery) provision for credit losses as a percentage of interest income was (1.82)% and 2.06% in 2023 and 2022, respectively.
The increase was primarily due to an increase in residential 1 - 4 family of $165.1 million; commercial non-owner occupied of $72.3 million; and construction loans of $39.7 million; partially offset by a decrease of $24.7 million in commercial and industrial loans.
The increase was primarily due to an increase in residential 1 - 4 family of $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 in construction loans.
Net Interest Income Net interest income increased $4.2 million, or 6.1%, to $73.3 million for the year ended 2022 compared to $69.1 million for the year ended 2021. The increase in net interest income was primarily due to an increase in interest income of $5.4 million, partially offset by an increase in interest expense of $1.2 million.
Net Interest Income Net interest income decreased $9.1 million, or 12.4%, to $64.2 million for the year ended 2023 compared to $73.3 million for the year ended 2022. The 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.
Investment securities Total investment securities decreased to $18.7 million at December 31, 2022, from $23.3 million at December 31, 2021, a decrease of $4.5 million or 19.4%. The decrease was primarily due to pay downs of $2.9 million and $1.0 million valuation decline.
Investment securities Total investment securities decreased to $16.4 million at December 31, 2023, from $18.7 million at December 31, 2022, a decrease of $2.4 million or 12.6%. The decrease was primarily due to pay downs of $2.5 million, partially offset by a $0.1 million valuation increase.
Results of Operations Net Income We recorded net income available to common shareholders of $41.8 million or $3.51 per basic common share and $3.44 per diluted common share, for the year ended December 31, 2022, compared to $40.7 million, or $3.43 per basic common share and $3.36 per diluted common share, for the year ended December 31, 2021, an increase of $1.1 million or 2.6%.
Results of Operations Net Income We recorded net income available to common shareholders of $28.4 million or $2.38 per basic common share and $2.35 per diluted common share, for the year ended December 31, 2023, compared to $41.8 million, or $3.51 per basic common share and $3.44 per diluted common share, for the year ended December 31, 2022, a decrease of $13.4 million or 32.0%.
Allowance for Loan and Lease Losses : Our allowances for loan and lease losses represents management's best estimate of probable losses inherent in our loan portfolio excluding those loans accounted for under fair value. Our process for determining the allowance for loan and lease losses is discussed in Note 1 to the Consolidated Financial Statements.
Allowance for Credit Losses : Our allowances for credit losses represents management's best estimate of probable losses inherent in our investment and loan portfolios, excluding those loans accounted for under fair value. Refer to N ote 1 in the Notes t o the Consolidated Financial Statements for further information.
The decrease in total liabilities was primarily due to a decrease in total deposits, partially offset by an increase in borrowings. Total deposits decreased $192.4 million, or 10.9%, to $1.6 billion at December 31, 2022, from $1.8 billion at December 31, 2021.
Total liabilities were $1.74 billion at December 31, 2023. This represented a $20.3 million, or 1.2%, increase from $1.72 billion at December 31, 2022. The increase in total liabilities was primarily due to an increase in borrowings, partially offset by a decrease in deposits.
The Bank expects this trend to continue in the foreseeable future. 22 Borrowings At December 31, 2022, total borrowings increased $5.2 million to $126.1 million at December 31, 2022, from $120.9 million at December 31, 2021. The increase in borrowings was primarily due to an increase in FHLBNY advances of $5.0 million.
Borrowings At December 31, 2023, total borrowings increased $42.0 million to $168.1 million at December 31, 2023, from $126.1 million at December 31, 2022. The increase in borrowings was primarily due to an increase in FHLBNY advances of $41.9 million.
Interest expense increased to $14.2 million for 2022, from $13.0 million for 2021, an increase of $1.2 million, or 9.3%. The increase in interest expense was primarily due to an increase in market interest rates on our deposit accounts.
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 expense was primarily due to an increase in market interest rates on deposit accounts at the Bank, as well as a change in the deposit mix.
Deposits At December 31, 2022, the Bank’s total deposits decreased to $1.6 billion from $1.8 billion at December 31, 2021, a decrease of $192.4 million, or 10.9%.
Deposits At December 31, 2023, the Bank’s total deposits decreased to $1.55 billion from $1.58 billion at December 31, 2022, a decrease of $23.2 million, or 1.5%.
The decrease in deposits was primarily attributed to a decrease in non-interest bearing demand deposits of $201.3 million, and time deposits of $91.9 million, partially offset by an increase in brokered CD balances of $101.3 million.
The decrease in deposits was primarily attributed to a decrease in non-interest bearing demand deposits of $120.4 million, savings of $105.1 million, time deposits of $42.2 million, and interest checking of $20.1 million 24 partially offset by an increase in money market of $218.4 million, and brokered CD balances of $46.2 million.
Equity Total shareholders’ equity increased to $266.0 million at December 31, 2022, from $232.4 million at December 31, 2021, an increase of $33.7 million or 14.5%.
Equity Total shareholders’ equity increased to $284.3 million at December 31, 2023, from $266.0 million at December 31, 2022, an increase of $18.3 million or 6.9%.
Total loans outstanding increased $266.6 million at December 31, 2022, primarily due to an increase in residential 1 to 4 family loans of $165.1 million; commercial non-owner occupied loans of $72.3 million; and construction loans of $39.7 million; net of a decrease of $24.7 million in commercial and industrial loans.
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 construction loans of $34.8 million.
Non-interest Income The table below displays the components of non-interest income for 2022 and 2021. 2022 2021 $ Change % Change ( Dollars in thousands) Service fees on deposit accounts $ 4,927 $ 5,662 $ (735) (13.0) % Other Loan fees 1,379 1,346 33 2.5 % Bank owned life insurance income 568 575 (7) (1.2) % Gain on sale of SBA loans 98 214 (116) (54.2) % Gain on sale and valuation adjustments of OREO 328 60 268 446.7 % Other 1,082 942 140 14.9 % Total non-interest income $ 8,382 $ 8,799 $ (417) (4.7) % Non-interest income decreased by $0.4 million to $8.4 million in 2022 compared to 2021 primarily due to a decrease in fee income related to commercial deposit accounts, partially offset by an increase in the gain on sale of OREO.
Non-interest Income The table below shows the components of non-interest income for the years ended December 31, 2023 and 2022. 2023 2022 $ Change % Change ( Dollars in thousands) Service fees on deposit accounts $ 3,872 $ 4,927 $ (1,055) (21.4) % Other Loan fees 851 1,379 (528) (38.3) % Bank owned life insurance income 737 568 169 29.8 % Gain on sale of SBA loans — 98 (98) (100.0) % Gain on sale and valuation adjustments of OREO 38 328 (290) (88.4) % Other 1,194 1,082 112 10.4 % Total non-interest income $ 6,692 $ 8,382 $ (1,690) (20.2) % 22 Non-interest income decreased by $1.7 million to $6.7 million during the year ended December 31, 2023 compared to 2022, primarily due to a decrease in fee income related to commercial deposit accounts and other loan fees, partially offset by an increase in income earned on bank owned life insurance.
Allowance for loan losses Allowance for loan losses increased $2.0 million, to $31.8 million, or 6.70%, at December 31, 2022, from $29.8 million at December 31, 2021. The increase was primarily due to the provision of $1.8 million due to the increase in the loan portfolio.
Allowance for credit losses Allowance for credit losses increased $0.3 million, to $32.1 million, or 0.90%, at December 31, 2023, from $31.8 million at December 31, 2022. The increase was primarily due to an increase in the portfolio balance, net of a decrease in historical loss rates.
The following table presents certain key condensed balance sheet data as of December 31, 2022 and December 31, 2021: 21 December 31, 2022 December 31, 2021 $ Change % Change ( Dollars in thousands) Cash and cash equivalents $ 182,150 $ 596,553 $ (414,403) (69.5) % Investment securities 18,744 23,269 (4,525) (19.4) % Loans, net of unearned income 1,751,459 1,484,847 266,612 18.0 % Allowance for loan losses (31,845) (29,845) (2,000) 6.7 % Total assets 1,984,915 2,136,445 (151,530) (7.1) % Total deposits 1,575,981 1,768,410 (192,429) (10.9) % FHLBNY borrowings 83,150 78,150 5,000 6.4 % Subordinated debt 42,921 42,732 189 0.4 % Total liabilities 1,718,881 1,904,084 (185,203) (9.7) % Total equity 266,034 232,361 33,673 14.5 % Total liabilities and equity 1,984,915 2,136,445 (151,530) (7.1) % Cash and cash equivalents Cash and cash equivalents decreased $414.4 million to $182.2 million at December 31, 2022, from $596.6 million at December 31, 2021, a decrease of 69.5%.
The following table presents certain key condensed balance sheet data as of December 31, 2023 and December 31, 2022: December 31, 2023 December 31, 2022 $ Change % Change ( Dollars in thousands) Cash and cash equivalents $ 180,376 $ 182,150 $ (1,774) (1.0) % Investment securities 16,387 18,744 (2,357) (12.6) % Loans, net of unearned income 1,787,340 1,751,459 35,881 2.0 % Allowance for credit losses (32,131) (31,845) (286) 0.9 % Total assets 2,023,500 1,984,915 38,585 1.9 % Total deposits 1,552,827 1,575,981 (23,154) (1.5) % FHLBNY borrowings 125,000 83,150 41,850 50.3 % Subordinated debt 43,111 42,921 190 0.4 % Total liabilities 1,739,183 1,718,881 20,302 1.2 % Total equity 284,317 266,034 18,283 6.9 % Total liabilities and equity 2,023,500 1,984,915 38,585 1.9 % Cash and cash equivalents Cash and cash equivalents decreased $1.8 million to $180.4 million at December 31, 2023, from $182.2 million at December 31, 2022, a decrease of 1.0%.
Interest income for 2022 increased to $87.5 million, an increase of $5.4 million, or 6.6%, from $82.1 million for 2021, primarily due to an increase in interest earned on average deposits held at the Federal Reserve Bank ("FRB") of $3.1 million and an increase in interest and fees on loans of $2.3 million due to higher average outstanding loan balances and higher interest rates.
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 the average balance of $225.1 million.
Our provision for loan losses increased by $1.3 million in 2022 compared to 2021 primarily as a result of the growth of the loan portfolio. For more information about our provision and allowance for loan and lease losses and our loss experience, see “Risk Management and Asset Quality-Allowance for Loan and Lease Losses” and NOTE 4.
For more information about our provision and allowance for credit losses and our loss experience, see “Risk Management and Asset Quality-Allowance for Credit Losses” and NOTE 4. Loans and Allowance for Credit Losses in the Notes to the Consolidated Financial Statements.
Deposits from the cannabis industries decreased to $177.3 million at December 31, 2022, from $375.2 million at December 31, 2021. Total borrowings were $126.1 million at December 31, 2022, an increase of $5.2 million, compared to December 31, 2021, primarily due to an increase in FHLB advances of $5.0 million.
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.
These critical estimates include significant use of our own historical data and other qualitative, 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 losses is comprised of two components. The specific allowance covers impaired loans and is calculated on an individual loan basis.
These evaluations are inherently subjective, as they require material estimates and may be susceptible to significant change. Our allowance for credit losses is comprised of two components, a specific allowance and a general calculation. A specific allowance is calculated for loans and leases that do not share similar risk characteristics with other financial assets, and include collateral dependent loans.
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. 19 Years ended December 31, 2022 vs 2021 Variance due to change in Average Volume Average Rate Net Increase/ (Decrease) ( Dollars in thousands) Interest Income: Loans (net of deferred costs/fees) $ 3,535 $ (1,278) $ 2,257 Investment securities (2) 21 19 Deposits with banks (239) 3,374 3,135 Total interest income 3,294 2,117 5,411 Interest Expense: Deposits (244) 1,561 1,317 Borrowed funds (796) 679 (117) Total interest expense (1,040) 2,240 1,200 Net interest income $ 4,334 $ (123) $ 4,211 Provision for loan losses Our provision for loan losses in each period is driven by net charge-offs and changes to the allowance for loan losses.
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. 21 Years ended December 31, 2023 vs 2022 Variance due to change in Average Volume Average Rate Net Increase/ (Decrease) ( Dollars in thousands) Interest Income: Loans (net of deferred costs/fees) $ 10,583 $ 12,578 $ 23,161 Investment securities (22) 298 276 Deposits with banks (2,517) 4,301 1,784 Total interest income 8,044 17,177 25,221 Interest Expense: NOWs (25) 985 960 Money markets 568 12,625 13,193 Savings (314) 895 581 Time deposits (155) 10,497 10,342 Brokered CDs 3,303 1,809 5,112 Borrowed funds 1,309 2,837 4,146 Total interest expense 4,686 29,648 34,334 Net interest income $ 3,358 $ (12,471) $ (9,113) Provision for credit losses Our provision for credit losses in each period is driven by net charge-offs and changes to the allowance for credit losses.
Deposits from the cannabis businesses decreased to $177.3 million at December 31, 2022, from $375.2 million at December 31, 2021, a decrease of $197.9 million. The decrease in such deposits is primarily attributable to increased competition from other banks, as more banks are soliciting deposits from these businesses and offering favorable terms and fees for such deposits.
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.
Commitments and Contingencies in the Notes to the Consolidated Financial Statements for our banking services to customers who do business in the cannabis industry. 20 Non-Interest Expense The following table displays the components of non-interest expense for 2022 and 2021. 2022 2021 $ Change % Change ( Dollars in thousands) Compensation and benefits $ 10,835 $ 9,731 $ 1,104 11.3 % Professional services 2,249 3,724 (1,475) (39.6) % Occupancy and equipment 2,522 2,381 141 5.9 % Data processing 1,293 1,306 (13) (1.0) % FDIC insurance and other assessments 1,050 1,104 (54) (4.9) % OREO expense 493 287 206 71.8 % Other operating expense 5,391 3,970 1,421 35.8 % Total non-interest expense $ 23,833 $ 22,503 $ 1,330 5.9 % Non-interest expense increased $1.3 million to $23.8 million for 2022, from $22.5 million for 2021 primarily due to an increase in other operating expense of $1.4 million, an increase in compensation and benefits of $1.1 million, and an increase in OREO expense of $206 thousand, partially offset by a decrease in professional services expense of $1.5 million.
Non-Interest Expense The following table displays the components of non-interest expense for 2023 and 2022. 2023 2022 $ Change % Change ( Dollars in thousands) Compensation and benefits $ 12,340 $ 10,835 $ 1,505 13.9 % Professional services 2,328 2,249 79 3.5 % Occupancy and equipment 2,604 2,522 82 3.3 % Data processing 1,385 1,293 92 7.1 % FDIC insurance and other assessments 1,292 1,050 242 23.0 % OREO expense 839 493 346 70.2 % Other operating expense 14,479 5,391 9,088 168.6 % Total non-interest expense $ 35,267 $ 23,833 $ 11,434 48.0 % Non-interest expense increased $11.4 million to $35.3 million for the year ended December 31, 2023, from $23.8 million for 2022 primarily due to an increase in other operating expense of $9.1 million, an increase in compensation and benefits of $1.5 million, and an increase in OREO expense of $0.3 million.
We also use brokered deposits as a funding source, which is more volatile than core deposits. The Bank also joined the IntraFi network to secure an additional alternative funding source. IntraFi provides the Bank an additional source of external funds through their weekly CDARS® settlement process.
The Bank joined the IntraFi network to secure an additional alternative funding source. IntraFi provides the Bank an additional source of external funds through their weekly CDARS® settlement 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, 2022, total assets decreased 7.1% and total equity increased 14.5%, compared to December 31, 2021. Our risk based tier 1 capital ratio remained strong during the year and was 19.3% at December 31, 2022. In addition, during 2022 we returned $7.9 million of capital to our common shareholders through common stock dividends.
Our risk based tier 1 capital ratio was 20.8% at December 31, 2023. In addition, during 2023 we returned $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.
The decrease in total assets was primarily attributable to a decrease in cash and cash equivalents, partially offset by an increase in loans. Cash and cash equivalents decreased $414.4 million, to $182.2 million at December 31, 2022, primarily due to a decrease in deposits, as well as in increase in loans receivable.
Financial Condition General At December 31, 2023, the Company’s total assets were $2.02 billion, an increase of $38.6 million or 1.9%, from December 31, 2022. The increase in total assets was primarily attributable to an increase in loans, restricted stock, and other assets. Cash and cash equivalents decreased $1.8 million, to $180.4 million at December 31, 2023.
Net income available to common shareholders for 2022 was $41.8 million. In 2022, net income available to common shareholders increased 2.6% over the previous year primarily due to higher net interest income, partially offset by an increase in the provision for loan losses and higher non-interest expense.
In addition, non-interest expense increased due to an increase in compensation and benefits expense, lower net interest income, and lower non-interest income, partially offset by lower provision for credit losses. At December 31, 2023, total assets increased 1.9% and total equity increased 6.9%, compared to December 31, 2022.
The decrease in professional services expense was mainly due to the prior year remediation efforts related to our BSA Secrecy Act ("BSA") compliance. Income Tax Income tax expense increased $0.3 million to $14.3 million on income before taxes of $56.1 million for 2022, compared to income tax expense of $13.9 million on income before taxes of $54.9 million for 2021.
Income Tax Income tax expense decreased $5.0 million to $9.2 million on income before taxes of $37.7 million for 2023, compared to income tax expense of $14.3 million on income before taxes of $56.1 million for 2022. The effective income tax rates for 2023 and 2022 were 24.5% and 25.4%, respectively.
Removed
Our business operations are subject to risks and uncertainties that could materially affect our operating results, including the continued adverse impact of the COVID-19 pandemic on the local and national economy and our business and results of operations. The extent of such impact will depend on future developments, which are highly uncertain.
Added
Net income available to common shareholders for 2023 was $28.4 million.
Removed
Loans and Allowance for Loan and Lease Losses in the Notes to the Consolidated Financial Statements.
Added
In 2023, net income available to common shareholders decreased 32.0% over the previous year primarily due to a $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.
Removed
The increase in other operating expense was primarily driven by a $793 thousand increase in Pennsylvania shares tax, a $172 thousand increase in director fees, and a $321 thousand increase in other loan expense. The increase in compensation and benefits was primarily due to a $425 thousand increase in salaries, and a $597 thousand increase in pension cost.
Added
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%.
Removed
The effective income tax rates for 2022 and 2021 were 25.4% and 25.4%, respectively. Financial Condition General At December 31, 2022, the Company’s total assets were $1.98 billion, a decrease of $151.5 million or 7.1%, from December 31, 2021.
Added
In addition, a decrease in non-interest bearing demand balances and an increase in brokered deposit balances contributed to the increase in interest expense during the 2023 fiscal year..
Removed
The decrease in the commercial and industrial loan portfolio is primarily due to the Paycheck Protection Program loans, which decreased $25.1 million to $2.8 million at December 31, 2022, from $27.8 million at December 31, 2021. Total liabilities were $1.72 billion at December 31, 2022. This represented a $185.2 million, or 9.7%, decrease from $1.90 billion at December 31, 2021.
Added
Our provision for credit losses decreased by $3.9 million in 2023 compared to 2022 primarily as a result of a decrease in vintage loss rates and a change in the loan portfolio mix, partially offset by an increase in outstanding loan balances. Additionally, the provision for unfunded commitments contributed to $461.0 thousand of the decrease.
Removed
Total equity was $266.0 million and $232.4 million at December 31, 2022 and December 31, 2021, respectively, an increase of $33.7 million from December 31, 2021.
Added
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 cannabis industry.
Removed
The decrease was primarily due to a decrease in deposits mainly attributed to a decrease in deposits from the cannabis businesses, as well as in increase in loans receivable. The decrease in cannabis deposits is primarily due to increased competition for such deposits from other banks. See “Deposits” below.
Added
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.
Removed
During 2022, an armored car company used by the Bank to transport and store cash for the Bank’s cannabis-related customers, informed the Company that some of the cash stored for the Bank is missing from its vault and is presumed to have been stolen.
Added
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.
Removed
Based on preliminary estimates, the Company believes that the amount missing that is attributable to the Bank is approximately $9.5 million. The exact amount of the potential loss, if any, is unknown at this time. Please see Note 15 Commitments and Contingencies of the Notes to Consolidated Financial Statements.
Added
Total deposits decreased $23.2 million, or 1.5%, to $1.55 billion at December 31, 2023, from $1.58 billion at December 31, 2022. Deposits from the cannabis industries decreased to $96.7 million at December 31, 2023, from 23 $177.3 million at December 31, 2022.
Removed
The rates are comparable to brokered deposits and can be obtained within a shorter period time than brokered deposits. While deposit accounts comprise the vast majority of our funding needs, we maintain secured borrowing lines with the FHLBNY.
Added
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.
Removed
As of December 31, 2022 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) Interest-earning assets: Loans (1) $ 320,454 $ 314,500 $ 704,350 $ 238,135 $ 155,871 $ 1,733,310 Investment securities 6,019 1,791 4,769 4,960 1,205 18,744 Cash and cash equivalents 154,985 — — — — 154,985 Total interest-earning assets $ 481,458 $ 316,291 $ 709,119 $ 243,095 $ 157,076 $ 1,907,039 Interest-bearing liabilities: NOW, Saving and Money market deposits $ 32,216 $ 96,649 $ 257,730 $ 212,712 $ 20,993 $ 620,300 Retail time deposits 87,377 168,588 218,085 18,648 — 492,698 Brokered time deposits 11,667 97,537 1,233 — — 110,437 Borrowed funds 23,403 73,150 — — 30,000 126,553 Total interest-bearing liabilities $ 154,663 $ 435,924 $ 477,048 $ 231,360 $ 50,993 $ 1,349,988 Interest rate sensitive gap $ 326,795 $ (119,633) $ 232,071 $ 11,735 $ 106,083 $ 557,051 Cumulative interest rate gap $ 326,795 $ 207,162 $ 439,233 $ 450,968 $ 557,051 $ — Ratio of rate-sensitive assets to rate-sensitive liabilities 311.3 % 72.6 % 148.6 % 105.1 % 308.0 % 141.3 % Cumulative interest sensitivity gap to total assets 16.5 % 10.4 % 22.1 % 22.7 % 28.1 % — (1) Loan balances exclude nonaccruing loans, deferred fees and costs, and loan discounts.
Added
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.
Removed
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 is based on periodic evaluations of the 26 loan and lease portfolios and other relevant factors.
Added
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 (Dollars in thousands) Interest-earning assets: Loans (1) $ 283,271 $ 446,949 $ 785,851 $ 212,231 $ 49,112 $ 1,777,414 Investment securities 8,127 1,442 3,676 4,049 7,272 24,566 Cash and cash equivalents 167,659 — — — — 167,659 Total interest-earning assets $ 459,057 $ 448,391 $ 789,527 $ 216,280 $ 56,384 $ 1,969,639 Interest-bearing liabilities: NOW, Saving and Money market deposits $ 33,543 $ 100,627 $ 345,578 $ 203,450 $ 30,370 $ 713,568 Retail time deposits 153,882 257,720 35,947 2,937 — 450,486 Brokered time deposits 106,692 49,150 742 — — 156,584 Borrowed funds 43,403 — 95,000 — 30,000 168,403 Total interest-bearing liabilities $ 337,520 $ 407,497 $ 477,267 $ 206,387 $ 60,370 $ 1,489,041 Interest rate sensitive gap $ 121,537 $ 40,894 $ 312,260 $ 9,893 $ (3,986) $ 480,598 Cumulative interest rate gap $ 121,537 $ 162,431 $ 474,691 $ 484,584 $ 480,598 $ — 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 6.0 % 8.0 % 23.5 % 23.9 % 23.8 % — (1) Loan balances exclude nonaccruing loans, deferred fees and costs, and loan discounts.
Removed
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.
Added
Our determination of the allowance for credit losses is based on periodic evaluations of the loan and lease portfolios and other relevant factors, broken down into vintage based on year of origination. These critical estimates include significant use of our 28 own historical data and other qualitative, and quantitative data.
Removed
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.
Added
A loan is considered to be collateral dependent when foreclosure of the underlying collateral is probable.
Removed
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.
Added
Parke has elected to apply the practical expedient to measure expected credit losses of a collateral dependent asset using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.
Removed
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.

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