To Our Shareholders:
The economy continued to improve in 2015, although slower than we would have liked. Real estate activity increased and values enjoyed a slight appreciation. There is still a long way to go before the industry returns to the pre-recession explosion in real estate values. Lower unemployment and an under control inflation rate supported the Federal Reserve finally delivering on their many promises over the last two years to raise interest rates. The modest 25 basis point interest rate increase still leaves the banking industry facing continued compressed net interest margins, creating challenges in growing profits. These challenges supported the continued consolidation of many banks. Mergers and acquisitions by banks increased in 2015 with bank values improving.
The new regulations implemented for residential mortgages have dramatically increased the cost of providing this product to the public. Many banks in this region have discontinued offering residential mortgages due to the unreasonable exposure and costs that banks now have to face. We have continued to offer residential mortgages, but at a much lower profit margin, which again puts pressure on earnings. It is important that consumers have options for their banking needs. Onerous regulations and costs reduce the ability of community banks to compete, leaving consumers with drastically reduced options and less competition. I would like to think that regulations would be structured to encourage participation of community banks.
The challenges in the economy, increased regulatory costs and fierce competition, including the tremendous growth of online lending, did not stop Parke Bancorp from having another great year. We generated $9.5 million in net income available to common shareholders, our third consecutive year of record earnings. The core earnings of our Bank continued to grow with a strong increase in interest income of $1.3 million, an increase of 3.4% over 2014, while maintaining strict controls over our expenses.
We enjoyed strong growth in 2015 with a 7.7% growth in total assets to $885.1 million, up from $821.7 million in 2014. The growth was supported by the increase in our loan portfolio to $758.5 million as of December 31, 2015, up from $713.1 million at December 31, 2014. The competition for quality loans is fierce, pushing down interest rates. Although we are actively responding to lower interest rates when competing for a loan, we do not compromise our underwriting standards. We have recently added new loan officers to our team, which provides support to our goal of continuing the growth in our loan portfolio.
We continue to focus on reducing our nonperforming assets (“NPAs”). It has been, and will continue to be our commitment to our shareholders to dispose of NPAs without jeopardizing shareholder value. We reduced nonperforming loans to $13.6 million at December 31, 2015, a reduction of 50%. Other Real Estate Owned (“OREO”) on December 31, 2015 was $16.6 million, down from $20.9 million as of December 31, 2014, a 21% reduction. The major OREO property continues to be a condominium project in Absecon, NJ. We have commenced sales in the project and sold 16 units since March 2015, reducing the asset from over $9 million to below $6.5 million. We also saw substantial improvement in our 30 to 89 days past due loans, which totaled $1.2 million at December 31, 2015, a decrease of $1.7 million from December 31, 2014, for close to a 60% reduction.
The improved credit quality of our loan portfolio has not diminished our commitment to prudently monitoring our allowance for loan losses to ensure that the balance remains appropriate for our loan portfolio. Our allowance for loan losses was $16.1 million as of December 31, 2015. Our allowance for loan losses remains over 2% of our loan portfolio. Our allowance for loan losses to nonperforming loans experienced a substantial improvement to 119%, up from 67% as of December 31, 2014.
Total shareholders’ equity increased to $112 million as of December 31, 2015, an increase of close to 10% from December 31, 2014. We continue to have a very strong capital position, which is substantially in excess of the amount required by Federal banking regulations to be a well-capitalized bank. The Bank’s Tier 1 Capital Ratio is $77.4 million in excess of the amount required to be well capitalized. Strong capital remains the key ingredient to facing the many challenges in the economy and the ever changing regulatory environment. It also provides the foundation for growth and the ability to take advantage of opportunities that may materialize in the market.
The continued strength in our capital position, combined with our ability to generate strong earnings, has put us in an excellent position to grow our Bank’s footprint and enhance shareholder value. As reported last year, we identified an excellent opportunity to open a state of the art branch office in Collingswood, NJ, which will include the latest technology for interactive teller machines (“ITM”). Although it has taken longer than initially projected, we now have all approvals in place and anticipate construction to commence to renovate the building within the next 60 days. Based on our analysis of this market, we have expanded our plans for the office to include additional lenders that will be located in this office, in addition to a Business Development Officer. We will provide a full array of banking products, deposit programs, commercial loans, SBA loans and consumer loans at this new location. We are in an excellent position to provide very competitive rates for our deposits and loan products in addition to providing superior banking services in the community.
We are also in the process of finalizing an agreement to open a full service branch in the Chinatown neighborhood of Philadelphia. We have had the benefit of a substantial loan portfolio in this largely Asian community since opening Parke Bank. We currently have over $200 million in loans from this community which consistently outperform the balance of our loan portfolio. We still have a lot of work to do, including all required regulatory approvals, however we are confident that a full service branch at this location will be a great addition to our branch system and enhance the footprint of our growing bank. We will be able to provide direct service to our Asian friends and customers in their native language.
No one really knows where the economy and the banking industry is heading. Depending on what page of the newspaper you open, forecasts would include an upcoming worldwide recession, to slow continued growth in the economy and even some predict a robust expansion in the economy after the Presidential election. World events constantly change the direction of the economy. There are many unknowns, which are out of our control. What we can do is maintain a strong capital position, continue with tight controls on expenses and strategically take advantage of opportunities, while carefully expanding our already well qualified staff to implement our growth plans. Our Board of Directors, management and staff will continue to work tirelessly to protect and enhance shareholder value. We remain focused on returning the commitment to our shareholders that they have demonstrated they have in us.
C.R. “Chuck” Pennoni
Vito S. Pantilione
President and Chief Executive Officer