To Our Shareholders:
It is sometimes difficult to believe that we are starting our 20th year in business. Many of you were right there with us investing in our Company when all we could present to you was our business plan and goals to build a quality bank in the Delaware Valley region. Our initial investors provided $8 million dollars to start our de novo bank in a little bank trailer in Washington Township, NJ. Thanks to that investment, and our Board of Directors and staff, our Bank became profitable in our 13th month of operation, which at that time was a record for a de novo bank in New Jersey. Our Bank continued to grow and maintained profitability which supported our going public in 2002, raising an additional $8.5 million in capital. We continued to grow and generate strong profits, which provided the financial strength to open new branches in the region. Today we have seven branches stretching from the shore to Philadelphia and, as of the end of 2017, we are over $1 billion dollars in assets with shareholders’ equity of close to $135 million. Our Board of Directors focused on shareholder value, approving ten stock dividends since going public and cash dividends beginning in July of 2014. We have increased our cash dividend five times since first beginning to pay a cash dividend. Today we are paying 12 cents per share per quarter, up from our initial cash dividend of 5 cents per share per quarter. Our Board of Directors also issued a 10% stock dividend in 2017, again enhancing shareholder value. Our company’s growth in assets, loans, deposits and profitability continued through the most challenging recession, which started in 2007, since the Great Depression. Over the last five years our stock has outperformed the NASDAQ, S&P and DOW averages.
Strong operating profits continued in 2017 with Net Income of $10.8 million, after taking the non-recurring deferred tax asset charge of $3.2 million, due to the new tax law that was passed in December 2017. The new tax law dampened our earnings in 2017, due to the lowering of the corporate tax rate from 35% to 21%. Based on our Company’s past performance, we believe the new tax rate will support the charge being recovered by year-end 2018. The deferred tax asset charge reduced our ROAA from 1.43% to 1.13% and our ROAE from 12.19% to 9.40% in 2017. Our Company’s strong operating income was supported by our loan portfolio growing to over $1 billion by the end of 2017, close to a 20% increase from the end of 2016. Our deposits grew to $866 million at year-end, a 10% increase from the end of 2016, which helped support the growth of our loan portfolio. We maintained very tight controls on our Company’s expenses ending the year with a cost efficiency ratio of 36.39%, which again makes us one of the leaders in controlling expenses in our peer group.
We have an unwavering commitment to reducing our non-performing assets (“NPAs”). Our non-performing loans decreased 60% in 2017 to $4.5 million, a decrease of $6.8 million from the end of 2016. OREO decreased to $7.2 million, a 31% reduction from $10.5 million at the end of 2016. The Company’s NPAs to total assets ratio is 1.04%, down from 2.15% at the end of 2016. Our focus continues to be on reducing our NPAs through aggressive workouts of these assets rather than selling them at a deep discount, preserving shareholder value.
Last year we discussed the possibility of the business environment improving due to promised changes in regulations and the anticipation of a new tax bill being passed. There have been many regulations removed or amended to assist various industries with growth and employment. There also was a new tax law passed in December of 2017. The new tax bill did not have a direct effect on the country’s 2017 economy, however, the GDP experienced strong growth.
When the new tax law was passed, many companies announced moving their operations and cash back to the United States, while other companies announced the expansion of their existing operation, with some announcing construction of new plants in the US, which will support additional growth.
Several companies, including Parke Bank, increased the starting salaries of entry-level employees while others issued special bonuses to their employees. Employee wages increased and 200,000 new jobs were added in January of 2018. All good news, right? Not so fast, alarms sounded that the economy would be overheating and increased wages will spike inflation which may force the Fed to accelerate their plans to raise interest rates. A volatile and uncertain economy is certainly nothing new. However, we believe our Company is well positioned to take advantage of opportunities in the market.
Parke Bancorp’s Board, Management and Staff will be working hard in what looks to be another exciting year in 2018. We are currently working on the potential of opening two new Loan Production Offices, which could help the strong loan growth that we enjoyed in 2017. We are also working on new products including offering credit cards and upgrading our debit card process, in addition to new loan products. Thanks to you, our shareholders, we have the capital to expand our market share, increase lending and grow the profitability of our Company.
C.R. “Chuck” Pennoni
Vito S. Pantilione
President and Chief Executive Officer
The Federal Deposit Insurance Corporation (FDIC) has permanently increased deposit insurance on all accounts to $250,000 per depositor.