VITO S. PANTILIONE
2020 was one of the most difficult years the country and the world have faced. The COVID-19 pandemic changed our lives and the way the world conducts business. The term “Lockdown” took on a completely new meaning. Unemployment skyrocketed to a high not seen since the Great Depression and major cities became ghost towns. The government created the Cares Act to help people and businesses survive the crisis. Included in the package was a bank supported program identified as PPP loans, Paycheck Protection Program. This enabled businesses to borrow money through a bank in an SBA program to help them survive the crisis and to continue paying their employees, with a provision that the loan, if certain criteria were met, would be forgiven. The program was rolled out and there were changes made to the program almost daily. Regardless of the challenges, Parke Bank jumped in and participated in the PPP loan program. We provided millions of dollars in loans to our customers and area businesses to help them survive the pandemic. The government recently rolled out the second round of the PPP program. Once again, Parke Bank is supporting our customers by participating in the Round II Funding. All PPP loans are 100% guaranteed by the SBA.
The economic and health crisis from the pandemic is not over. Major challenges will continue even though the COVID-19 vaccination process is well under way. Many businesses will not survive, while others will take years to recover. The unemployment rate is slowly coming down and many “experts” are forecasting a robust recovery of the economy by the end of 2021. This forecast may be in jeopardy if positive COVID -19 cases continue to increase.
Despite the many challenges in 2020, Parke Bank achieved very strong earnings. We generated $28.4 million in Net Income, $2.37 per diluted common share in 2020, only slightly less than our record earnings in 2019. We achieved this result while maintaining a conservative approach to future credit challenges due to the pandemic. We increased our loan loss provision close to $5 million over the provision for 2019. When excluding our PPP loans, which as previously mentioned are 100% guaranteed by the SBA, our ALLL is over 2%. Asset quality continues to be an important priority of our bank.
Like most banks, we have a high level of liquidity. Cash and cash equivalent s increased 139% from December 31, 2019 to $458.6 million as of December 31, 2020. It was only a year ago, 2019, that banks were battling each other for deposits, especially in our Mid-Atlantic region. A portion of this cash was generated from stimulus check funds and the cannabis industry. Total deposits increased to $1.59 billion as of December 31, 2020, up from $1.34 billion as of December 31, 2019, a 19% increase.
Although our outstanding loans increased $150 million from $1.42 billion as of December 31, 2019 to $1.57 billion as of December 31, 2020, the majority of the increase was due to the PPP loans that we funded in 2020. Due to the pandemic’s effect on the economy, our loan growth was relatively flat.
One of the critical factors supporting Parke Bank’s continued strong earnings is our tight controls of expenses. Our efficiency ratio in 2020 was 30.75%, one of the best in the banking industry. We focus on ways to maintain, and reduce where possible, our expenses without comprising the services to our customers or the safety and soundness of the bank.
Equally important is the growth of Parke Bank’s equity. Our equity increased 13% to $202.6 million as of December 31, 2020, up from $179.4 million as of December 31, 2019. Parke Bank’s capital posit ion is above the regulatory guidelines for a well-capitalized bank.
Parke Bank continued to generate strong earnings in the 1st quarter of 2021. The banking industry, including Parke Bank, is facing strong headwinds with shrinking margins, increased regulatory costs and a volatile economy. There are many risk sectors in a bank’s loan portfolio due to the pandemic. We choose to be optimistic, although cautious as we continue to add to our ALLL. The vaccination process in this country continues with a reported 25% of the population vaccinated, and government representatives stating that everyone wanting a COVID-19 vaccine would be able to get one by June 1, 2021. There is a concern about the recent increase in positive COVID-19 tests, especially considering the number of vaccines issued. We are seeing more businesses opening and increased capacity limits for our restaurants, hotels, sport venues, and catering facilities. Regardless of the economy becoming stronger, there will be a new paradigm for businesses. Virtual offices will be more commonplace and online shopping will remain as a major source of consumer spending.
We will continue to focus on maintaining the financial strength of Parke Bank. That means strong capital, strong reserves, and tight controls on expenses. The strength of our company enables us to take advantage of opportunities in the market. Tough times creates those opportunities and we are well positioned to move quickly when they become available.
C.R. “Chuck” Pennoni
Vito S. Pantilione
President and Chief Executive Officer