UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 2006
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 000-51338
PARKE BANCORP, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 65-1241959
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
601 DELSEA DRIVE, WASHINGTON TOWNSHIP, NEW JERSEY 08080
(Address of principal executive offices) (Zip Code)
856-256-2500
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 4, 2006, there were issued and outstanding 2,825,475 shares of
the registrant's common stock.
PARKE BANCORP, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2006
INDEX
PAGE
----
PART I FINANCIAL INFORMATION
------
Item 1. Financial Statements............................................................................1
Item 2. Management's Discussion and Analysis of Financial Conditional
and Results of Operations..................................................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................17
Item 4. Controls and Procedures........................................................................17
PART II OTHER INFORMATION
-------
Item 1. Legal Proceedings..............................................................................18
Item 1A. Risk Factors...................................................................................18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds....................................18
Item 3. Default Upon Senior Securities.................................................................18
Item 4. Submission of Matters to a Vote of Security Holders............................................19
Item 5. Other Information..............................................................................19
Item 6. Exhibits.......................................................................................19
SIGNATURES
EXHIBITS AND CERTIFICATIONS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PARKE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
2006 2005
------------- -------------
ASSETS
Cash and cash due from banks $ 4,267,383 $ 4,377,196
Federal funds sold 2,381,860 2,840
------------- -------------
CASH AND CASH EQUIVALENTS 6,649,243 4,380,036
------------- -------------
Investment securities available for sale, at market value 22,661,052 22,022,944
Investment securities held to maturity, at amortized cost
(market value $2,298,247 at June 30, 2006 and $2,322,985 at
December 31, 2005) 2,419,164 2,405,841
------------- -------------
TOTAL INVESTMENT SECURITIES 25,080,216 24,428,785
------------- -------------
Restricted stock, at cost 1,312,500 1,348,900
------------- -------------
Loans 294,276,368 259,035,088
Less: allowance for loan losses (4,134,312) (3,573,812)
------------- -------------
TOTAL NET LOANS 290,142,056 255,461,276
------------- -------------
Bank premises and equipment, net 3,009,925 3,079,876
Accrued interest receivable and other assets 9,690,517 9,111,571
------------- -------------
TOTAL ASSETS $ 335,884,457 $ 297,810,444
============= =============
See Notes to Consolidated Financial Statements
1
PARKE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
2006 2005
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing demand $ 19,167,240 $ 17,918,339
Interest-bearing 250,700,473 214,137,969
------------- -------------
TOTAL DEPOSITS 269,867,713 232,056,308
Borrowed funds 4,919,000 5,082,500
Federal Home Loan Bank advances 18,535,024 20,574,360
Subordinated debentures 10,310,000 10,310,000
Accrued interest payable and other accrued liabilities 2,992,960 2,593,949
------------- -------------
TOTAL LIABILITIES 306,624,497 270,617,117
------------- -------------
Commitments and Contingencies (Note 1)
Shareholders' Equity
Common stock, $0.10 par value, 10,000,000 shares
authorized; 2,851,063 shares issued and outstanding at June 30,
2006 and 2,317,364 shares issued and outstanding at December 31, 2005 285,106 231,736
Preferred stock, 1,000,000 shares authorized; no shares issued
and outstanding -- --
Additional paid-in capital 20,905,049 20,511,410
Retained earnings 8,983,791 6,787,118
Accumulated other comprehensive income (loss) (470,674) (286,296)
Treasury stock, at cost (22,438 shares at June 30, 2006 and
2,380 shares at December 31, 2005) (443,312) (50,641)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 29,259,960 27,193,327
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 335,884,457 $ 297,810,444
============= =============
See Notes to Consolidated Financial Statements
2
PARKE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, 2006 JUNE 30, 2005 JUNE 30, 2006 JUNE 30, 2005
------------- ------------- ------------- -------------
Interest And Dividend Income
Loans, including fees $ 5,789,039 $ 3,800,932 $11,039,027 $ 7,200,053
Securities 331,653 297,130 634,104 594,378
Federal funds sold 37,763 8,747 54,821 8,865
----------- ----------- ----------- -----------
Total interest and dividend income 6,158,455 4,106,809 11,727,952 7,803,296
----------- ----------- ----------- -----------
Interest Expense
Deposits 2,414,195 1,359,485 4,437,853 2,475,365
Federal Home Loan Bank Advances 212,982 131,523 414,300 260,300
Other borrowings 198,751 24,224 387,763 44,768
----------- ----------- ----------- -----------
Total interest expense 2,825,928 1,515,232 5,239,916 2,780,433
----------- ----------- ----------- -----------
Net interest income 3,332,527 2,591,577 6,488,036 5,022,863
Provision For Loan Losses 328,000 276,023 563,000 508,157
----------- ----------- ----------- -----------
Net Interest Income After Provision For Losses 3,004,527 2,315,554 5,925,036 4,514,706
----------- ----------- ----------- -----------
Noninterest Income
Service charges and other fee income 166,635 327,760 422,484 480,467
Gain (Loss) on sale of securities -- (9,240) -- (9,240)
----------- ----------- ----------- -----------
Total noninterest income 166,635 318,520 422,484 471,227
----------- ----------- ----------- -----------
Noninterest Expenses
Compensation and benefits 636,028 532,850 1,332,525 1,058,882
Occupancy, equipment and data processing 221,163 203,250 433,874 398,328
Marketing and business development 73,481 100,690 126,908 134,517
Professional services 198,028 205,742 347,058 403,150
Other operating expenses 181,251 91,978 446,262 273,475
----------- ----------- ----------- -----------
Total noninterest expenses 1,309,951 1,134,510 2,686,627 2,268,352
----------- ----------- ----------- -----------
Income Before Income Tax Expense 1,861,211 1,499,564 3,660,893 2,717,581
Income Tax Expense 740,000 595,550 1,464,220 1,081,550
----------- ----------- ----------- -----------
Net Income $ 1,121,211 $ 904,014 $ 2,196,673 $ 1,636,031
=========== =========== =========== ===========
Net Income Per Common Share
Basic $ 0.40 $ 0.34 $ 0.78 $ 0.61
=========== =========== =========== ===========
Diluted $ 0.33 $ 0.29 $ 0.65 $ 0.52
=========== =========== =========== ===========
Weighted Average Shares Outstanding
Basic 2,830,232 2,696,257 2,808,566 2,671,135
=========== =========== =========== ===========
Diluted 3,352,122 3,135,802 3,355,152 3,148,349
=========== =========== =========== ===========
See Notes to Consolidated Financial Statements
3
PARKE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE SHAREHOLDERS'
STOCK CAPITAL EARNINGS (LOSS) TREASURY STOCK EQUITY
----- ------- -------- ------ -------------- ------
Balance, December 31, 2004 $ 217,556 $19,390,102 $3,292,697 $ (71,204) $ - $22,829,151
Stock options and warrants exercised 7,567 627,148 - - - 634,715
Comprehensive income:
Net income for the period - - 1,636,031 - - 1,636,031
Change in net unrealized gain on
securities available for sale,
net of reclassification
adjustment and tax effects, if
any - - - (53,952) - (53,952)
-----------
Total comprehensive income 1,582,079
--------- ----------- ---------- --------- --------- -----------
Balance, June 30, 2005 $ 225,123 $20,017,250 $4,928,728 $(125,156) $ - $25,045,945
========= =========== ========== ========= ========= ===========
Balance, December 31, 2005 $ 231,736 $20,511,410 $6,787,118 $(286,296) $ (50,641) $27,193,327
Stock options and warrants exercised 6,127 445,611 - - - 451,738
Treasury stock purchased - - - - (392,671) (392,671)
20% stock dividend 47,243 (51,972) - - - (4,729)
Comprehensive income:
Net income for the period - - 2,196,673 - - 2,196,673
Change in net unrealized gain on
securities available for sale,
net of reclassification
adjustment and tax effects, if
any - - - (184,378) - (184,378)
Total comprehensive income 2,066,633
--------- ----------- ---------- --------- --------- -----------
Balance, June 30, 2006 $ 285,106 $20,905,049 $8,983,791 $(470,674) $(443,312) $29,259,960
========= =========== ========== ========= ========= ===========
See Notes to Consolidated Financial Statements
4
PARKE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
2006 2005
-------------- ---------------
Operating Activities
Net income $ 2,196,673 $ 1,636,031
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 124,486 131,860
Provision for loan losses 563,000 508,157
Net (accretion) of investment securities
premiums/discounts (10,379) (62,239)
Loss on sale of securities - 9,240
Changes in operating assets and liabilities:
Decrease(increase) in accrued interest receivable and other assets 43,979 (327,695)
Increase in accrued interest payable and other liabilities 398,811 545,936
------------ ------------
Net cash provided by operating activities 3,316,570 2,441,290
------------ ------------
Investing Activities
Purchases of investment securities available for sale (2,000,000) (1,982,500)
Redemptions of restricted stock 36,400 266,500
Proceeds from sales of investment securities available for sale - 5,092,053
Principal payments on mortgage-backed securities 551,645 1,073,971
Net increase in loans (35,243,780) (28,700,499)
Purchases of building premises and equipment (54,535) (39,952)
------------ ------------
Net cash used in investing activities (36,710,270) (24,290,427)
------------ ------------
Financing Activities
Proceeds from exercise of stock options and warrants 451,738 634,715
Purchase of treasury stock (392,671) -
20% stock dividend (4,729) -
Net increase(decrease) in other borrowings (163,500) 1,282,500
Net decrease in Federal Home Loan Bank Advances (2,039,336) (4,031,803)
Net increase in interest-bearing deposits 36,562,504 30,319,089
Net increase in noninterest-bearing deposits 1,248,901 3,741,246
------------ ------------
Net cash provided by financing activities 35,662,907 32,645,747
------------ ------------
Increase in cash and cash equivalents 2,269,207 10,796,610
Cash and Cash Equivalents, January 1, 4,380,036 1,801,788
------------ ------------
Cash and Cash Equivalents, June 30, $ 6,649,243 $ 12,598,398
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest on deposits and borrowings $ 4,899,035 $ 2,360,893
============ ============
Income taxes $ 1,900,000 $ 1,075,000
============ ============
See Notes to Consolidated Financial Statements
5
PARKE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. GENERAL
BUSINESS
Parke Bancorp, Inc. ("Parke Bancorp" or the "Company") is a bank holding
company incorporated under the laws of the State of New Jersey in January 2005
for the sole purpose of becoming the holding company of Parke Bank (the "Bank").
Parke Bancorp recognized the assets and liabilities transferred at the carrying
amounts in the accounts of the Bank as of June 1, 2005, the effective date of
the reorganization. The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") and are presented as if the exchange of shares
occurred as of January 1, 2005. Pursuant to the Plan of Acquisition, each
outstanding share of Parke Bank was converted automatically by operation of law
into one share of Parke Bancorp. Parke Bancorp had no activity prior to the
completion of this reorganization. Parke Bancorp is authorized to issue
10,000,000 shares of common stock, par value $0.10 per share and 1,000,000
shares of serial preferred stock, par value $0.10 per share. Options and
warrants outstanding under the Bank's various Plans were converted automatically
by operation of law into options and warrants to purchase shares of Parke
Bancorp on the same terms and conditions.
The Bank is a commercial bank which commenced operations on January 28,
1999. The Bank is chartered by the New Jersey Department of Banking and insured
by the Federal Deposit Insurance Corporation ("FDIC"). Parke Bancorp and the
Bank maintain their principal offices at 601 Delsea Drive, Washington Township,
New Jersey. The Bank also conducts business through offices in Northfield and
Washington Township, New Jersey and Philadelphia, PA.
FINANCIAL STATEMENTS
The financial statements as of June 30, 2006 and for the three and six
month periods ended June 30, 2006 and 2005 included herein have not been
audited. Comparison to 2005 interim period financial data relate to the
financial condition and results of operations of Parke Bank. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with GAAP have been condensed or omitted; therefore, these financial
statements should be read in conjunction with the Company's audited financial
statements and the notes thereto for the years ended December 31, 2005 included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2005, as filed with the SEC. The accompanying financial statements reflect
all adjustments, which are, in the opinion of management, necessary to present a
fair statement of the results for the interim periods presented. Such
adjustments are of a normal recurring nature. The results for the three months
and six months ended June 30, 2006 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2006 or any other periods.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements include the accounts of Parke Bancorp Inc. and its
wholly owned subsidiaries, Parke Bank and Parke Capital Markets. All significant
inter-company balances and transactions have been eliminated. Such statements
have been prepared in accordance with GAAP and general practice within the
banking industry.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from such estimates.
6
PARKE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
INVESTMENTS
The Company has identified investment securities that will be held for
indefinite periods of time, including securities that will be used as a part of
the Bank's asset/liability management strategy and may be sold in response to
changes in interest rates, prepayments and similar factors. These securities are
classified as "available-for-sale" and are carried at fair value, with temporary
unrealized gains or losses reported as a separate component of accumulated other
comprehensive income (losses), net of the related income tax effect. Declines in
the fair value of the individual available-for-sale securities below their cost
that are other than temporary result in write downs of the individual securities
to their fair value and are included in noninterest income in the consolidated
statements of operations. Factors affecting the determination of whether an
other-than-temporary impairment has occurred include a downgrading of the
security by a rating agency, a significant deterioration in the financial
condition of the issuer, or that the Company would not have the intent and
ability to hold a security for a period of time sufficient to allow for any
anticipated recovery in fair value. The unrealized losses that existed as of
June 30, 2006 are the result of market changes in interest rates since the
securities where purchased. This factor coupled with the fact the Company has
both the intent and ability to hold securities for a period of time sufficient
to allow for any anticipated recovery in fair value substantiates that the
unrealized losses in the available-for-sale portfolio are temporary.
COMMITMENTS
In the general course of business, there are various outstanding
commitments to extend credit, such as letters of credit and un-advanced loan
commitments, which are not reflected in the accompanying financial statements.
Management does not anticipate any material losses as a result of these
commitments.
CONTINGENCIES
The Company is from time to time a party to routine litigation in the
normal course of its business. Management does not believe that the resolution
of this litigation will have a material adverse effect on the financial
condition or results of operations of the Company. However, the ultimate outcome
of any such litigation, as with litigation generally, is inherently uncertain
and it is possible that some litigation matters may be resolved adversely to the
Company.
NOTE 2. EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to
holders of common stock (the numerator) by the weighted average number of common
shares outstanding (the denominator) during the period. Shares issued during the
period are weighted for the portion of the period that they were outstanding.
The weighted average number of common shares outstanding for the three months
ended June 30, 2006 and 2005 was 2,830,232 and 2,696,257, respectively and for
the six months ended June 30, 2006 and 2005 was 2,808,566 and 2,671,135,
respectively.
Diluted earnings per share are similar to the computation of basic earnings
per share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the dilutive
options and warrants outstanding had been exercised. The assumed conversion of
dilutive options and warrants resulted in 521,890 and 439,545 additional shares
for the three months ended June 30, 2006 and 2005, respectively, and for the six
months ended June 30, 2006 and 2005 was 546,586 and 477,214, respectively.
NOTE 3. STOCK-BASED EMPLOYEE COMPENSATION
Effective January 1, 2006, the Company adopted Financial Accounting
Standards Board ("FASB") Statement No. 123 Share-Based Payment (Revised 2004)
("SFAS 123R") utilizing the modified prospective approach. Under the modified
prospective transition method, the Company is required to recognize compensation
cost for 1) all share-based payments granted prior to, but not vested
7
PARKE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
as of, January 1, 2006 based on the grant date fair value estimated in
accordance with the original provisions of SFAS 123; and 2) for all share-based
payments granted on or after January 1, 2006 based on the grant date fair value
estimated in accordance with SFAS 123R. In accordance with the modified
prospective method, the Company has not restated prior period results.
Prior to January 1, 2006, the Company accounted for share-based payments
under the recognition and measurement provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations, as
permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation.
Because options granted had an exercise price equal to or greater than the
market value of the underlying common stock on the date of the grant, no
stock-based employee compensation cost was included in determining net income
for the three and six months ended June 30, 2005.
All outstanding stock options as of January 1, 2006 were fully vested (in
prior years, all options vested upon issuance), thus no compensation expense was
recognized during the six months ended June 30, 2006 for such options. The
Company will use the Black-Scholes option pricing model to estimate the fair
value of any stock-based awards in 2006.
As of June 30, 2006, there were no unvested options and, accordingly, no
unrecognized compensation cost related to share-based payments to be recognized
in the future.
The following table illustrates the effect on net income and earnings per
share for the three and six months ended June 30, 2006, if the Company had
applied the fair value recognition provisions of Financial Accounting Standards
Board ("FASB") Statement No. 123, Accounting for Stock-Based Employee
Compensation, to stock-based employee compensation. Both basic and diluted
calculations give retroactive effect to stock dividends declared.
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
2006 2005 2006 2005
---------- --------- ---------- ----------
Net income, as reported $1,121,211 $ 904,014 $2,196,673 $1,636,031
Deduct total stock-based
compensation expense determined
under the fair value method for
all awards, net of related tax
effects - - - (90,000)
---------- --------- ---------- ----------
Pro-forma net income $1,121,211 $ 904,014 $2,196,673 $1,546,031
========== ========= ========== ==========
Basic earnings per share:
As reported $0.40 $0.34 $0.78 $0.61
Pro forma $0.40 $0.34 $0.78 $0.58
Diluted earnings per share:
As reported $0.33 $0.29 $0.65 $0.52
Pro forma $0.33 $0.29 $0.65 $0.49
NOTE 4. REGULATORY RESTRICTIONS
Both the Company and the Bank are subject to various regulatory capital
requirements of federal and state banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve
8
PARKE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts and ratios
(set forth in the following table) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined).
PARKE BANK
FOR CAPITAL
ACTUAL ADEQUACY PURPOSE
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
AS OF JUNE 30, 2006:
--------------------
(AMOUNTS IN THOUSANDS)
Total Risk Based Capital $42,444 15% $23,236 8%
(to Risk Weighted Assets)
Tier 1 Capital $38,807 13% $11,618 4%
(to Risk Weighted Assets)
Tier 1 Capital $38,807 12% $12,852 4%
(to Average Assets)
FOR CAPITAL
ACTUAL ADEQUACY PURPOSE
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
AS OF DECEMBER 31, 2005:
------------------------
(AMOUNTS IN THOUSANDS)
Total Risk Based Capital $39,416 15% $20,825 8%
(to Risk Weighted Assets)
Tier 1 Capital $36,158 14% $10,413 4%
(to Risk Weighted Assets)
Tier 1 Capital $36,158 13% $11,370 4%
(to Average Assets)
PARKE BANCORP, INC.
FOR CAPITAL
ACTUAL ADEQUACY PURPOSE
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
AS OF JUNE 30, 2006:
--------------------
(AMOUNTS IN THOUSANDS)
Total Risk Based Capital $43,368 15% $20,932 8%
(to Risk Weighted Assets)
Tier 1 Capital $36,601 13% $10,466 4%
(to Risk Weighted Assets)
Tier 1 Capital $36,601 11% $12,852 4%
(to Average Assets)
9
PARKE BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR CAPITAL
ACTUAL ADEQUACY PURPOSE
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
AS OF DECEMBER 31, 2005:
------------------------
(AMOUNTS IN THOUSANDS)
Total Risk Based Capital $40,737 16% $20,856 8%
(to Risk Weighted Assets)
Tier 1 Capital $34,349 13% $10,428 4%
(to Risk Weighted Assets)
Tier 1 Capital $34,349 12% $11,370 4%
(to Average Assets)
Management believes, as of June 30, 2006 and December 31, 2005, that the
Bank and the Company met all capital adequacy requirements to which either of
them was subject.
NOTE 5. SUBORDINATED DEBENTURES
On August 23, 2005, Parke Capital Trust I, a Delaware statutory business
trust and a wholly-owned subsidiary of the Company, issued $5 million of
variable rate capital trust pass-through securities to investors. The variable
interest rate re-prices quarterly at the three-month LIBOR plus 1.66% and was
6.85% at June 30, 2006. Parke Capital Trust I purchased $5.2 million of variable
rate junior subordinated deferrable interest debentures from the Company. The
debentures are the sole asset of the Trust. The terms of the junior subordinated
debentures are the same as the terms of the capital securities. The Company has
also fully and unconditionally guaranteed the obligations of the Trust under the
capital securities. The capital securities are redeemable by the Company on or
after November 23, 2010, at par or earlier if the deduction of related interest
for federal income taxes is prohibited, classification as Tier 1 Capital is no
longer allowed, or certain other contingencies arise. The capital securities
must be redeemed upon final maturity of the subordinated debentures on November
23, 2035. Proceeds of approximately $4.2 million were contributed to paid-in
capital at the Bank. The remaining $800,000 was retained at the Company for
future use.
On August 23, 2005, Parke Capital Trust II, a Delaware statutory business
trust and a wholly-owned subsidiary of the Company, issued $5 million of
fixed/variable rate capital trust pass-through securities to investors.
Currently, the interest rate is fixed at 6.25%. The fixed/variable interest rate
re-prices quarterly at the three-month LIBOR plus 1.66% beginning November 23,
2010. Parke Capital Trust II purchased $5.2 million of variable rate junior
subordinated deferrable interest debentures from the Company. The debentures are
the sole asset of the Trust. The terms of the junior subordinated debentures are
the same as the terms of the capital securities. The Company has also fully and
unconditionally guaranteed the obligations of the Trust under the capital
securities. The capital securities are redeemable by the Company on or after
November 23, 2010, at par or earlier if the deduction of related interest for
federal income taxes is prohibited, classification as Tier 1 Capital is no
longer allowed, or certain other contingencies arise. The capital securities
must be redeemed upon final maturity of the subordinated debentures on November
23, 2035. Proceeds of approximately $4.2 million were contributed to paid-in
capital at the Bank. The remaining $800,000 was retained at the Company for
future use.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral "forward-looking
statements" including statements contained in this Report and in other
communications by the Company which are made in good faith pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements, such as statements of the Company's plans,
objectives, expectations, estimates and intentions, involve risks and
uncertainties and are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements: the strength of the United States economy in general
and the strength of the local economies in which the Company conducts
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of Governors of the
Federal Reserve System, inflation, interest rate, market and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Company and the perceived overall value of these products and
services by users, including the features, pricing and quality compared to
competitors' products and services; the impact of changes in financial services
laws and regulations (including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in consumer spending
and saving habits; and the success of the Company at managing the risks involved
in the foregoing.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company also cautions readers not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date on which they are given. The Company is not obligated to publicly
revise or update these forward-looking statements to reflect events or
circumstances that arise after any such date. Readers should carefully review
the risk factors described in other documents the Company files from time to
time with the SEC, including quarterly reports on Form 10-Q, annual reports on
Form 10-K and any current reports on Form 8-K.
GENERAL
The Company's results of operations are dependent primarily on net interest
income, which is the difference between the interest income earned on its
interest-earning assets, such as loans and securities, and the interest expense
paid on its interest-bearing liabilities, such as deposits and borrowings. The
Company also generates noninterest income such as service charges, earnings from
bank owned life insurance (BOLI), loan exit fees and other fees. The Company's
noninterest expenses primarily consist of employee compensation and benefits,
occupancy expenses, marketing expenses, data processing costs and other
operating expenses. The Company is also subject to losses in its loan portfolio
if borrowers fail to meet their obligations. The Company's results of operations
are also significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory agencies.
THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED JUNE 30, 2005
(UNAUDITED)
The following discussion compares the results of operations for the three
month period ended June 30, 2006 (unaudited) to the results of operations for
the three month period ended June 30, 2005 (unaudited). This discussion should
be read in conjunction with the accompanying financial statements (unaudited)
and related notes as well as the financial information included in the 2005
annual report on Form 10K.
11
RESULTS OF OPERATIONS
Net Income. For the three months ended June 30, 2006, net income totaled
$1.1 million, compared to $904,014 for the three months ended June 30, 2005.
Diluted earnings per share for the three months ended June 30, 2006 totaled
$0.33, compared to $0.29 per share for the same period of 2005. Increased net
income for the three months ended June 30, 2006 was attributable primarily to an
increase in net interest income of $740,950, partially offset by an increase in
the provision for loan losses of $51,977, a decrease in noninterest income of
$151,885, an increase in noninterest expenses of $175,441, and an increase in
tax expense of $144,450.
Net Interest Income. Our primary source of earnings is net interest income,
which is the difference between income earned on interest-earning assets, such
as loans and investment securities, and interest expense incurred on the
interest-bearing sources of funds, such as deposits and borrowings. The level of
net interest income is determined primarily by the average balances ("volume")
and the rate spreads between the interest-earning assets and our funding
sources.
Net interest income for the three months ended June 30, 2006 totaled $3.3
million, an increase of 28.6% over $2.6 million for the three months ended June
30, 2005. The increase is attributable primarily to the growth in loan balances.
The net interest margin for the three month period ended June 30, 2006 was 4.3%,
compared to 4.4% for the comparable period of 2005.
Interest income increased by $2.1 million for the three months ended June
30, 2006, primarily as a result of an increase of $71.2 million in average
interest-earning assets. Average loans outstanding increased by $68.1 million
and average investment securities increased by $3.1 million. Yields on earning
assets for the three months ended June 30, 2006 increased to 8.0% from 6.9% for
the same period of 2005. Interest expense increased by $1.3 million, which is
primarily attributable to average interest-bearing liabilities increasing by
$64.9 million coupled with a general rise in interest rates. Average
interest-bearing deposits increased by $51.7 million and average borrowings
increased by $13.2 million. The average rate paid on interest-bearing
liabilities increased to 4.2% for the three months ended June 30, 2006 from 2.9%
for the same period of 2005.
Noninterest Income. Noninterest income decreased $151,885, or 47.7%, for
the three months ended June 30, 2006 to $166,635 down from $318,520 for the same
period of 2005, reflecting mainly a decrease in loan exit fees.
Provision for Loan Losses. The provision for loan losses was $328,000 for
the three months ended June 30, 2006, compared to $276,023 for the same period
in 2005. The increase in the provision for the 2006 period was due to loan
growth in 2006.
Noninterest Expenses. For the three months ended June 30, 2006, noninterest
expenses increased by $175,441, or 15.5%, to $1.3 million, compared to $1.1
million for the same period of 2005. Increased compensation expenses of 19.4%
were related to personnel costs for staffing increases to support loan and
deposit growth. In addition, marketing costs increased for new promotional
programs.
Income Taxes. The Company recorded income tax expense of $740,000, on
income before taxes of $1,861,211 for the three months ended June 30, 2006,
resulting in an effective tax rate of 39.8%, compared to income tax expense of
$595,550 on income before taxes of $1,499,564 for the same period of 2005,
resulting in an effective tax rate of 39.7%.
SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(UNAUDITED)
The following discussion compares the results of operations for the six
months ended June 30, 2006 (unaudited) to the results of operations for the six
months ended June 30, 2005 (unaudited), and the financial condition at June 30,
2006 (unaudited) to the financial condition at December 31, 2005. This
discussion should be read in conjunction with the accompanying financial
statements (unaudited) and related notes as well as the financial information
included in the 2005 annual report on Form 10K.
12
RESULTS OF OPERATIONS
Net Income. For the six months ended June 30, 2006, net income totaled $2.2
million, compared to $1.6 million for the six months ended June 30, 2005.
Diluted earnings per share for the first six months of 2006 totaled $0.65,
compared to $0.52 per share for the same period of 2005. Increased net income
for the first six months of 2005 was attributable primarily to increases in net
interest income of $1.4 million, partially offset by a decrease in non interest
income of $48,743, an increase in the provision for loan losses of $54,843, an
increase in non interest expenses of $418,275, and an increase in tax expense of
$382,670.
Net Interest Income. Our primary source of earnings is net interest income,
which is the difference between income earned on interest-earning assets, such
as loans and investment securities, and interest expense incurred on the
interest-bearing sources of funds, such as deposits and borrowings. The level of
net interest income is determined primarily by the average balances ("volume")
and the rate spreads between the interest-earning assets and our funding
sources.
Interest income for the first six months of 2006 totaled $11.7 million, an
increase of 50.0% over $7.8 million for the six months ended June 30, 2005. The
net interest margin for the six month period ended June 30, 2006 was 4.3%, which
was down from 4.4% for the comparable period of 2005.
Interest income increased by $3.4 million, driven by an increase of $71.7
million in average interest-earning assets. Average loans outstanding increased
by $69.6 million while average investment securities increased by $2.1 million.
Yields on earning assets for the period ended June 30, 2005 increased to 7.8%
from 6.8% for the same period of 2005. Interest expense increased by $2.5
million. Average interest-bearing liabilities increased by $64.9 million.
Average interest-bearing deposits increased by $51.7 million and average
borrowings increased by $13.2 million. The average rate paid on interest-bearing
liabilities increased to 4.0% for the period ended June 30, 2006 from 2.8% for
the same period of 2005.
Noninterest Income. Noninterest income decreased $48,743, or 10.3%, for the
six months ended June 30, 2006 to $422,484, down from $471,227 for the same
period of 2005 due to lower loan exit fees.
Provision for Loan Losses. The provision for loan losses was $563,000 for
the six months ended June 30, 2006, compared to $508,157 for the same period in
2005. The increase in the provision for the 2006 period was due to increased
loan balances.
Noninterest Expenses. For the six months ended June 30, 2006, noninterest
expenses increased by $418,275 or 18.4% to $2.7 million compared to $2.3 million
for the same period of 2005. An increase in compensation expenses of 25.9% was
related to personnel costs as a result of staffing increases in the loan and
deposit areas, compared to the same period of 2005. Other operating expenses
increased $172,787 or 63.2% due to real estate activity.
Income Taxes. The Company recorded income tax expense of $1.5 million on
income before taxes of $3.7 million for the six months ended June 30, 2006,
resulting in an effective tax rate of 40.0%, compared to income tax expense of
$1,081,550 on income before taxes of $2.7 million for the same period of 2005,
resulting in an effective tax rate of 39.8%.
FINANCIAL CONDITION
AT JUNE 30, 2006 AND DECEMBER 31, 2005
(UNAUDITED)
The following discussion compares the financial condition at June 30, 2006
to the financial statements at December 31, 2005. This discussion should be read
in conjunction with the accompanying financial statements and related notes as
well as statistical information included in this Form 10-Q.
Total assets increased to $335.9 million at June 30, 2006, compared to
$297.8 million at December 31, 2005, increasing $38.1 million, or 12.8%. Gross
loans outstanding increased to $294.3 million, or 13.6% from $259.0 million at
December 31, 2005. Deposits increased by $37.8 million, or 16.3%. Borrowed funds
decreased by $2.2 million, or 6.1%. Shareholders' equity increased by $2.1
13
million, or 7.6%, driven by net income of $2.2 million for the three months
ended June 30, 2006 net of against comprehensive loss of $184,378.
The increase in total loans was primarily due to increases in the
commercial loans, which grew by $34.1 million and totaled $268.7 million as of
June 30, 2006. This increase is in line with management's strategic plan and
reflects increased origination activity over the past year and a good local real
estate market. All other categories of loans increased in the aggregate by $1.1
million.
Allowance for Loan Losses. The allowance for loan losses was $4.1 million
at June 30, 2006 as compared to $3.6 million at December 31, 2005. The ratio of
the allowance for loan losses to total loans was 1.4% at both June 30, 2006 and
December 31, 2005. The Company's management has considered non-performing assets
and other assets of concern in establishing the allowance for loan losses. The
Company continues to monitor its allowance for loan losses and will make future
additions or reductions in light of the level of loans in its portfolio and as
economic conditions dictate. The current level of the allowance for loan losses
is a result of the Company's management's assessment of the risks within the
portfolio based on the information revealed in credit reporting processes. The
Company utilizes a risk-rating system on all commercial, business, agricultural,
construction and multi-family and commercial real estate loans, including
purchased loans. A periodic credit review is performed on all types of loans to
establish the necessary reserve based on the estimated risk within the
portfolio. This assessment of risk takes into account the composition of the
loan portfolio, historical loss experience for each loan category, previous loan
experience, concentrations of credit, current economic conditions, and other
factors that in management's judgment deserve recognition.
Although the Company's management believes that it uses the best
information available to determine the allowances, unforeseen market conditions
could result in adjustments and net earnings being significantly affected if
circumstances differ substantially from the assumptions used in making the final
determinations. Future additions to the Company's allowances may result from
periodic loan, property and collateral reviews and thus cannot be predicted in
advance.
Non-performing assets, expressed as a percentage of total assets, remained
the same at 0.7% at June 30, 2006 and December 31, 2005. At June 30, 2006, the
Company had $2.2 million in non-accruing loans, which increased from $1.9
million in non-accruing loans at December 31, 2005. One loan became non-accrual
during the quarter ended June 30, 2006.
Deposits. Deposits totaled $269.9 million at June 30, 2006, increasing
$37.8 million, or 16.3%, from the December 31, 2005 balance of $232.1 million.
The increase in deposits is attributable to the Company's growth strategy, which
includes significant marketing, promotion and cross selling of additional
products to existing customers.
Included in deposits at June 30, 2006 and December 31, 2005 were $79.7
million and $67.2 million, respectively, of brokered deposits.
Borrowings. Total borrowings, consisting of borrowed funds, Federal Home
Loan Bank (FHLB) advances and subordinated debentures, totaled $33.8 million at
June 30, 2006, decreasing $2.2 million, or 6.1%, from December 31, 2005. The
decrease was a result of maturities of FHLB advances during 2006. The Compnay
did not need to borrow additional funds in 2006 due to deposit increases.
14
COMPARATIVE AVERAGE BALANCES, INTEREST AND YIELDS
The following table provides information regarding the average balances
and yield/rates on interest-earning assets and interest-bearing liabilities
during the periods indicated:
SIX MONTHS ENDED
---------------------------------------------------------------------------------------
JUNE 30, 2006 JUNE 30, 2005
------------- -------------
AVERAGE INTEREST ANNUAL AVERAGE INTEREST ANNUAL
BALANCE INCOME/EXPENSE YIELD BALANCE INCOME/EXPENSE YIELD
------- -------------- ----- ------- -------------- -----
Assets
------
Loans $272,413,835 $11,039,027 8.1% $202,800,337 $7,200,053 7.1%
Investment securities 25,771,413 634,104 4.9 25,358,862 594,378 4.7
Federal funds sold 2,357,102 54,821 4.7 644,783 8,865 2.7
------------- ----------- ------------ ----------
Total interest-earning assets 300,542,350 $11,727,952 7.8 228,803,982 $7,803,296 6.8
=========== ==========
Allowance for loan losses (3,769,146) (2,846,968)
Other assets 15,959,153 13,894,143
------------ ------------
Total assets $312,732,357 $239,851,157
============ ============
Liabilities and shareholders' equity
------------------------------------
Regular savings deposits $ 31,602,277 $ 521,573 3.3% $ 21,236,805 $ 217,064 2.0%
NOW & money market savings 24,390,756 289,570 2.4 27,783,614 241,976 1.7
Time deposits 175,397,812 3,626,710 4.1 130,639,744 2,016,325 3.1
------------ ----------- ------------ ----------
Total interest-bearing deposits 231,390,845 4,437,853 3.8 179,660,163 2,475,365 2.8
Borrowed funds 31,994,445 802,063 5.0 18,826,955 305,068 3.2
------------ ----------- ------------ ----------
Total interest-bearing liabilities 263,385,290 $ 5,239,916 4.0 198,487,118 $2,780,433 2.8
=========== ==========
Non interest-bearing demand deposits 18,164,857 15,649,898
Other liabilities 2,635,236 1,628,469
Shareholders' equity 28,546,974 24,085,672
------------ ------------
Total liabilities and
shareholders' Equity $312,732,357 $239,851,157
============ ============
Net interest income $ 6,488,036 $5,022,863
=========== ==========
Interest rate spread 3.8% 4.0%
Net interest margin 4.3% 4.4%
CRITICAL ACCOUNTING POLICY
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The
financial information contained within these statements is, to a significant
extent, financial information that is used on approximate measures of the
financial effects of transactions and events that have already occurred. Based
on its consideration of accounting policies that involve the most complex and
subjective decisions and assessments, management has identified its most
critical accounting policy to be related to the allowance for loan losses. The
Company's allowance for loan loss methodology incorporates a variety of risk
considerations, both quantitative and qualitative in establishing an allowance
for loan loss that management believes is appropriate at each reporting date.
Quantitative factors include the Company's historical loss experience,
delinquency and charge-offs trends, collateral values, changes in nonperforming
loans, and other factors. Quantitative factors also incorporate known
information about individual loans, including borrowers' sensitivity to increase
rate movements. Qualitative factors include the general economic environment in
the Company's market area. Size and complexity of individual credits in relation
to loan structure, existing loan policies and pace of portfolio growth are other
qualitative factors that are considered in the methodology. Management may
report a materially different amount for the provision for loan losses in
15
the statement of operations to change the allowance for loan losses if its
assessment of the above factors were different. This discussion and analysis
should be read in conjunction with the Company's financial statements and the
accompanying notes presented elsewhere herein, as well as the portion of this
Managements Discussion and Analysis, which discusses the allowance for loan
losses in this section, entitled "Financial Condition". Although management
believes the level of this allowance as of June 30, 2006 was adequate to absorb
losses inherent in the loan portfolio, a decline in local economic conditions,
or other factors, could result in increasing losses that can not be reasonably
predicated at this time.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity describes our ability to meet the financial obligations that
arise out of the ordinary course of business. Liquidity addresses the Company's
ability to meet deposit withdrawals on demand or at contractual maturity, to
repay borrowings as they mature, and to fund current and planned expenditures.
Liquidity is derived from increased repayment and income from interest-earning
assets. The loan to deposit ratio was 109.1% and 110.0% at June 30, 2006 and
December 31, 2005, respectively. Funds received from new and existing depositors
provided a large source of liquidity for the six-month period ended June 30,
2006. The Company seeks to rely primarily on core deposits from customers to
provide stable and cost-effective sources of funding to support local growth.
The Company also seeks to augment such deposits with longer term and higher
yielding certificates of deposit. To the extent that retail deposits are not
adequate to fund customer loan demand, liquidity needs can be met in the
short-term funds market. Longer term funding can be obtained through the
issuance of trust preferred securities and advances from the FHLB. As of June
30, 2006, the Company maintained lines of credit with the FHLB of $47.7 million.
As of June 30, 2006, the Company's investment securities portfolio included
$8.2 million of mortgage-backed securities that provide significant cash flow
each month. The majority of the investment portfolio is classified as available
for sale, is readily marketable, and is available to meet liquidity needs. The
Company's residential real estate portfolio includes loans, which are
underwritten to secondary market criteria, and accordingly could be sold in the
secondary mortgage market if needed as an additional source of liquidity. The
Company's management is not aware of any known trends, demands, commitments or
uncertainties that are reasonably likely to result in material changes in
liquidity.
CAPITAL
A strong capital position is fundamental to support the continued growth of
the Company. The Company is subject to various regulatory capital requirements.
Regulatory capital is defined in terms of Tier I capital (shareholders' equity
as adjusted for unrealized gains or losses on available-for-sale securities),
Tier II capital (which includes a portion of the allowance for loan losses) and
total capital (Tier I plus Tier II). Risk-based capital ratios are expressed as
a percentage of risk-weighted assets. Risk-weighted assets are determined by
assigning various weights to all assets and off-balance sheet associated risk.
Regulators have also adopted minimum Tier I leverage ratio standards, which
measure the ratio of Tier I capital to total assets.
At June 30, 2006, the Company's management believes that the Bank and the
Company are "well-capitalized" and in compliance with all applicable regulatory
requirements.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the information regarding market
risk disclosed under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Interest Rate Sensitivity and
Liquidity -- Rate Sensitivity Analysis" in the Company's Annual Report for the
fiscal year ended December 31, 2005.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. Based on their evaluation
of the Company's disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, (the "Exchange Act")), the
Company's principal executive officer and principal financial officer have
concluded that as of the end of the period covered by this Quarterly Report on
Form 10-Q, such disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the required time periods.
INTERNAL CONTROLS
Changes in internal control over financial reporting. During the last
fiscal quarter, there was no change in the Company's internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.
17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 27, 2004, Republic First Bank filed an action captioned
Republic First Bank v. Parke Bank and Vito S. Pantilione in the Superior Court
of New Jersey Law Division, Gloucester County. The Bank believes that the action
is without merit and intends to vigorously defend against it. The suit alleges,
among other things, fraud, negligent misrepresentation, breach of fiduciary duty
and breach of contract in connection with certain loans to two Parke Bank
customers in which Republic First Bank became a participant. Republic First Bank
is seeking unspecified damages and requesting that a receivership be appointed
for certain collateral. The complaint in the action was served on us in January
2005. The Bank filed an answer to the complaint, and the case is currently in
the discovery phase.
On June 1, 2005, Atlantic Central Bankers Bank and New Century Bank filed
an action captioned Atlantic Central Bankers Bank and New Century Bank v. Parke
Bank and Parke Capital Markets in the Superior Court of New Jersey Chancery
Division, Cape May County. The Bank believes that the action is without merit
and intends to vigorously defend against it. The suit alleges breach of
participation agreements and fraudulent misrepresentation in connection with the
plaintiffs' participations in loans to the same Parke Bank customers as the
Republic First Bank matter discussed above. In August 2005, the plaintiffs'
motion for a preliminary injunction was denied, and they were ordered to pay the
Bank's expenses. This case has been consolidated with the Republic First Bank
case, and is currently in the discovery phase.
On November 4, 2004, Stephen P. Magenta and other parties filed an action
captioned Stephen P. Magenta, et. al. v. General Insulation Services, Inc., et.
al. in the Superior Court of New Jersey Law Division, Gloucester County, related
to the alleged embezzlement of over $1 million by an employee of one of our
customers of funds maintained in accounts at the Bank. All but one of the claims
against the Bank have been dismissed. The Bank believes that the action is
without merit and intends to vigorously defend against it. In addition, the Bank
believes that this action is covered by its insurance.
Other than the foregoing, at June 30, 2006, the Company was not a party to
any material legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes from the Risk Factors disclosed in
Company's Annual Report for the fiscal year ended December 31, 2005.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Election of Directors:
NAME FOR WITHHELD
---- --- --------
Daniel J. Dalton 1,765,080 650
(b) Ratification of the appointment of McGladrey & Pullen, LLP as the
Company's independent auditor for the fiscal year ending December 31,
2006.
For 1,765,730
Against --
Abstain --
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
31 Certifications required by Rule 13a-14(a).
32 Certification required by 18 U.S.C. ss.1350.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARKE BANCORP, INC.
Date: August 10, 2006 /s/ Vito S. Pantilione
----------------------------------------
Vito S. Pantilione
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 2006 /s/ Ernest D. Huggard
----------------------------------------
Ernest D. Huggard
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
20