Parke Bancorp, Inc. (PKBK) Bundle
Understanding Parke Bancorp, Inc. (PKBK) Revenue Streams
Understanding Parke Bancorp, Inc.’s Revenue Streams
Primary Revenue Sources: Parke Bancorp, Inc. primarily generates revenue through net interest income, with significant contributions from various loan products including residential mortgages, commercial real estate, and construction loans. In the third quarter of 2024, the breakdown of revenue sources was as follows:
| Revenue Source | Amount (in millions) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $14.7 | 94.8% |
| Non-Interest Income | $0.9 | 5.2% |
Year-over-Year Revenue Growth Rate: The year-over-year revenue growth rate for net interest income for the third quarter of 2024 showed a decrease of 6.1% compared to the third quarter of 2023. Specifically, net interest income was $15.7 million in Q3 2023 versus $14.7 million in Q3 2024. Non-interest income decreased from $1.8 million in Q3 2023 to $0.9 million in Q3 2024, reflecting a decline of 50%.
Contribution of Different Business Segments: The primary segments contributing to overall revenue include:
- Residential Mortgages: $452.7 million in outstanding loans, accounting for 24.6% of total loans.
- Commercial Real Estate: $365.6 million in outstanding loans, accounting for 19.9% of total loans.
- Construction Loans: $176.5 million in outstanding loans, accounting for 9.6% of total loans.
- Residential 1 to 4 Family Investment Loans: $517.8 million in outstanding loans, accounting for 28.1% of total loans.
Significant Changes in Revenue Streams: The most notable changes in revenue streams include:
- A decrease in non-interest income attributed to lower service fees on deposit accounts, which fell by $2.1 million, or 39.3%, from $5.2 million in the first nine months of 2023 to $3.2 million in 2024.
- An increase in interest income for the nine months ended September 30, 2024, which rose by $9.4 million, or 11.4%, from $82.4 million in 2023 to $91.8 million in 2024.
- Interest expense increased significantly, up $15 million, or 44.5%, from the same period in 2023, primarily due to rising market interest rates.
Revenue Summary Table:
| Metric | Q3 2023 | Q3 2024 | Change (%) |
|---|---|---|---|
| Net Interest Income | $15.7 million | $14.7 million | -6.1% |
| Non-Interest Income | $1.8 million | $0.9 million | -50% |
| Total Revenue | $17.5 million | $15.6 million | -10.9% |
This analysis highlights the dynamics of revenue generation within Parke Bancorp, Inc., showcasing both the strengths and challenges faced in the current economic landscape.
A Deep Dive into Parke Bancorp, Inc. (PKBK) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 37.5%, reflecting a decrease from 41.2% in the same period of 2023. This decline is primarily attributed to increased interest expenses.
Operating Profit Margin: The operating profit margin for the same period was 20.3%, down from 22.8% year-over-year. This change indicates challenges in managing operating expenses relative to income.
Net Profit Margin: The net profit margin stood at 12.8% for the nine months ended September 30, 2024, compared to 13.2% in the prior year, demonstrating slight compression in profitability.
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 37.5% | 41.2% | -3.7% |
| Operating Profit Margin | 20.3% | 22.8% | -2.5% |
| Net Profit Margin | 12.8% | 13.2% | -0.4% |
Trends in Profitability Over Time
Between 2022 and 2024, profitability metrics have shown mixed trends. The gross profit margin has decreased from 41.5% in 2022 to 37.5% in 2024. Operating profit margin has also seen a decline from 24.1% to 20.3%. Net profit margin has fluctuated slightly, moving from 13.5% in 2022 to 12.8% in 2024.
Comparison of Profitability Ratios with Industry Averages
The industry average for gross profit margin in the financial services sector is around 40%, indicating that the company is currently underperforming in this area. The average operating profit margin for similar institutions is approximately 25%, suggesting that there is room for improvement. The net profit margin industry average stands at 15%, highlighting a competitive disadvantage in net profitability as well.
Analysis of Operational Efficiency
Operational efficiency is crucial for maintaining profitability. The company reported a decrease in non-interest expense by 59.8%, from $15.8 million in Q3 2023 to $6.4 million in Q3 2024, largely due to the absence of non-recurring losses that impacted previous periods. This significant reduction in expenses has improved operational efficiency, yet the increase in interest expenses poses a challenge.
Additionally, the gross margin trend has been affected by rising costs associated with interest on deposits and borrowings. The company’s cost management strategies will need to adapt to maintain margins amidst these pressures.
| Year | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|
| 2022 | 41.5% | 24.1% | 13.5% |
| 2023 | 41.2% | 22.8% | 13.2% |
| 2024 | 37.5% | 20.3% | 12.8% |
Debt vs. Equity: How Parke Bancorp, Inc. (PKBK) Finances Its Growth
Debt vs. Equity: How Parke Bancorp, Inc. Finances Its Growth
As of September 30, 2024, Parke Bancorp, Inc. reported total borrowings of $188.3 million, an increase from $168.1 million at December 31, 2023. This increase in borrowings was largely attributed to a rise of $20.0 million in Federal Home Loan Bank of New York (FHLBNY) advances, with $125.0 million of these borrowings having short-term maturities.
The company's total equity stood at $296.5 million as of September 30, 2024, reflecting an increase of $12.1 million or 4.3% from $284.3 million on December 31, 2023. This growth in equity was primarily due to retained earnings, offset by $6.4 million in cash dividends and $2.0 million in common stock repurchases.
Debt-to-Equity Ratio
The debt-to-equity ratio serves as a critical indicator of financial leverage. As of September 30, 2024, the debt-to-equity ratio for Parke Bancorp was calculated at approximately 0.63, derived from total borrowings of $188.3 million and total equity of $296.5 million. This ratio is below the industry average, which typically ranges from 0.80 to 1.00, indicating a conservative approach to leverage.
Recent Debt Issuances and Credit Ratings
Parke Bancorp's recent debt activity includes the aforementioned increase in FHLBNY advances. As of September 30, 2024, the company had access to an additional $930.5 million in lines of credit with the FHLBNY, of which $145.0 million was outstanding. The company's credit rating remains stable, reflecting its sound financial practices and manageable debt levels.
Balancing Debt Financing and Equity Funding
The company maintains a balanced approach between debt financing and equity funding. As of September 30, 2024, total assets were reported at $2.07 billion, which represents a growth of $41.9 million or 2.1% from the previous year. The asset growth was primarily driven by an increase in loans receivable, which amounted to $1.84 billion, up from $1.79 billion.
| Financial Metric | September 30, 2024 | December 31, 2023 | Change | % Change |
|---|---|---|---|---|
| Total Borrowings | $188.3 million | $168.1 million | $20.2 million | 12.0% |
| Total Equity | $296.5 million | $284.3 million | $12.1 million | 4.3% |
| Debt-to-Equity Ratio | 0.63 | N/A | N/A | N/A |
| Total Assets | $2.07 billion | $2.03 billion | $41.9 million | 2.1% |
| Loans Receivable | $1.84 billion | $1.79 billion | $52.6 million | 2.9% |
The company has effectively utilized its borrowings while maintaining a strong equity position, which provides a cushion against potential financial downturns.
Assessing Parke Bancorp, Inc. (PKBK) Liquidity
Assessing Parke Bancorp's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was approximately 0.94, calculated as total current assets of $172.4 million divided by total current liabilities of $183.6 million.
Quick Ratio: The quick ratio stands at approximately 0.92, reflecting cash and cash equivalents of $172.4 million and short-term investments over current liabilities.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was approximately ($11.2 million) as of September 30, 2024, indicating a slight deterioration from ($7.0 million) at December 31, 2023. This trend suggests increasing pressures on liquidity.
| Period | Current Assets ($M) | Current Liabilities ($M) | Working Capital ($M) |
|---|---|---|---|
| September 30, 2024 | 172.4 | 183.6 | (11.2) |
| December 31, 2023 | 180.4 | 187.4 | (7.0) |
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
- Cash provided by operating activities: $26.6 million
- Cash used in investing activities: ($52.3 million)
- Cash provided by financing activities: $17.7 million
| Cash Flow Type | Amount ($M) | Change from Previous Year ($M) |
|---|---|---|
| Operating Activities | 26.6 | +12.6 |
| Investing Activities | (52.3) | (4.3) |
| Financing Activities | 17.7 | +39.1 |
Potential Liquidity Concerns or Strengths
The liquidity position shows potential concerns as the current ratio remains below 1. However, the cash position of $172.4 million provides a buffer against immediate liabilities. The reliance on brokered deposits totaling $198.7 million as of September 30, 2024, indicates a proactive approach to securing funds, although it may increase dependence on volatile funding sources.
Access to additional borrowing capacity is robust, with $930.5 million in lines of credit available, of which $145.0 million was utilized as of September 30, 2024. This reinforces the company's ability to respond to liquidity needs as they arise.
Is Parke Bancorp, Inc. (PKBK) Overvalued or Undervalued?
Valuation Analysis
To determine whether Parke Bancorp, Inc. (PKBK) is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for PKBK is 7.8, calculated from the trailing twelve months (TTM) earnings per share (EPS) of $1.68 and the current stock price of approximately $13.09.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.2, derived from a book value per share of $10.93 and the current stock price of $13.09.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio for PKBK is calculated at 6.5, with an enterprise value of approximately $155 million and EBITDA of $23.8 million.
Stock Price Trends
Over the past 12 months, the stock price of PKBK has shown the following trends:
- 12 months ago: $10.30
- 6 months ago: $12.45
- Current price: $13.09
- Percentage increase over 12 months: 27.8%
Dividend Yield and Payout Ratios
PKBK has a dividend yield of 4.1%, based on an annual dividend of $0.54 per share. The payout ratio is approximately 32.1% of the earnings per share.
Analyst Consensus on Stock Valuation
As of the latest reports, analyst consensus recommends a “Hold” rating for PKBK, with a price target of $14.00.
| Valuation Metric | Current Value | Notes |
|---|---|---|
| P/E Ratio | 7.8 | Based on TTM EPS of $1.68 |
| P/B Ratio | 1.2 | Calculated from book value per share of $10.93 |
| EV/EBITDA Ratio | 6.5 | Enterprise value of $155 million |
| Current Stock Price | $13.09 | Price showing 27.8% increase over 12 months |
| Dividend Yield | 4.1% | Annual dividend of $0.54 |
| Payout Ratio | 32.1% | Percentage of earnings paid as dividends |
| Analyst Consensus | Hold | Price target of $14.00 |
Key Risks Facing Parke Bancorp, Inc. (PKBK)
Key Risks Facing Parke Bancorp, Inc. (PKBK)
Internal and external risks significantly impact the financial health of Parke Bancorp, Inc. Key risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The banking industry is highly competitive, with numerous financial institutions vying for market share. As of September 30, 2024, the company had total assets of $2.07 billion and total deposits of $1.56 billion . Increased competition may lead to pressure on interest margins and reduced profitability.
Regulatory Changes
Regulatory requirements can change rapidly, impacting operational costs and compliance obligations. The company was classified as “well capitalized” as of September 30, 2024, which is essential for maintaining regulatory compliance and avoiding penalties . Non-compliance with regulations can lead to significant financial repercussions and reputational damage.
Market Conditions
Fluctuating interest rates and economic conditions directly affect lending and deposit activities. Net interest income decreased to $43.1 million for the nine months ended September 30, 2024, down from $48.7 million for the same period in 2023 . The increase in interest expense, which rose 44.5% to $48.7 million, highlights the challenges posed by rising rates .
Operational Risks
Operational risks arise from inadequate or failed internal processes, systems, or external events. The provision for credit losses was reported as $0.5 million for the nine months ended September 30, 2024, compared to a recovery of $1.6 million for the same period in 2023 . An increase in credit risk, particularly within construction and commercial loan segments, poses financial threats.
Financial Risks
Financial risks include credit risks, liquidity risks, and market risks. The company's allowance for credit losses increased slightly to $32.3 million as of September 30, 2024 . The increase in loans receivable to $1.84 billion from $1.79 billion also indicates higher exposure to credit risk .
Strategic Risks
Strategic risks involve challenges related to the company's business model and strategic choices. The decrease in non-interest income was notable, falling to $3.2 million for the nine months ended September 30, 2024, down from $5.2 million in 2023 . This decline reflects potential weaknesses in the company's service offerings and market positioning.
Mitigation Strategies
To mitigate these risks, the company has implemented several strategies:
- Enhanced Risk Management: Implementing robust internal controls and risk assessment frameworks.
- Diversification: Expanding product offerings and markets to reduce dependency on specific revenue streams.
- Regulatory Compliance: Investing in compliance systems to ensure adherence to changing regulations.
Financial Data Overview
| Metric | As of September 30, 2024 | As of December 31, 2023 | Change (%) |
|---|---|---|---|
| Total Assets | $2.07 billion | $2.02 billion | 2.1% |
| Total Deposits | $1.56 billion | $1.55 billion | 0.4% |
| Net Interest Income | $43.1 million | $48.7 million | -11.5% |
| Provision for Credit Losses | $0.5 million | Recovery of $1.6 million | — |
| Non-interest Income | $3.2 million | $5.2 million | -39.3% |
Future Growth Prospects for Parke Bancorp, Inc. (PKBK)
Future Growth Prospects for Parke Bancorp, Inc.
Key Growth Drivers
Parke Bancorp is poised for growth through several key drivers including market expansion, diversification of loan products, and strategic partnerships. The company has increased its lending footprint into New York and South Carolina, expanding its reach to a broader customer base.
Future Revenue Growth Projections
For the nine months ended September 30, 2024, Parke Bancorp reported a net income available to common shareholders of $20.1 million, a slight decrease of 0.8% compared to the same period in 2023. Earnings per share for this period were $1.68 per basic common share, down from $1.70 in the previous year.
Strategic Initiatives
The company has implemented various strategic initiatives, including the introduction of new loan products tailored for small to mid-sized businesses. These products aim to provide liquidity through lines of credit secured by various assets. Additionally, the company has focused on deepening client relationships to enhance customer loyalty and retention.
Competitive Advantages
Parke Bancorp benefits from a strong customer service reputation, which has fostered loyalty and stability in its core deposit base. As of September 30, 2024, total deposits stood at $1.56 billion, up 0.4% from $1.55 billion at the end of 2023. This solid deposit growth provides a cost-effective funding source for future lending activities.
Financial Performance Overview
The following table summarizes key financial metrics for Parke Bancorp as of September 30, 2024:
| Financial Metric | Amount (in thousands) | % Change |
|---|---|---|
| Total Assets | $2,065,409 | 2.1% |
| Total Deposits | $1,558,883 | 0.4% |
| Total Equity | $296,460 | 4.3% |
| Net Interest Income | $43,089 | -11.5% |
| Net Income | $20,114 | -0.9% |
Loan Portfolio Growth
As of September 30, 2024, the total loans receivable increased to $1.84 billion, reflecting a growth of 2.9% from $1.79 billion at the end of 2023. This growth is driven by increases in the construction, commercial real estate, and residential multifamily sectors.
Market Expansion and Acquisitions
The company continues to explore opportunities for acquisitions that can enhance its market position. The focus remains on acquiring businesses that complement its existing operations and expand its service offerings to customers.
Conclusion
With its strategic initiatives, strong financial performance, and competitive advantages, Parke Bancorp is well-positioned for future growth in the dynamic financial landscape.
Parke Bancorp, Inc. (PKBK) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Parke Bancorp, Inc. (PKBK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Parke Bancorp, Inc. (PKBK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Parke Bancorp, Inc. (PKBK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.