Last year was tough for a lot of businesses, including banks.
Parke Bancorp Inc. (NASDAQ: PKBK) had a tough 2023, especially when it came to its cannabis investments, resulting in mixed performance in its fourth quarter and annual report.
For the quarter ending Dec. 31, 2023, the parent company of Parke Bank reported net income of $8.2 million, a notable decrease of 21.8% versus the same quarter the previous year. A key driver of this decreased profitability was a reduction in net interest income, which fell 18% to $15.5 million for the quarter.
Cannabis-related service fees from its accounts declined, contributing to the 18% decrease in non-interest income to $1.5 million.
For the whole year, Parke Bancorp’s net income stood at $28.4 million, a decline of 32% from 2022. Other pressure points included an $11.4 million increase in non-interest expenses, partly due to a one-time recognition of a $9.5 million contingent loss.
Total assets posted a modest increase to $2.02 billion, up 1.9% from the previous year. The loan portfolio grew slightly.
However, deposits from cannabis-related businesses fell significantly to $80.7 million from $96.7 million, versus $177.3 million in the previous year due to “increased competition for such deposits, and consolidation within the cannabis industry.”
In a statement, CEO Vito Pantilione cited high inflation, rising interest rates, and global military conflicts as key headwinds.
He emphasized the company’s capital and asset quality as foundational strengths moving forward. He also noted how the bank has managed to maintain a respectable return on average assets and equity.
“Maintaining deposits remained challenging in 2023, triggering higher rates and the offering of special deposit programs. This caused a substantial increase in our interest expense as rates continued to climb,” Pantilione said.
Loan growth came in lower than projections, driven by increased interest rates and challenges in the real estate industry.
“It became more difficult to qualify new loan requests with the higher debt service. Increased rents did not keep pace with the rising debt service cost,” Pantilione added. “We have, however, seen an increase in loan activity in the beginning of 2024 due to the anticipated interest rate cuts.”
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