Safe and Sound

Parke Bank

Sewell, NJ
5
Star Rating
Founded in 1999, Parke Bank is an FDIC-insured bank based in Sewell, NJ. The bank holds equity of $147.4 million on assets of $1.14 billion, according to December 31, 2017, regulatory filings.

U.S. bank customers have $868.0 million on deposit at 8 offices in multiple states run by 81 full-time employees. With that footprint, the bank currently holds loans and leases worth $996.7 million, including $958.4 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Parke Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three key criteria Bankrate used to score American banks on safety and soundness.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and provides protection for account holders when a bank is struggling financially. It follows then that a bank's level of capital is an essential measurement of a bank's financial resilience. When looking at safety and soundness, more capital is better.

Parke Bank exceeded the national average of 13.13 points on our test to measure capital adequacy, racking up 16 out of a possible 30 points.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Parke Bank's Tier 1 capital ratio was 15.56 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to economic headwinds.

Overall, Parke Bank held equity amounting to 12.96 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by troubled assets, such as unpaid mortgages.

A bank with large numbers of these kinds of assets may eventually have to use capital to cover losses, diminishing its equity cushion. It also means that there are likely to be many assets that are in non-accrual status and no longer earning money, resulting in lower earnings and potentially more risk of a future failure.

On Bankrate's test of asset quality, Parke Bank scored 36 out of a possible 40 points, lower than the national average of 37.49 points.

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.45 percent of Parke Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing how large that reserve is to the total amount of problem loans can be a handy indicator when evaluating a bank's ability to manage troubled assets. Unfortunately, the FDIC did not provide information on Parke Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or use them to deal with problematic loans, potentially making the bank more resilient in tough times. Obviously, banks that are losing money are less able to do those things.

On Bankrate's earnings test, Parke Bank scored 18 out of a possible 30, better than the national average of 15.12.

One key way to measure a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by total equity. The most recent annualized quarterly return on equity for Parke Bank was 8.67 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank earned net income of $12.5 million on total equity of $147.4 million. The bank reported an annualized return on average assets, or ROA, of 1.18 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.