Parke Bancorp: An Undervalued Regional Bank with Attractive Dividend Yield

Parke Bancorp (NASDAQ:PKBK) offers an attractive combination of yield and value as a regional bank. Trading at a discounted valuation, it provides an above-average dividend yield, making it an interesting play across the US regional banking space.

Parke Bancorp, Inc. (NASDAQ:PKBK) stands out as a regional bank offering an appealing combination of yield and value. Trading at a discounted valuation, it provides an above-average dividend yield, making it an intriguing option for investors in the U.S. regional banking space.

Business Overview

Parke Bancorp is a small regional bank, serving as the holding company for Parke Bank, a full-service commercial bank. It operates in Philadelphia and Southern New Jersey, offering a range of banking products and services, including residential mortgage lending, commercial real estate lending, and construction loans. The bank's current market value is approximately $257 million, with shares trading on the NASDAQ stock exchange. Deposits are insured by the FDIC up to the legal limits.

Financial Performance

Parke Bancorp's financial performance has shown a mix of volatility and stability. At the end of 2024, its total assets stood at $2.14 billion, with loans accounting for about 87% of total assets. The bank's deposits amounted to $1.63 billion, resulting in a loans-to-deposits (LtD) ratio of 115%, which is above the average for the sector. Despite this, the bank's funding sources are stable, with most loans funded directly through deposits and a small portion from borrowings from The Office of Finance and subordinated debt.

The bank's net interest income (NII) dropped by 9% in 2024 to $58.7 million, due to higher deposit costs outpacing asset yields. However, the bank maintained good cost control, with total operating expenses declining by 26% to $26 million. The bank's efficiency ratio of 41% is among the lowest in the U.S., reflecting its small size and focus on online banking services.

Dividend Yield

Parke Bancorp offers a relatively stable dividend, with a current quarterly dividend of $0.18 per share, translating to an annual yield of 3.3%. This yield is above average for the banking sector and sustainable given the bank's strong capital position and conservative dividend payout ratio.

Valuation

The bank's valuation appears to be undervalued, trading at 8x earnings and 0.82x book value, significantly lower than its peers. This valuation discount is not justified by the bank's defensive business profile and above-average dividend yield.

Conclusion

Parke Bancorp offers an attractive combination of yield and value, making it an interesting play for investors in the U.S. regional banking space. With a strong capital position, stable dividend yield, and a valuation that appears to be undervalued, the bank presents a compelling investment opportunity.

References

[1] https://seekingalpha.com/article/4814137-parke-bancorp-offers-an-interesting-combination-of-yield-and-value