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Malizia Spidi & Fisch, PC
ATTORNEYS AT LAW
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1227 25th Street, N.W.
Suite 200 West
Washington, D.C. 20037
(202) 434-4660
Facsimile: (202) 434-4661
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John J. Spidi
spidilaw@aol.com
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writer's direct dial number
(202) 434-4670
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RE:
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Parke Bancorp, Inc.
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Form 10-K for Fiscal Year Ended December 31, 2010
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Form 10-Q for Fiscal Quarter Ended March 31, 2011
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File No. 000-51338
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1.
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Please describe, and revise future filings to disclose, the material factors that led to the payment of bonuses disclosed in the Summary Compensation Table. Refer to Item 402(o) of Regulation S-K.
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1.
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In accordance with the Employment Agreement between Vito Pantilione, President and CEO and Parke Bank (the “Bank”), Mr. Pantilione is eligible to receive a bonus annually after the end of each calendar year equal to ten percent (10%) of the net pre-tax profits of the Bank during such year up to a maximum of fifty percent (50%) of the Executive’s then annual base salary. For purposes of calculating
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Executive’s bonus, net pre-tax profits means the Bank’s gross revenues for such calendar year less all operating expenses and charges to income in accordance with generally accepted accounting principles, consistently applied. With respect to bonus payments for the other Named Executive Officers, the CEO and the Compensation Committee evaluates the job performance of the Officers and the financial performance of the Company in determining bonus awards. The Company will describe these factors in future filings in accordance with your request.
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2.
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We note the disclosure that the terms of loans to officers, directors and their affiliates were “similar to those prevailing for comparable transactions with other customers and do not involve more than a normal risk of collectability or other unfavorable features.” Please confirm, and revise future filings to disclose, if accurate, that loans to related persons—as that term is defined in Instruction 1 to Item 404(a) of Regulation S-K—were made in the ordinary course of business; were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender; and did not involve more than the normal risk of collectability or present other unfavorable features. Refer to Instruction 4.c. to Item 404(a) of Regulation S-K and Regulation S-K Compliance & Disclosure Interpretation 130.05. If loans were made on terms that are available to employees generally, but not available to the general public, please provide the information required by Item 404(a)(5) of Regulation S-K.
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2.
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The Company hereby confirms, and will disclose in future filings that all loans to related persons were made in the ordinary course of business; were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the Bank; and did not involve more than the normal risk of collectability or present other unfavorable features.
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3.
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We note your disclosure that Mr. Hedenberg is currently involved in a land development project where the Bank has its main office. Please provide us with further detail regarding the relationship between this project and the Bank. If appropriate, please provide us with proposed “Related Party” disclosure to be included in future filings.
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3.
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The Company has no ownership interest in Mr. Hedenberg’s land development project located in Sewell, NJ and, therefore, related party disclosure is not warranted. The Bank has provided financing for the project and the loan is included in loans to related persons.
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4.
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We note your portfolio segments and classes of financing receivables appear to be the same for purposes of providing the disclosures required by ASU 2010-20. Please tell us how you considered paragraphs 310-10-55-16 through 310-10-55-18 and 310-10-55-22 when determining that further disaggregation of your portfolio segments was not necessary. Confirm to us, if true, that the classes presented are at the level management uses to assess and monitor the risk and performance of the portfolio.
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4.
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After a review by management, the commercial real estate mortgage portfolio will be disaggregated by owner occupied, non-owner occupied and multi-family. Future filings will include this disaggregation in Note 4 - Loans and Note 5 - Allowance for Loan Losses. This will better reflect the portfolio’s risk profile and aligns with the segments management uses to monitor performance. Management also considered whether a further disaggregation by industry sector was appropriate. Since no industry sector was greater than 10% of the overall portfolio, and there is no concentration of impaired loans within these sectors, it was decided that this information would not be beneficial to the reader.
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5.
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We note that the effective date section of the summary of ASU 2010-20 encourages, but does not require, comparative disclosure for earlier periods. To the extent the information required for comparative disclosure is reasonably available, please provide comparative footnote disclosure in all future filings considering the significant benefit this information provides investors and the objective of the ASU.
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5.
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Management will make every reasonable effort to provide comparative disclosures in future filings in Note 4 - Loans.
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6.
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In regard to your troubled debt restructurings (TDRs), please tell us and revise future filings to address the following:
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Provide a robust discussion of your TDR and renegotiated loan activities. Your discussion should include in tabular format quantification of the types of concessions made (e.g., rate reductions, payment extensions, forgiveness of principal, forbearance or other actions) and discussion of your successes or failures with the different types of concessions;
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·
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Whether there is a minimum of six months of current payment history under the current terms;
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Whether the loan is current at the time of restructuring; and
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Whether we expect the loan to continue to perform under the restructured terms with a debt coverage ratio that complies with the Bank’s credit underwriting policy of 1.25X.
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TDRs in compliance with their modified terms and accruing interest
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TDRs that are not accruing interest
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Total
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(amounts in thousands)
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Reduction in interest rate
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$ | 20,688 | $ | 7,616 | $ | 28,304 | |||||
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A period of interest only payments
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20,589 | 12,426 | 33,015 | ||||||||
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Total
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$ | 41,277 | $ | 20,042 | $ | 61,319 | |||||
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Provide a table (by loan type) that identifies the number and amount of TDRs on accrual and nonaccrual; and
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TDRs in compliance
with their modified
terms and accruing
interest
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TDRs that are not
accruing interest
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Total
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Balance
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Count
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Balance
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Count
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Balance
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Count
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(loan balances in thousands)
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Commercial
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$ | -- | -- | $ | 594 | 1 | $ | 594 | 1 | |||||||||||||||
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Commercial Real Estate Construction
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-- | -- | 2,656 | 3 | 2,656 | 3 | ||||||||||||||||||
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Commercial Real Estate Mortgage -
Owner Occupied
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4,862 | 8 | 4,446 | 6 | 9,308 | 14 | ||||||||||||||||||
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Commercial Real Estate Mortgage -
Non-owner Occupied
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28,221 | 10 | 4,968 | 4 | 33,189 | 14 | ||||||||||||||||||
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Commercial Real Estate Mortgage - Multifamily
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4,520 | 1 | 506 | 2 | 5,026 | 3 | ||||||||||||||||||
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Residential Real Estate Mortgage
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3,674 | 1 | 6,872 | 1 | 10,546 | 2 | ||||||||||||||||||
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Total
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$ | 41,277 | 20 | $ | 20,042 | 17 | $ | 61,319 | 37 | |||||||||||||||
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Disclose your policy regarding how many payments the borrower needs to make on restructured loans before returning loans to accrual status.
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7.
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Given the increasing levels of troubled debt restructurings and increases in OREO, please address and disclose the following, as it relates to your appraisal policies:
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Tell us and disclose your appraisal policy;
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Describe the procedures performed at each balance sheet date to determine the fair value of collateral-dependent impaired loans and OREO;
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When you receive new appraisals, describe the type of appraisals received, such as “retail value” or “as is value”;
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Address how partially charged-off loans measured for impairment based on the collateral value are classified and accounted for subsequent to receiving an updated appraisal. For example, disclose whether the loans are returned to performing status or whether they remain as nonperforming;
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Address the typical timing surrounding the recognition of a loan as nonaccrual and recording of any provision or charge-off;
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Address the procedures performed between receipt of updated appraisals to ensure impairment of loans measured for impairment based on collateral value are measured appropriately; and
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Address how you determine the amount to charge-off.
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8.
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Please provide us with sufficient information so that we will have a better understanding of your allowance for loan loss evaluation process of impaired loans. Discuss how you considered the increase in the level of impaired loans in both fiscal 2010 and in the interim period of 2011, and the increases in the loan loss provisions and charge-offs when determining the portion of allowance related to these loans. Further, provide us with and disclose sufficient information to enable the reader to understand the relationship between the loans identified as being impaired and the loans classified as substandard and OAEM included in the credit risk profile table on page 19.
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8.
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The tepid economic recovery and the continued weakness in the housing market has had an substantial impact on the credit quality of the Bank’s loan portfolio and is reflected in the increase in loans deemed impaired.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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9.
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Please provide us with and revise future filings to include a table of nonperforming loans by loan type for each period presented. Further, revise to also include the coverage ratio of nonperforming loans to total loans for these periods.
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9.
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The following is an analysis of nonperforming loans as of March 31, 2011 and December 31, 2010. This information will be provided in Management's Discussion and Analysis in future filings.
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March 31, 2011
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December 31, 2010
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(amounts in thousands except ratios)
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Commercial
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$ | — | $ | — | ||||
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Real estate construction:
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Residential
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5,068 | 8,546 | ||||||
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Commercial
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5,077 | 6,701 | ||||||
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Real estate mortgage:
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Residential
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11,178 | 9,415 | ||||||
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Commercial
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8,341 | 2,722 | ||||||
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Consumer
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61 | 61 | ||||||
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Total
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$ | 29,725 | $ | 27,445 | ||||
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Nonperforming loans to total loans
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4.77 | % | 4.38 | % | ||||
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10.
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Please provide us with and revise future filings to include a rollforward of activity within OREO for the periods presented.
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10.
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An analysis of the activity of Other Real Estate Owned is as follow. This information will be provided in Management's Discussion and Analysis in future filings.
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For the Three Months Ended
March 31,
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2011
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2010
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(amounts in thousands)
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Balance at beginning of period
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$ | 16,701 | $ | — | ||||
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Real estate acquired in settlement of loans
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— | 3,572 | ||||||
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Sales of real estate
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(2,489 | ) | — | |||||
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Capitalized improvements to real estate
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1,770 | — | ||||||
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Balance at end of period
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$ | 15,982 | $ | 3,572 | ||||
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cc:
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Marc Thomas, SEC Staff Accountant
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Vito S. Pantilione, President and Chief Executive Officer
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John S. Hawkins, Executive Vice President and Chief Financial Officer
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Joan S. Guilfoyle, Esq.
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