PARKE BANCORP, INC. (PKBK) stock intrinsic value fair value estimate & owner earnings analysis

Parke Bancorp owns Parke Bank, a New Jersey-chartered commercial bank that opened on January 28, 1999. It has seven branches, with its main office at 601 Delsea Drive in Sewell, New Jersey, and lends mainly to small and mid-sized businesses and individuals in southern New Jersey, southeastern Pennsylvania and the Brooklyn and Bronx sections of New York City. At the end of 2025 loans were $2.04 billion, almost all secured by real estate: investor-owned one-to-four family homes ($494 million), commercial property not occupied by its owner ($478 million), residential mortgages ($451 million), owner-occupied commercial property ($183 million), apartment buildings ($174 million) and construction loans. Loan growth in 2025 came mainly from non-owner-occupied commercial real estate (up $107 million) and construction (up $63 million). At June 30, 2026 the bank had $2.30 billion of assets, $2.03 billion of loans, $1.76 billion of deposits and $346 million of shareholders' equity, about $29.40 per share, with no goodwill. The bank also serves state-licensed cannabis businesses. Deposits from them fell from $151.9 million (9.3% of deposits) at the end of 2024 to $61.9 million (3.5%) at the end of 2025, and loans to the industry were $47.0 million. The annual report warns that a change in federal enforcement could force the bank to stop serving this industry immediately. How we measured earnings. We start from operating cash flow, take out swings in other assets and accrued liabilities, and charge stock compensation, a small amount of premises spending, and, because this is a bank, loan-loss provisions and foreclosed-property losses as real costs. On that basis the bank earned $2.96 per share in 2025, $2.26 in 2024, $2.37 in 2023 (after a one-time $9.5 million loss on cash stolen from a third-party armored-car facility), $3.32 in 2022 and $3.46 in 2021. These figures track reported net income closely. For a bank, earnings move with the size of the balance sheet, so we measure normal earning power as a return on assets. From 2018 to 2025, leaving out 2023 for the theft loss, the median was 1.85% of average assets. That window covers the cheap-deposit years of 2021 and 2022 (about 2.0%), the 2020 pandemic provision (1.38%) and the 2024 peak in deposit costs (1.31%), so it spans a full rate cycle. Applied to today's $2.30 billion of assets it gives about $3.56 per share. Recent results are running above that. Owner earnings rose 29% in 2025. The base case assumes 2026 earnings of about $3.97 per share, up about 34%. The extra growth is not a forecast: the first half of 2026 is already reported. Net income was $24.1 million against $16.1 million a year earlier, and interest paid fell from $35.6 million to $30.6 million while loans held at about $2.03 billion. First-half owner earnings were about $23.6 million, a return of about 2.07% on assets. Loans not accruing interest also halved in the half, from $10.8 million to $5.4 million. That can bring one-off catch-up interest, so we fade the recent pace back to the median rather than treating it as permanent. These earnings are already after interest on deposits, $130 million of Federal Home Loan Bank advances (all due within a year at 4.17% at the end of 2025) and $13.4 million of subordinated notes. For a bank, borrowed money is the raw material of the business, so we do not subtract it again. Leverage is charged in the bear case instead. All future cash is discounted at 6%. Base case, $67.00 per share. Return on assets of 2.05% in 2026, 1.95% in 2027, then the 1.85% median from 2028. Assets grow 1.5% a year. That is just below the roughly 1.7% a year achieved from the end of 2021 to mid-2026. Deposits have not grown since 2021 ($1.77 billion then, $1.76 billion now), and loans already exceed deposits, so the faster 5% a year from 2019 to 2025 is not in the bag. Earnings per share dip to about $3.67 in 2028 and reach about $4.14 in 2036. After that, earnings hold flat with no further growth, supported by a deposit and lending franchise that has operated for 27 years. The roughly $39 million of extra capital this growth needs is covered by capital the bank already holds, so no earnings are held back. The business is worth about $799 million. Its borrowings are already paid for inside those earnings, so nothing further is owed ahead of shareholders and equity is also worth about $799 million. Bear case, $29.76 per share. This case includes a full commercial real estate credit cycle of the kind banks like this went through in 2008 to 2011. Parke's own record shows what that looks like: net charge-offs totaled $25.4 million from 2011 to 2015 alone, on a loan book of about $742 million at the end of 2015. We charge losses of 5% of today's loans, about $102 million before tax or $75 million after tax, spread over 2028 to 2031. Earnings fall to about zero in 2029. Separately, from 2027 the return on assets drops to 1.30%, just below the 2024 low. Reasons include deposit costs returning to 2024 levels, dependence on short-term advances, and the loss of the remaining cannabis deposits. Assets do not grow. Afterward the franchise earns about $2.51 a share for twenty years beyond 2036 and nothing after that. The business is worth about $355 million, with nothing more owed ahead of shareholders. This case is slightly above tangible book value of about $29.40 a share. That is justified because the bank holds about $116 million (roughly $9.70 a share) of equity above the 10% of assets it has historically run with. That surplus absorbs the whole after-tax loss without new shares at depressed prices, and the bank keeps earning through the cycle. Bull case, $87.86 per share. The bank keeps earning 2.0% on its assets, as in 2021, 2022 and the first half of 2026. Assets grow 4% a year, below the 5.0% a year from 2019 to 2025. That growth needs about $117 million of new capital by 2036, which the existing surplus and early earnings can fund. Earnings reach about $5.72 a share in 2036 and then hold flat. The business is worth about $1.05 billion, with nothing further owed ahead of shareholders. What could make this wrong. Loans are concentrated in investor real estate and construction. The bank earned least when deposit costs rose in 2023 and 2024, and loans exceeding deposits leave it reliant on borrowed funding. A federal crackdown on cannabis banking could end that line of business. On the other side, Tier 1 risk-based capital was 20.5% at the end of 2025, a large cushion. What changed since our previous analysis. Earlier figures were built on a different earnings basis and are not comparable. On the business itself, the main development is the strong first half of 2026; our earlier view that those elevated returns will fade still holds. Margin-of-safety price. We are fairly confident in the earnings level. It rests on eight years that include both cheap and expensive money, and it tracks reported earnings. The worst plausible outcome is a regional commercial real estate bust larger than the one we model, together with a sudden end to cannabis banking. Even then, the bank's equity of 15% of assets and its lack of goodwill mean losses would come out of surplus capital before shareholders were diluted. The two things we are most likely to be wrong about are the normal return on assets and growth. If the return settles at 1.50% instead of 1.85% and assets never grow, the shares are worth about $49. The dividend, $0.20 a quarter in mid-2026, pays something over the holding period. The margin-of-safety price is $38. From that price, a move to the base value within three years plus dividends implies about 28% a year, and within four years about 22%. The bear case implies a loss of only about a fifth, with shares backed close to one-for-one by tangible book value. If we are wrong on both the return and growth, $38 still implies about 37% if the price reaches that value within one year, but only about 15% a year over three, so $38 is the highest price consistent with the target.