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Monarch Financial Reports First Quarter Financial Performance

Monarch Financial Holdings, Inc. logo

CHESAPEAKE, Va., April 24, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported first quarter profitability and continued strong performance. First quarter 2014 highlights are:

  • 1st quarter net income of $2,537,265
  • Return on Equity of 10.46%
  • Return on Assets of 1.06%
  • Basic earnings per share of $0.24
  • Non-performing assets at 0.27% of total assets
  • $271 million in mortgage loans closed

"We are extremely pleased with our first quarter results. Efforts to manage our expenses and structure the company for the future resulted in improved profitability from the previous two quarters with slightly less top line revenue, a nice accomplishment. Solid bank and mortgage loan closings, non-existent credit costs, expense control, and a strong net interest margin continued to drive our bottom line results," stated Brad E. Schwartz, Chief Executive Officer. "In April we celebrate Monarch's 15th anniversary, in May we open our new Williamsburg banking, mortgage and private wealth office, and we are working on several other initiatives that will further our goal of remaining the top performing community bank in our market."

Net income was $2,537,265 for the first quarter of 2014, up from the previous two quarters but down from the record first quarter of 2013. The quarterly annualized return on average equity (ROE) was 10.46%, and the quarterly return on average assets (ROA) was 1.06%. Quarterly diluted earnings per share were $0.24, compared to $0.21 in the previous quarter and $0.33 in the same quarter in 2013.

Total assets at March 31, 2014 were $1.0 billion, with both loans and deposits showing nominal net growth since year-end 2013. Declines in our loans held for sale portfolio due to lower mortgage loan closings were offset on a quarterly and annual basis by growth in loans held for investment, investment securities, interest bearing bank balances, and federal funds balances. We anticipate much of this excess liquidity will be utilized to fund the spring and summer residential mortgage closing season based on growing mortgage loan applications, improvements in the weather, and continued favorable market loan rates. Funding continues to shift to a higher level of demand deposits and money market accounts, with 31% of our total deposits now in demand deposits. Our funding mix should enhance the net interest margin when rates are predicted to rise in the next 12-24 months.

"We continue to attract top quality clients with loan growth over the past year in commercial, construction, commercial real estate, and mortgage loans. Our loan pipeline is robust and we are excited about the growth prospects at our new Williamsburg and Newport News locations," stated Neal Crawford, President of Monarch Bank.

Non-performing assets to total assets were 0.27%, which remains significantly below that of our local, state, and national peer group. Non-performing assets were $2.8 million which was down from $3.5 million or 0.33% of total assets one year prior. Non-performing assets were comprised of $1.7 million in non-accrual loans, $759 thousand in loans more than 90 days past due, and $302 thousand in one foreclosed property. Net recoveries for the quarter were $152 thousand and the allowance for loan losses represents 1.29% of loans held for investment and 372% of non-performing loans.

Capital strength continues to grow by all measures. Average equity to average assets improved to 10.13%, up from 8.00% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 14.27%, significantly higher than the required level to meet the highest rating of "Well Capitalized" by federal banking regulators. Monarch was again awarded the highest 5-Star "Superior" rating by Bauer Financial, an independent third-party bank rating agency that rates banks on safety and soundness.

Net interest income, our number one driver of profitability, declined 9.1% or $953 thousand during the first quarter of 2014 compared to the same quarter in 2013 driven by reduced balances of mortgage loans held for sale. Mortgage loans held for sale interest income declined $1.9 million compared to the first quarter of 2013, which was partially offset by growth in loans held for investment interest income and a reduction in funding costs. The net interest margin increased to 4.25% for the first quarter, which was up from the previous quarter of 4.13% and from the first quarter of 2013 of 4.12%. The lower average volume of mortgage loans held for sale and the repayment of a discounted loan were the primary reason for the increased net interest margin.

Non-interest income declined 22.5% or $3.9 million from the previous year driven by reduced revenues from mortgage loans sold and related title insurance fees. Investment revenue more than doubled compared to the previous year due to the recent formation of Monarch Bank Private Wealth. Mortgage revenue continues to be the number one driver of non-interest income. We closed $271 million in mortgage loans (81% purchase) during the first quarter of 2014 compared to $542 million (43% purchase) in the first quarter of 2013, and $350 million (80% purchase) in the fourth quarter of 2013.

"All of our efforts over the past several months paid off in the first quarter, despite the multitude of snow storms that hit Washington, Richmond, Hampton Roads and even Charlotte. Our long-term focus has always been on purchase mortgage lending, with 81% of the loans closed in the first quarter of 2014 used to purchase homes," stated William T. Morrison, CEO of Monarch Mortgage. "Our pipeline is strong and we expect the traditional spring and summer sales cycle to return this year. Based on our application volume we anticipate an increase in loan closings going forward."

Total non-interest expenses declined 14.2% or $3.1 million during the first quarter due to reduced commissions and loan expenses. Net overhead, the difference between non-interest income and non-interest expense, increased $758 thousand driven by higher occupancy expenses and technology costs. The company is currently reviewing all physical locations to determine if any enhancements need to be made to improve operating efficiency.

Monarch Financial Holdings, Inc. is the one-bank holding company for Monarch Bank. Monarch Bank is a community bank with eleven banking offices in Chesapeake, Virginia Beach, Norfolk, Suffolk, and Williamsburg, Virginia. OBX Bank, a division of Monarch Bank, operates offices in Kitty Hawk and Nags Head, North Carolina. Monarch Mortgage and our affiliated mortgage companies have over thirty offices with locations in Virginia, North Carolina, Maryland, and South Carolina. Our subsidiaries/ divisions include Monarch Bank, OBX Bank, Monarch Mortgage (secondary mortgage origination), OBX Bank Mortgage (secondary mortgage origination), Coastal Home Mortgage, LLC (secondary mortgage origination), Regional Home Mortgage, LLC (secondary mortgage origination), Monarch Bank Private Wealth (investment, trust, planning and private banking), Monarch Investments (investment and insurance solutions), Real Estate Security Agency, LLC (title agency) and Monarch Capital, LLC (commercial mortgage brokerage). The shares of common stock of Monarch Financial Holdings, Inc. are publicly traded on the Nasdaq Capital Market under the symbol "MNRK".

This press release may contain "forward-looking statements," within the meaning of federal securities laws that involve significant risks and uncertainties. Statements herein are based on certain assumptions and analyses by the Company and are factors it believes are appropriate in the circumstances. Actual results could differ materially from those contained in or implied by such statements for a variety of reasons including, but not limited to: changes in interest rates; changes in accounting principles, policies, or guidelines; significant changes in the economic scenario: significant changes in regulatory requirements; and significant changes in securities markets. Consequently, all forward-looking statements made herein are qualified by these cautionary statements and the cautionary language in the Company's most recent Form 10-K and 10-Q reports and other documents filed with the Securities and Exchange Commission. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Consolidated Balance Sheets
Monarch Financial Holdings, Inc. and Subsidiaries
(In thousands)
Unaudited
March 31, December 31, September 30, June 30, March 31,
2014 2013 2013 2013 2013
ASSETS:
Cash and due from banks $ 18,510 $ 18,971 $ 21,016 $ 19,050 $ 17,414
Interest bearing bank balances 37,033 31,955 24,504 15,195 14,099
Federal funds sold 84,232 53,985 83,454 56,972 21,937
Investment securities, at fair value 23,197 48,822 16,973 16,573 16,493
Loans held for sale 92,839 99,718 120,435 166,586 242,457
Loans held for investment, net of unearned income 715,088 712,671 697,541 697,376 692,410
Less: allowance for loan losses (9,213) (9,061) (11,228) (11,320) (10,788)
Net loans 705,875 703,610 686,313 686,056 681,622
Bank premises and equipment, net 29,902 28,882 28,454 28,101 27,507
Restricted equity securities, at cost 3,156 3,683 3,666 3,792 3,781
Bank owned life insurance 7,467 7,409 7,351 7,290 7,231
Goodwill 775 775 775 775 775
Intangible assets, net 60 104 149 194 238
Accrued interest receivable and other assets 19,673 18,786 18,857 20,815 21,421
Total assets $ 1,022,719 $ 1,016,700 $ 1,011,947 $ 1,021,399 $ 1,054,975
LIABILITIES:
Demand deposits---non-interest bearing $ 221,357 $ 206,891 $ 222,079 $ 218,880 $ 201,346
Demand deposits---interest bearing 55,949 55,528 48,244 52,101 57,074
Money market deposits 367,590 374,462 364,488 341,042 332,305
Savings deposits 24,327 22,137 22,665 22,172 23,579
Time deposits 224,947 234,100 228,652 264,491 317,181
Total deposits 894,170 893,118 886,128 898,686 931,485
FHLB borrowings 1,150 1,175 1,200 1,225 1,250
Short Term borrowings -- -- -- -- 5,000
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 17,422 14,661 17,855 16,733 14,894
Total liabilities 922,742 918,954 915,183 926,644 962,629
STOCKHOLDERS' EQUITY:
Common stock 51,584 51,432 51,230 50,873 50,821
Capital in excess of par value 7,357 7,069 6,755 6,521 6,300
Retained earnings 41,232 39,437 38,014 36,233 33,790
Accumulated other comprehensive loss (314) (419) (406) (480) (174)
Total Monarch Financial Holdings, Inc. stockholders' equity 99,859 97,519 95,593 93,147 90,737
Noncontrolling interest 118 227 1,171 1,608 1,609
Total equity 99,977 97,746 96,764 94,755 92,346
Total liabilities and stockholders' equity $ 1,022,719 $ 1,016,700 $ 1,011,947 $ 1,021,399 $ 1,054,975
Preferred shares outstanding at period end -- -- -- -- --
Common shares outstanding at period end 10,619,444 10,502,323 10,480,023 10,408,544 10,398,073
Nonvested shares of common stock included in commons shares outstanding 302,710 215,960 233,960 233,960 233,960
Book value per common share at period end (1) $ 9.40 $ 9.29 $ 9.12 $ 8.95 $ 8.73
Tangible book value per common share at period end (2) $ 9.33 $ 9.20 $ 9.03 $ 8.86 $ 8.63
Closing market price $ 12.26 $ 12.31 $ 11.72 $ 10.83 $ 10.61
Total risk based capital - Consolidated company 14.30% 13.91% 13.68% 13.46% 13.21%
Total risk based capital - Bank 14.27% 13.95% 13.83% 13.66% 13.94%
(1) Book value per common share is defined as stockholders' equity divided by common shares outstanding.
(2) Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by commons shares outstanding
Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
Three Months Ended
March 31,
2014 2013
INTEREST INCOME:
Interest on federal funds sold $ 40,378 $ 5,158
Interest on other bank accounts 36,032 8,142
Dividends on equity securities 30,000 74,435
Interest on investment securities 76,049 57,569
Interest on loans held for sale 772,732 2,733,572
Interest and fees on loans held for investment 9,478,892 8,974,994
Total interest income 10,434,083 11,853,870
INTEREST EXPENSE:
Interest on deposits 834,413 1,029,462
Interest on trust preferred subordinated debt 122,337 119,042
Interest on other borrowings 14,362 289,178
Total interest expense 971,112 1,437,682
NET INTEREST INCOME 9,462,971 10,416,188
PROVISION FOR LOAN LOSSES -- --
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,462,971 10,416,188
NON-INTEREST INCOME:
Mortgage banking income 12,202,162 16,165,936
Service charges and fees 470,212 451,154
Title income 105,034 254,351
Investment and insurance income 445,472 206,936
Other income 85,771 102,641
Total non-interest income 13,308,651 17,181,018
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,271,561 8,205,075
Commissions and incentives 4,010,965 7,065,476
Occupancy and equipment 2,276,703 1,866,518
Loan expense 1,363,141 1,830,437
Marketing expense 521,841 512,958
Data processing 479,278 400,958
Telephone 311,137 254,924
Other expenses 1,512,007 1,724,275
Total non-interest expense 18,746,633 21,860,621
INCOME BEFORE TAXES 4,024,989 5,736,585
Income tax provision (1,471,240) (1,993,553)
NET INCOME 2,553,749 3,743,032
Less: Net income attributable to noncontrolling interest (16,484) (284,903)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC $2,537,265 $3,458,129
NET INCOME PER COMMON SHARE:
Basic $ 0.24 $ 0.37
Diluted $ 0.24 $ 0.33
Weighted average basic shares outstanding 10,572,435 9,300,760
Weighted average diluted shares outstanding 10,613,452 10,451,897
Return on average assets 1.06% 1.27%
Return on average stockholders' equity 10.46% 15.86%
Financial Highlights
Monarch Financial Holdings, Inc. and Subsidiaries
(Dollars in thousands, For the Quarter Ended
except per share data) March 31, December 31, September 30, June 30, March 31,
2014 2013 2013 2013 2013
EARNINGS
Interest income $ 10,434 $ 10,677 $ 10,842 $ 10,976 $ 11,854
Interest expense (971) (1,044) (1,121) (1,184) (1,438)
Net interest income 9,463 9,633 9,721 9,792 10,416
Provision for loan losses -- -- -- -- --
Noninterest income - mortgage banking income 12,202 13,277 15,657 20,572 16,166
Noninterest income - other 1,106 1,075 1,018 1,102 1,015
Noninterest expense (18,747) (20,562) (22,315) (26,173) (21,861)
Pre-tax net income 4,024 3,423 4,081 5,293 5,736
Minority interest in net income (16) (87) (255) (428) (285)
Income taxes (1,471) (1,179) (1,416) (1,798) (1,993)
Net income $ 2,537 $ 2,157 $ 2,410 $ 3,067 $ 3,458
PER COMMON SHARE
Earnings per share - basic $ 0.24 $ 0.21 $ 0.23 $ 0.29 $ 0.37
Earnings per share - diluted 0.24 0.20 0.23 0.29 0.33
Common stock - per share dividends 0.07 0.07 0.06 0.06 0.05
Average Basic Shares Outstanding 10,600,766 10,486,056 10,464,992 10,401,992 9,300,760
Average Diluted Shares Outstanding 10,641,782 10,535,313 10,519,472 10,483,420 10,451,897
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 9,061 $ 11,228 $ 11,320 $ 10,788 $ 10,910
Provision for loan losses -- -- -- -- --
Charge-offs (12) (2,252) (137) (279) (554)
Recoveries 164 85 45 811 432
Net charge-offs 152 (2,167) (92) 532 (122)
Ending balance $ 9,213 $ 9,061 $ 11,228 $ 11,320 $ 10,788
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 759 $ 472 $ 82 $ -- $ 351
Nonaccrual loans 1,718 1,740 2,814 2,889 3,070
OREO 302 302 95 95 95
Nonperforming assets 2,779 2,514 2,991 2,984 3,516
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.27% 0.25% 0.30% 0.29% 0.33%
Nonperforming loans to total loans 0.35 0.31 0.42 0.41 0.49
Allowance for loan losses to total loans held for investment 1.29 1.27 1.61 1.62 1.56
Allowance for loan losses to nonperforming loans 371.94 409.63 387.71 391.83 315.35
Annualized net charge-offs to average loans held for investment -0.09 1.25 0.05 -0.31 0.07
FINANCIAL RATIOS
Return on average assets 1.06% 0.86% 0.94% 1.19% 1.27%
Return on average stockholders' equity 10.46 8.88 10.18 13.42 15.86
Net interest margin (FTE) 4.25 4.13 4.11 4.11 4.12
Non-interest revenue/Total revenue 56.1 57.3 60.4 66.4 59.2
Efficiency - Consolidated 82.1 85.5 84.8 83.0 79.1
Efficiency - Bank only 59.9 60.4 59.1 58.2 53.1
Average equity to average assets 10.13 9.73 9.27 8.88 8.00
PERIOD END BALANCES (Amounts in thousands)
Total loans held for sale $ 92,839 $ 99,718 $ 120,435 $ 166,586 $ 242,457
Total loans held for investment 715,088 712,671 697,541 697,376 692,410
Interest-earning assets 956,160 952,981 950,760 960,481 994,946
Assets 1,022,719 1,016,700 1,011,947 1,021,399 1,054,975
Total deposits 894,170 893,118 886,128 898,686 931,485
Other borrowings 11,150 11,175 11,200 11,225 16,250
Stockholders' equity 99,859 97,519 95,593 93,147 90,737
AVERAGE BALANCES (Amounts in thousands)
Total loans held for sale $ 70,856 $ 104,104 $ 136,660 $ 200,733 $ 316,189
Total loans held for investment 704,917 695,074 692,731 680,037 665,542
Interest-earning assets 910,929 935,059 946,575 964,872 1,033,838
Assets 970,815 990,734 1,013,932 1,032,345 1,105,933
Total deposits 848,969 869,113 882,553 908,229 865,146
Other borrowings 11,174 11,199 11,257 11,250 123,291
Stockholders' equity 98,374 96,415 93,958 91,638 88,430
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 271,233 $ 349,695 $ 478,304 $ 607,189 $ 542,235
Percentage of refinance based on dollar volume 19.1% 20.3% 22.6% 39.2% 56.8%

CONTACT: Brad E. Schwartz (757) 389-5111 www.monarchbank.com

Source:Monarch Financial Holdings, Inc.