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Monarch Financial Reports Financial Performance and Declares Cash Dividend

Monarch Financial Holdings, Inc. logo

CHESAPEAKE, Va., July 24, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported second quarter profitability and continued strong financial performance. The Board of Directors announced a quarterly common stock cash dividend of $0.08 per common share, payable on August 29, 2014, to shareholders of record on August 8, 2014.

Second quarter 2014 highlights are:

  • 2nd quarter net income of $3,183,574
  • Return on Equity of 12.63%
  • Return on Assets of 1.29%
  • Diluted earnings per share of $0.30
  • Equity Capital exceeds $100 million for first time
  • Non-performing assets at 0.36% of total assets
  • $447 million in mortgage loans closed with 85% purchase

Year to date 2014 highlights are:

  • Net income of $5,720,839, for a return on equity of 11.57%
  • Diluted earnings per share of $0.54
  • $718 million in mortgage loans closed with 84% purchase

"We are pleased to report our best quarter in the past year. Our efforts to structure the company for the future resulted in improved profitability for all of our business segments. Higher mortgage loan closings, non-existent credit costs, expense management, and a strong net interest margin continued to drive our bottom line results," stated Brad E. Schwartz, Chief Executive Officer. "Our challenge going forward is growing our loan portfolio with our disciplined style for both credit quality and interest rate risk, in an otherwise undisciplined market. We are up to this challenge."

Net income was $3,183,574 for the second quarter of 2014, a record for the past five quarters, and up 3.8% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 12.63%, and the quarterly return on average assets (ROA) was 1.29%. Quarterly diluted earnings per share increased to $0.30, compared to $0.24 in the previous quarter and $0.29 for the same quarter in 2013.

Net income was $5,720,839 for the first six months of 2014. The annualized return on average equity (ROE) was 11.57%, and the quarterly return on average assets (ROA) was 1.18%. Diluted earnings per share were $0.54, compared to $0.62 for the same period in 2013.

Total assets at June 30, 2014 were $1.0 billion, with both loans held for investment and deposits slightly down since year-end 2013. The decline in our loans held for investment portfolio was due to several large payoffs, with $95 million in new loans booked in the first six months of the year. This decline was more than offset by growth in our mortgage loans held for sale portfolio driven by stronger mortgage loan closings. Funding continues to shift to a higher level of demand deposits and money market accounts, with 33% of our total deposit mix now in demand deposits. Demand deposit balances are at a record high. Our funding mix should enhance and protect the net interest margin when rates are predicted to rise in the next 12-24 months.

"Our loan pipeline remains robust and we continue to attract top quality clients for their commercial, construction, commercial real estate, and mortgage loan needs. Our cash management and retail deposit teams continue to perform at a high level, with almost a third of our deposits now in demand deposits – which also delivered positive growth in fee income," stated Neal Crawford, President of Monarch Bank.

Non-performing assets to total assets were 0.36%, which remain significantly below that of our local, state, and national peer group. Non-performing assets were $3.7 million which was up slightly from the previous quarter and the same period in 2013. Non-performing assets were comprised of $3.0 million in non-accrual loans, $499 thousand in loans more than 90 days past due, and $144 thousand in one foreclosed property. Net recoveries for the year were $9 thousand and the allowance for loan losses represents 1.30% of loans held for investment and 257% of non-performing loans.

During the second quarter the Company's equity capital exceeded $100 million for the first time in its 15 year history. The Board of Directors announced a quarterly common stock cash dividend of $0.08 per common share, payable on August 29, 2014, to shareholders of record on August 8, 2014. Even with two increases in the quarterly cash dividend in the past year, tangible book value per share has increased 8.2% to $9.59, with the stock now trading at 122% of book value. We consider our stock to be undervalued.

Capital strength continues to grow by every metric. Average equity to average assets improved to 10.18%, up from 8.88% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 14.29%, significantly higher than the level required to be rated "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 2.1% or $211 thousand during the second quarter of 2014 compared to the same quarter in 2013 driven by reduced balances in mortgage loans held for sale. Mortgage loans held for sale interest income declined $499 thousand compared to the same quarter of 2013, which was partially offset by growth in loans held for investment, investment income and a reduction in funding costs. The net interest margin was 4.18% for the second quarter, which was down from the previous quarter of 4.25% but up from 4.11% in the same quarter in 2013.

Non-interest income declined 14.7% or $3.2 million from the previous year driven by reduced revenues from mortgage loans sold and related title insurance fees. Investment and insurance revenue increased 37% compared to the previous year due to the continued growth of Monarch Bank Private Wealth. Mortgage revenue continues to be the number one driver of non-interest income. We closed $447 million in mortgage loans (85% purchase) during the second quarter of 2014 compared to $271 million (81% purchase) in the first quarter of 2014, a significant increase.

"The month of June was the best month in our company's history for purchase mortgage closings, and our realtor and builder focus drove our higher second quarter volume. We are a leaner and more nimble mortgage operation that never stopped investing in our training, technology, marketing or our people when volumes were low. This formula should continue to differentiate us in our markets and lead to continued market share growth," stated William T. Morrison, CEO of Monarch Mortgage.

Total non-interest expense declined 12.1% or $3.2 million during the second quarter due to reduced commissions and loan expenses. Net overhead, the difference between non-interest income and non-interest expense, improved by $10 thousand. To further improve our efficiency we have decided to close one banking office and one mortgage office in July, and soon plan to announce the relocation of two banking offices to improve our footprint and growth opportunities. These initiatives and many others have allowed us to improve our technology delivery, meet growing compliance burdens, and meet our client service expectations all while keeping our expense structure in line with revenue growth.

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. Monarch Bank also has a loan production office in Newport News, 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), 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
June 30,
2014
March 31,
2014
December 31,
2013
September 30,
2013
June 30,
2013
ASSETS:
Cash and due from banks $ 19,661 $ 18,510 $ 18,971 $ 21,016 $ 19,050
Interest bearing bank balances 37,166 37,033 31,955 24,504 15,195
Federal funds sold 29,761 84,232 53,985 83,454 56,972
Investment securities, at fair value 23,773 23,197 48,822 16,973 16,573
Loans held for sale 156,584 92,839 99,718 120,435 166,586
Loans held for investment, net of unearned income 700,159 715,088 712,671 697,541 697,376
Less: allowance for loan losses (9,070) (9,213) (9,061) (11,228) (11,320)
Net loans 691,089 705,875 703,610 686,313 686,056
Bank premises and equipment, net 31,407 29,902 28,882 28,454 28,101
Restricted equity securities, at cost 3,169 3,156 3,683 3,666 3,792
Bank owned life insurance 7,526 7,467 7,409 7,351 7,290
Goodwill 775 775 775 775 775
Intangible assets, net 15 60 104 149 194
Accrued interest receivable and other assets 22,973 19,673 18,786 18,857 20,815
Total assets $ 1,023,899 $ 1,022,719 $ 1,016,700 $ 1,011,947 $ 1,021,399
LIABILITIES:
Demand deposits---non-interest bearing $ 240,348 $ 221,357 $ 206,891 $ 222,079 $ 218,880
Demand deposits---interest bearing 51,563 55,949 55,528 48,244 52,101
Money market deposits 377,096 367,590 374,462 364,488 341,042
Savings deposits 24,539 24,327 22,137 22,665 22,172
Time deposits 197,747 224,947 234,100 228,652 264,491
Total deposits 891,293 894,170 893,118 886,128 898,686
FHLB borrowings 1,125 1,150 1,175 1,200 1,225
Short Term borrowings -- -- -- -- --
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 18,650 17,422 14,661 17,855 16,733
Total liabilities 921,068 922,742 918,954 915,183 926,644
STOCKHOLDERS' EQUITY:
Common stock 51,624 51,584 51,432 51,230 50,873
Capital in excess of par value 7,675 7,357 7,069 6,755 6,521
Retained earnings 43,566 41,232 39,437 38,014 36,233
Accumulated other comprehensive loss (159) (314) (419) (406) (480)
Total Monarch Financial Holdings, Inc. stockholders' equity 102,706 99,859 97,519 95,593 93,147
Noncontrolling interest 125 118 227 1,171 1,608
Total equity 102,831 99,977 97,746 96,764 94,755
Total liabilities and stockholders' equity $ 1,023,899 $ 1,022,719 $ 1,016,700 $ 1,011,947 $ 1,021,399
Common shares outstanding at period end 10,624,668 10,619,444 10,502,323 10,480,023 10,408,544
Nonvested shares of common stock included in commons shares outstanding 299,910 302,710 215,960 233,960 233,960
Book value per common share at period end (1) $ 9.67 $ 9.40 $ 9.29 $ 9.12 $ 8.95
Tangible book value per common share at period end (2) $ 9.59 $ 9.33 $ 9.20 $ 9.03 $ 8.86
Closing market price $ 11.72 $ 12.26 $ 12.31 $ 11.72 $ 10.83
Total risk based capital - Consolidated company 14.29% 14.27% 13.91% 13.68% 13.46%
Total risk based capital - Bank 14.31% 14.30% 13.95% 13.83% 13.66%
(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
June 30,
Six Months Ended
June 30,
2014 2013 2014 2013
INTEREST INCOME:
Interest on federal funds sold $ 24,179 $ 25,312 $ 64,557 $ 30,470
Interest on other bank accounts 54,905 9,952 90,937 18,094
Dividends on equity securities 22,410 69,225 52,410 143,660
Interest on investment securities 91,929 57,302 167,978 114,871
Interest on loans held for sale 1,274,498 1,773,692 2,047,230 4,507,264
Interest and fees on loans held for investment 9,089,071 9,040,004 18,567,963 18,014,998
Total interest income 10,556,992 10,975,487 20,991,075 22,829,357
INTEREST EXPENSE:
Interest on deposits 839,303 1,020,913 1,673,716 2,050,375
Interest on trust preferred subordinated debt 123,359 124,200 245,696 243,242
Interest on other borrowings 14,224 38,810 28,586 327,988
Total interest expense 976,886 1,183,923 1,947,998 2,621,605
NET INTEREST INCOME 9,580,106 9,791,564 19,043,077 20,207,752
PROVISION FOR LOAN LOSSES -- -- -- --
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,580,106 9,791,564 19,043,077 20,207,752
NON-INTEREST INCOME:
Mortgage banking income 17,369,228 20,572,388 29,571,390 36,738,324
Service charges and fees 538,579 477,660 1,008,791 928,814
Title income 167,454 232,423 272,488 486,774
Investment and insurance income 335,887 245,524 781,359 452,460
Other income 87,725 146,276 173,496 248,917
Total non-interest income 18,498,873 21,674,271 31,807,524 38,855,289
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,492,446 8,502,755 16,764,007 16,707,830
Commissions and incentives 6,770,022 9,703,820 10,780,986 16,769,296
Occupancy and equipment 2,395,088 2,130,445 4,671,791 3,996,963
Loan expense 2,060,570 2,630,295 3,423,711 4,460,732
Marketing expense 797,908 744,646 1,319,749 1,257,604
Data processing 476,806 435,771 956,084 836,729
Telephone 293,451 308,138 604,588 563,062
Other expenses 1,720,693 1,717,014 3,232,701 3,441,289
Total non-interest expense 23,006,984 26,172,884 41,753,617 48,033,505
INCOME BEFORE TAXES 5,071,995 5,292,951 9,096,984 11,029,536
Income tax provision (1,767,500) (1,797,773) (3,238,740) (3,791,326)
NET INCOME 3,304,495 3,495,178 5,858,244 7,238,210
Less: Net income attributable to noncontrolling interest (120,921) (428,540) (137,405) (713,443)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC. $3,183,574 $3,066,638 $5,720,839 $ 6,524,767
NET INCOME PER COMMON SHARE:
Basic $ 0.30 $ 0.29 $ 0.54 $ 0.66
Diluted $ 0.30 $ 0.29 $ 0.54 $ 0.62
Weighted average basic shares outstanding 10,620,869 10,401,992 10,596,786 9,854,418
Weighted average diluted shares outstanding 10,660,217 10,483,420 10,636,968 10,467,707
Return on average assets 1.29% 1.19% 1.18% 1.23%
Return on average stockholders' equity 12.63% 13.42% 11.57% 14.61%
Financial Highlights
Monarch Financial Holdings, Inc. and Subsidiaries
(Dollars in thousands, For the Quarter Ended
except per share data) June 30, March 31, December 31, September 30, June 30,
2014 2014 2013 2013 2013
EARNINGS
Interest income $ 10,557 $ 10,434 $ 10,677 $ 10,842 $ 10,976
Interest expense (977) (971) (1,044) (1,121) (1,184)
Net interest income 9,580 9,463 9,633 9,721 9,792
Provision for loan losses -- -- -- -- --
Noninterest income - mortgage banking income 17,369 12,202 13,277 15,657 20,572
Noninterest income - other 1,130 1,106 1,075 1,018 1,102
Noninterest expense (23,007) (18,747) (20,562) (22,315) (26,173)
Pre-tax net income 5,072 4,024 3,423 4,081 5,293
Minority interest in net income (121) (16) (87) (255) (428)
Income taxes (1,767) (1,471) (1,179) (1,416) (1,798)
Net income $ 3,184 $ 2,537 $ 2,157 $ 2,410 $ 3,067
PER COMMON SHARE
Earnings per share - basic $ 0.30 $ 0.24 $ 0.21 $ 0.23 $ 0.29
Earnings per share - diluted 0.30 0.24 0.20 0.23 0.29
Common stock - per share dividends 0.08 0.07 0.07 0.06 0.06
Average Basic Shares Outstanding 10,620,869 10,600,766 10,486,056 10,464,992 10,401,992
Average Diluted Shares Outstanding 10,660,217 10,641,782 10,535,313 10,519,472 10,483,420
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 9,213 $ 9,061 $ 11,228 $ 11,320 $ 10,788
Provision for loan losses -- -- -- -- --
Charge-offs (184) (12) (2,252) (137) (279)
Recoveries 41 164 85 45 811
Net charge-offs (143) 152 (2,167) (92) 532
Ending balance $ 9,070 $ 9,213 $ 9,061 $ 11,228 $ 11,320
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 499 $ 759 $ 472 $ 82 $ --
Nonaccrual loans 3,028 1,718 1,740 2,814 2,889
OREO 144 302 302 95 95
Nonperforming assets 3,671 2,779 2,514 2,991 2,984
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.36 % 0.27 % 0.25 % 0.30 % 0.29 %
Nonperforming loans to total loans 0.50 0.35 0.31 0.42 0.41
Allowance for loan losses to total loans held for investment 1.30 1.29 1.27 1.61 1.62
Allowance for loan losses to nonperforming loans 257.16 371.94 409.63 387.71 391.83
Annualized net charge-offs to average loans held for investment 0.08 -0.09 1.25 0.05 -0.31
FINANCIAL RATIOS
Return on average assets 1.29 % 1.06 % 0.86 % 0.94 % 1.19 %
Return on average stockholders' equity 12.63 10.46 8.88 10.18 13.42
Net interest margin (FTE) 4.18 4.25 4.13 4.11 4.11
Non-interest revenue/Total revenue 63.7 56.1 57.3 60.4 66.4
Efficiency - Consolidated 81.8 82.1 85.5 84.8 83.0
Efficiency - Bank only 63.9 59.9 60.4 59.1 58.2
Average equity to average assets 10.18 10.13 9.73 9.27 8.88
PERIOD END BALANCES (Amounts in thousands)
Total loans held for sale $ 156,584 $ 92,839 $ 99,718 $ 120,435 $ 166,586
Total loans held for investment 700,159 715,088 712,671 697,541 697,376
Interest-earning assets 949,872 956,160 952,981 950,760 960,481
Assets 1,023,899 1,022,719 1,016,700 1,011,947 1,021,399
Total deposits 891,293 894,170 893,118 886,128 898,686
Other borrowings 11,125 11,150 11,175 11,200 11,225
Stockholders' equity 102,706 99,859 97,519 95,593 93,147
AVERAGE BALANCES (Amounts in thousands)
Total loans held for sale $ 116,851 $ 70,856 $ 104,104 $ 136,660 $ 200,733
Total loans held for investment 698,851 704,917 695,074 692,731 680,037
Interest-earning assets 927,552 910,929 935,059 946,575 964,872
Assets 993,003 970,815 990,734 1,013,932 1,032,345
Total deposits 867,217 848,969 869,113 882,553 908,229
Other borrowings 11,150 11,174 11,199 11,257 11,250
Stockholders' equity 101,092 98,374 96,415 93,958 91,638
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 446,863 $ 271,233 $ 349,695 $ 478,304 $ 607,189
Percentage of refinance based on dollar volume 15.0 % 19.1 % 20.3 % 22.6 % 39.2 %

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

Source:Monarch Financial Holdings, Inc.