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Monarch Financial Reports Financial Performance and Declares Cash Dividend

CHESAPEAKE, Va., Oct. 23, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported third quarter and annual financial performance. The Board of Directors also announced a quarterly common stock cash dividend of $0.08 per common share, payable on November 28, 2014, to shareholders of record on November 10, 2014.

Third quarter 2014 highlights are:

  • Net income of $2,807,848, up 16.5%
  • Diluted earnings per share of $0.26, up 13%
  • Quarterly cash dividend of $0.08 per share
  • Return on Equity of 10.72%
  • Return on Assets of 1.11%
  • Non-performing assets at 0.31% of total assets
  • $441 million in mortgage loans closed with 84% purchase

Year to date 2014 highlights are:

  • Net income of $8,528,687, for a return on equity of 11.27%
  • Diluted earnings per share of $0.80
  • $1.16 billion in mortgage loans closed with 84% purchase

"We are pleased to report another strong quarter for Monarch. Loan growth with a stable net interest margin, higher mortgage revenue, no credit costs, and focused expense management continue to drive our bottom line results." stated Brad E. Schwartz, Chief Executive Officer. "Our asset quality remains very strong, and we remain well positioned for an increase in interest rates that is anticipated sometime in 2015."

Net income was $2,807,848 for the third quarter of 2014, an increase of 16.5% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 10.72%, and the quarterly annualized return on average assets (ROA) was 1.11%. Quarterly diluted earnings per share increased to $0.26, compared to $0.23 in the previous quarter, a 13% increase. Net income was $8,528,687 for the first nine months of 2014. The annualized return on average equity (ROE) was 11.27%, and the annualized return on average assets (ROA) was 1.15%. Diluted earnings per share were $0.80, compared to $0.85 for the same period in 2013.

Total assets at September 30, 2014 were $1.0 billion. Loans held for investment grew 2.3% year over year, and mortgage loans held for sale grew 15.1%. Loans held for investment also grew $13.5 million or 1.9% from the previous quarter. We hit a milestone with over $300 million in demand deposit accounts, which now comprise 35% of our total deposit portfolio. Our funding mix position should enhance and protect the net interest margin when interest rates rise in the future.

"Even with irrational loan competition we were able to grow our loans in the past quarter and from the same period one year prior. Our cash management and retail deposit teams continue to perform at a high level, with over 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 0.31%, remaining significantly below that of our local, state, and national peer group. Non-performing assets were $3.2 million which was down from the previous quarter. Non-performing assets were comprised of $2.2 million in non-accrual loans, $243 thousand in loans more than 90 days past due, and $767 thousand in two properties in other real estate owned. The larger of the two properties is already under contract to close in November. Net charge-offs for the calendar year were $84 thousand and the allowance for loan losses represents 1.26% of loans held for investment and 370% of non-performing loans.

The Board of Directors announced a quarterly common stock cash dividend of $0.08 per common share, payable on November 28, 2014, to shareholders of record on November 10, 2014. Tangible book value of $9.80 per share has increased 8.5% over the past year, with the stock closing at 128% of book value.

Capital strength continues to grow by every metric. Average equity to average assets improved to 10.40%, up from 9.27% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 14.18%, 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 during the third quarter of 2014 was flat when compared to the same quarter in 2013. The net interest margin was 4.18% for the third quarter, which despite market-driven pressure on loan rates was the same as the previous quarter. The third quarter net interest margin of 4.18% was up from 4.12% in the same quarter in 2013.

Non-interest income grew in every category in the third quarter. Mortgage revenue continues to be the number one driver of non-interest income. We closed $441 million in mortgage loans (84% purchase money) during the third quarter of 2014 compared to $478 million (77% purchase) in the third quarter of 2013, a slight decrease. Despite the slightly lower volume closed mortgage revenue grew by $1 million. There were also increases in service charges and fees, title income, investment and insurance revenue, and other income. Investment and insurance revenue increased 62% compared to the same quarter the previous year due to the continued growth of Monarch Bank Private Wealth.

"We are extremely proud of our mortgage origination, support staff and leadership teams that have met the challenges of new regulations and a more traditional seasonal market. With slightly less volume in the third quarter we were able to grow revenue through stronger secondary pricing and efficiencies. Our past formula for success in a more traditional and seasonal market should continue to lead our continued market share growth." stated William T. Morrison, CEO of Monarch Mortgage.

Total non-interest expenses increased 3.6% during the third quarter due to increased commissions and incentives, occupancy and equipment expenses, and data processing expenses, which were partially offset by reduced loan expenses. Salaries and employee benefits remained stable with no growth, despite increases in health care expenses which were offset by lower salaries expense. Net overhead, the difference between non-interest income and non-interest expense, improved by $418 thousand or 7.4% in the third quarter compared to a year prior. During the third quarter we closed one banking office.

Monarch Financial Holdings, Inc. is the one-bank holding company for Monarch Bank. Monarch Bank is a community bank with ten banking offices in Chesapeake, Virginia Beach, Norfolk, 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
September 30, June 30, March 31, December 31, September 30,
2014 2014 2014 2013 2013
ASSETS:
Cash and due from banks $ 21,083 $ 19,661 $ 18,510 $ 18,971 $ 21,016
Interest bearing bank balances 58,207 37,166 37,033 31,955 24,504
Federal funds sold 3,938 29,761 84,232 53,985 83,454
Investment securities, at fair value 25,137 23,773 23,197 48,822 16,973
Mortgage loans held for sale 138,590 156,584 92,839 99,718 120,435
Loans held for investment, net of unearned income 713,667 700,159 715,088 712,671 697,541
Less: allowance for loan losses (8,977) (9,070) (9,213) (9,061) (11,228)
Net loans 704,690 691,089 705,875 703,610 686,313
Bank premises and equipment, net 30,368 31,407 29,902 28,882 28,454
Restricted equity securities, at cost 3,179 3,169 3,156 3,683 3,666
Bank owned life insurance 9,587 7,526 7,467 7,409 7,351
Goodwill 775 775 775 775 775
Intangible assets, net -- 15 60 104 149
Accrued interest receivable and other assets 23,688 22,973 19,673 18,786 18,857
Total assets $ 1,019,242 $ 1,023,899 $ 1,022,719 $ 1,016,700 $ 1,011,947
LIABILITIES:
Demand deposits--non-interest bearing $ 252,286 $ 240,348 $ 221,357 $ 206,891 $ 222,079
Demand deposits--interest bearing 53,093 51,563 55,949 55,528 48,244
Money market deposits 365,041 377,096 367,590 374,462 364,488
Savings deposits 25,211 24,539 24,327 22,137 22,665
Time deposits 189,142 197,747 224,947 234,100 228,652
Total deposits 884,773 891,293 894,170 893,118 886,128
FHLB borrowings 1,100 1,125 1,150 1,175 1,200
Short Term borrowings -- -- -- -- --
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 18,145 18,650 17,422 14,661 17,855
Total liabilities 914,018 921,068 922,742 918,954 915,183
STOCKHOLDERS' EQUITY:
Common stock 51,735 51,624 51,584 51,432 51,230
Capital in excess of par value 7,966 7,675 7,357 7,069 6,755
Retained earnings 45,523 43,566 41,232 39,437 38,014
Accumulated other comprehensive loss (135) (159) (314) (419) (406)
Total Monarch Financial Holdings, Inc. stockholders' equity 105,089 102,706 99,859 97,519 95,593
Noncontrolling interest 135 125 118 227 1,171
Total equity 105,224 102,831 99,977 97,746 96,764
Total liabilities and stockholders' equity $ 1,019,242 $ 1,023,899 $ 1,022,719 $ 1,016,700 $ 1,011,947
Common shares outstanding at period end 10,646,873 10,624,668 10,619,444 10,502,323 10,480,023
Nonvested shares of common stock included in commons shares outstanding 299,910 299,910 302,710 215,960 233,960
Book value per common share at period end (1) $ 9.87 $ 9.67 $ 9.40 $ 9.29 $ 9.12
Tangible book value per common share at period end (2) $ 9.80 $ 9.59 $ 9.33 $ 9.20 $ 9.03
Closing market price $ 12.56 $ 11.72 $ 12.26 $ 12.31 $ 11.72
Total risk based capital - Consolidated company 14.16% 14.29% 14.27% 13.91% 13.68%
Total risk based capital - Bank 14.18% 14.31% 14.30% 13.95% 13.83%
(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 Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
INTEREST INCOME:
Interest on federal funds sold $ 15,313 $ 43,210 $ 79,870 $ 73,680
Interest on other bank accounts 61,609 11,307 152,546 29,401
Dividends on equity securities 21,000 66,500 73,410 210,160
Interest on investment securities 90,669 55,314 258,647 170,185
Interest on mortgage loans held for sale 1,442,668 1,423,852 3,489,898 5,931,116
Interest and fees on loans held for investment 9,007,543 9,241,660 27,575,506 27,256,658
Total interest income 10,638,802 10,841,843 31,629,877 33,671,200
INTEREST EXPENSE:
Interest on deposits 789,712 979,858 2,463,428 3,030,233
Interest on trust preferred subordinated debt 124,200 125,818 369,896 369,060
Interest on other borrowings 13,765 15,355 42,351 343,343
Total interest expense 927,677 1,121,031 2,875,675 3,742,636
NET INTEREST INCOME 9,711,125 9,720,812 28,754,202 29,928,564
PROVISION FOR LOAN LOSSES -- -- -- --
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,711,125 9,720,812 28,754,202 29,928,564
NON-INTEREST INCOME:
Mortgage banking income 16,657,849 15,657,242 46,229,239 52,395,566
Service charges and fees 559,497 510,739 1,568,288 1,439,553
Title income 180,402 177,705 452,890 664,479
Investment and insurance income 428,265 264,967 1,209,624 717,427
Other income 72,921 64,420 246,417 313,337
Total non-interest income 17,898,934 16,675,073 49,706,458 55,530,362
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,571,995 8,632,847 25,336,002 25,340,677
Commissions and incentives 7,047,140 6,326,920 17,828,126 23,096,216
Occupancy and equipment 2,464,666 2,232,315 7,136,457 6,229,278
Loan expense 1,552,162 1,904,786 4,975,873 6,365,518
Marketing expense 801,403 807,938 2,121,152 2,065,542
Data processing 601,644 400,125 1,557,728 1,236,854
Telephone 325,405 306,848 929,993 869,910
Other expenses 1,756,476 1,703,182 4,989,177 5,144,471
Total non-interest expense 23,120,891 22,314,961 64,874,508 70,348,466
INCOME BEFORE TAXES 4,489,168 4,080,924 13,586,152 15,110,460
Income tax provision (1,635,440) (1,415,697) (4,874,180) (5,207,023)
NET INCOME 2,853,728 2,665,227 8,711,972 9,903,437
Less: Net income attributable to noncontrolling interest (45,880) (255,553) (183,285) (968,996)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC $2,807,848 $2,409,674 $8,528,687 $ 8,934,441
NET INCOME PER COMMON SHARE:
Basic $ 0.26 $ 0.23 $ 0.80 $ 0.89
Diluted $ 0.26 $ 0.23 $ 0.80 $ 0.85
Weighted average basic shares outstanding 10,635,275 10,464,992 10,609,757 10,060,179
Weighted average diluted shares outstanding 10,670,507 10,519,472 10,648,289 10,482,651
Return on average assets 1.11% 0.94% 1.15% 1.14%
Return on average stockholders' equity 10.72% 10.18% 11.27% 13.07%
Financial Highlights
Monarch Financial Holdings, Inc. and Subsidiaries
(Dollars in thousands, For the Quarter Ended
except per share data) September 30, June 30, March 31, December 31, September 30,
2014 2014 2014 2013 2013
EARNINGS
Interest income $ 10,639 $ 10,557 $ 10,434 $ 10,677 $ 10,842
Interest expense (928) (977) (971) (1,044) (1,121)
Net interest income 9,711 9,580 9,463 9,633 9,721
Provision for loan losses -- -- -- -- --
Noninterest income - mortgage banking income 16,658 17,369 12,202 13,277 15,657
Noninterest income - other 1,241 1,130 1,106 1,075 1,018
Noninterest expense (23,121) (23,007) (18,747) (20,562) (22,315)
Pre-tax net income 4,489 5,072 4,024 3,423 4,081
Minority interest in net income (46) (121) (16) (87) (255)
Income taxes (1,635) (1,767) (1,471) (1,179) (1,416)
Net income $ 2,808 $ 3,184 $ 2,537 $ 2,157 $ 2,410
PER COMMON SHARE
Earnings per share - basic $ 0.26 $ 0.30 $ 0.24 $ 0.21 $ 0.23
Earnings per share - diluted 0.26 0.30 0.24 0.20 0.23
Common stock - per share dividends 0.08 0.08 0.07 0.07 0.06
Average Basic Shares Outstanding 10,635,275 10,620,869 10,600,766 10,486,056 10,464,992
Average Diluted Shares Outstanding 10,670,507 10,660,217 10,641,782 10,535,313 10,519,472
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 9,070 $ 9,213 $ 9,061 $ 11,228 $ 11,320
Provision for loan losses -- -- -- -- --
Charge-offs (181) (184) (12) (2,252) (137)
Recoveries 88 41 164 85 45
Net charge-offs (93) (143) 152 (2,167) (92)
Ending balance $ 8,977 $ 9,070 $ 9,213 $ 9,061 $ 11,228
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 243 $ 499 $ 759 $ 472 $ 82
Nonaccrual loans 2,180 3,028 1,718 1,740 2,814
OREO 767 144 302 302 95
Nonperforming assets 3,190 3,671 2,779 2,514 2,991
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.31% 0.36% 0.27% 0.25% 0.30%
Nonperforming loans to total loans 0.34 0.50 0.35 0.31 0.42
Allowance for loan losses to total loans held for investment 1.26 1.30 1.29 1.27 1.61
Allowance for loan losses to nonperforming loans 370.49 257.16 371.94 409.63 387.71
Annualized net charge-offs to average loans held for investment 0.05 0.08 -0.09 1.25 0.05
FINANCIAL RATIOS
Return on average assets 1.11% 1.29% 1.06% 0.86% 0.94%
Return on average stockholders' equity 10.72 12.63 10.46 8.88 10.18
Net interest margin (FTE) 4.18 4.18 4.25 4.13 4.12
Non-interest revenue/Total revenue 62.7 63.7 56.1 57.3 60.6
Efficiency - Consolidated 83.7 81.8 82.1 85.5 84.8
Efficiency - Bank only 61.7 63.9 59.9 60.4 59.1
Average equity to average assets 10.40 10.18 10.13 9.73 9.27
PERIOD END BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 138,590 $ 156,584 $ 92,839 $ 99,718 $ 120,435
Total loans held for investment 713,667 700,159 715,088 712,671 697,541
Interest-earning assets 945,697 949,872 956,160 952,981 950,760
Assets 1,019,242 1,023,899 1,022,719 1,016,700 1,011,947
Total deposits 884,773 891,293 894,170 893,118 886,128
Other borrowings 11,100 11,125 11,150 11,175 11,200
Stockholders' equity 105,089 102,706 99,859 97,519 95,593
AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 138,382 $ 116,851 $ 70,856 $ 104,104 $ 136,660
Total loans held for investment 701,137 698,851 704,917 695,074 692,731
Interest-earning assets 930,420 927,552 910,929 935,059 946,575
Assets 999,358 993,003 970,815 990,734 1,013,932
Total deposits 867,980 867,217 848,969 869,113 882,553
Other borrowings 11,124 11,150 11,174 11,199 11,257
Stockholders' equity 103,908 101,092 98,374 96,415 93,958
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 440,784 $ 446,863 $ 271,233 $ 349,695 $ 478,304
Percentage of refinance based on dollar volume 16.0% 15.0% 19.1% 20.3% 22.6%

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

Source:Monarch Financial Holdings, Inc.