×

Monarch Financial Reports Higher Income, Strong Loan Growth, and Declares Cash Dividend

CHESAPEAKE, Va., Jan. 30, 2015 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported improved fourth 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 February 27, 2015, to shareholders of record on February 10, 2015.

Annual 2014 highlights are:

  • Net income of $11,211,850, for Return on Equity of 10.95%
  • Diluted earnings per share of $1.05
  • Cash dividends of $0.31 paid per share, up 29% from 2013
  • Loans held for investment grew $59.9 million, up 8.4%
  • Non-performing assets at 0.28% of total assets
  • Net Interest Margin was 4.25%
  • $1.6 billion in mortgage loans closed, with 80% home purchases

Fourth quarter 2014 highlights are:

  • Quarterly net income of $2,683,163, up 24%
  • Return on equity of 10.03%
  • Diluted earnings per share of $0.25
  • Loans held for investment grew $58.9 million
  • $446 million in mortgage loans closed with 69% home purchase

"We are pleased with our quarterly and annual financial performance, with very strong organic loan growth finally taking hold in the fourth quarter. Unlike many of our peers we have grown loans with our bankers, in our markets, and have not purchased loans to drive this growth. Mortgage production was in line with the previous year with our best year ever for purchase mortgage loan closings. We improved our performance in all three lines of business to include banking, mortgage, and wealth management," stated Brad E. Schwartz, Chief Executive Officer. "Non-performing assets remained low, our margin improved due to asset mix and pricing discipline, and our capital grew stronger with our retention of earnings. The market has responded to our performance with price appreciation in our common stock that, when combined with the increase in our common stock dividends, produced a 14% total shareholder return for 2014."

For 2014 net income was $11,211,850 compared to $11,091,007 for the same period in 2013, a 1% increase. The 2014 return on average equity (ROE) was 10.95%, and the return on average assets (ROA) was 1.13%. Annual diluted earnings per share were $1.05 compared to $1.08 in 2013, as our higher earnings were more than offset by the number of additional outstanding shares.

Net income was $2,683,163 for the fourth quarter of 2014 compared to $2,156,566 for the same period in 2013, a 24% increase. The quarterly annualized return on average equity (ROE) was 10.03%, and the annualized quarterly return on average assets (ROA) was 1.04 %, both metrics up from the same period a year ago. Diluted earnings per share for the fourth quarter were $0.25, up 25% from the previous year.

Total assets at December 31, 2014 were $1.07 billion, up 5% from the prior year. In 2014 loans held for investment grew 8% to $773 million and mortgage loans held for sale grew 48% to $148 million. The vast majority of the net loan growth occurred in the fourth quarter. Total deposits grew 3% to $919 million, with demand deposits growing $40 million or 15% for the year. Demand deposits now represent 33% of total deposits, an achievement driven by our dedicated cash management and banking office teams. While the current rate environment does not appropriately reward banks for a transaction-focused funding strategy, this strategy should deliver net interest margin protection when rates eventually rise.

"We are pleased to deliver over 8% quarterly and year over year loan growth. We are equally proud that we produced each and every loan and have not been tempted by participation loans or other loan purchase programs we see in the marketplace," stated E. Neal Crawford Jr., President of Monarch Bank. "We continue to hire talented bankers and expect to continue expanding the banking team into 2015. Our Richmond and Peninsula expansion is driving quality loan growth and deposit growth while our cash management and private banking teams continue to focus on growing core deposits."

Non-performing assets were 0.28% as of December 31, 2014 compared to 0.25% one year prior, and non-performing loans to loans held for investment were 0.37% compared to 0.31% one year prior. Non-performing assets were $3.0 million, comprised of $175 thousand 90 days or more past due and still accruing interest, $2.7 million in non-accrual loans and $144,000 in one parcel of other real estate owned that is already under contract for sale. The allowance for loan losses represents 1.16% of total loans held for investment and 311% of non-performing loans.

Average equity to average assets rose to 10.39% at year-end 2014, an increase from 9.73% one year prior. Cash dividends of $0.08 per share were paid in the fourth quarter of 2014, and a total of $0.31 per share was paid during the year, an increase of 29% over 2013. Total risk-based capital to risk weighted assets at Monarch Bank equaled 13.79%, significantly higher than the required level to meet the highest rating of "Well Capitalized" by federal banking regulators. We also already meet the new Basel III capital standards for a well-capitalized bank. 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, was flat for the year driven by the large volume of mortgage loans held for sale in the first six months of 2013 compared to the balances carried in 2014. These balances are driven by mortgage loan closings. Excluding the mortgage loans held for sale volatility, the net interest income from core banking operations increased 5.9% or $1.9 million. Our net interest margin for 2014 was 4.25%, up from 4.10% due to asset mix, loan and deposit pricing, mortgage loans held for sale pricing, fee income capture, and the additional income from loans previously on non-accrual status. Loan growth that occurred late in the year had minimal impact on net interest income even though it should contribute to net interest income on a going forward basis.

Non-interest income decreased $2.8 million in 2014 over the previous year driven by lower mortgage revenues, which was more than offset by a reduction of $3.6 million in commissions and incentives. Net overhead, or the difference between non-interest income and non-interest expenses, increased only $372 thousand or 1.7% due to increased spending for facilities, technology, technology risk management, compliance and marketing. Salaries and benefits were held flat for the year, a significant accomplishment with our increased benefits costs. Investment revenues related to Monarch Bank Private Wealth totaled $1.6 million for the year compared to $1.1 million the previous year, a noteworthy increase. The Company is recognized by Raymond James Financial Services as a top performing bank investment program, with $235 million in assets under management accumulated since the formation of Monarch Bank Private Wealth in the third quarter of 2012.

Mortgage revenue remains the number one driver of non-interest income. $446 million in mortgage loans were closed during the fourth quarter of 2014 (69% purchase) compared to $350 million in the fourth quarter of 2013 (80% purchase). Monarch closed $1.6 billion in mortgage loans during 2014 compared to $2.0 billion in 2012. While volumes year over year declined approximately 20%, revenues from mortgage lending declined only 5% due to a strong focus on loan product mix, secondary market pricing, and fee income.

"Our focus on the purchase market paid off in 2014 when we had the best year of purchase mortgage business in our history. We closed $1.3 billion in home purchase loans and $0.3 billion in refinances, and altogether closed over 6,000 loans during the year," stated William T. Morrison, CEO of Monarch Mortgage. "The year 2015 is beginning with an attractive rate environment and a much stronger pipeline of activity, and we expect it to be a great year for our mortgage operations."

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 loan production offices in Newport News and Richmond, 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
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
ASSETS:
Cash and due from banks $ 14,503 $ 21,083 $ 19,661 $ 18,510 $ 18,971
Interest bearing bank balances 49,761 58,207 37,166 37,033 31,955
Federal funds sold 1,135 3,938 29,761 84,232 53,985
Investment securities, at fair value 23,725 25,137 23,773 23,197 48,822
Mortgage loans held for sale 147,690 138,590 156,584 92,839 99,718
Loans held for investment, net of unearned income 772,590 713,667 700,159 715,088 712,671
Less: allowance for loan losses (8,949) (8,977) (9,070) (9,213) (9,061)
Net loans 763,641 704,690 691,089 705,875 703,610
Bank premises and equipment, net 30,247 30,368 31,407 29,902 28,882
Restricted equity securities, at cost 3,633 3,179 3,169 3,156 3,683
Bank owned life insurance 9,687 9,587 7,526 7,467 7,409
Goodwill 775 775 775 775 775
Intangible assets, net -- -- 15 60 104
Accrued interest receivable and other assets 21,940 23,688 22,973 19,673 18,786
Total assets $ 1,066,737 $ 1,019,242 $ 1,023,899 $ 1,022,719 $ 1,016,700
LIABILITIES:
Demand deposits--non-interest bearing $ 235,301 $ 252,286 $ 240,348 $ 221,357 $ 206,891
Demand deposits--interest bearing 66,682 53,093 51,563 55,949 55,528
Money market deposits 369,221 365,041 377,096 367,590 374,462
Savings deposits 20,003 25,211 24,539 24,327 22,137
Time deposits 228,207 189,142 197,747 224,947 234,100
Total deposits 919,414 884,773 891,293 894,170 893,118
FHLB borrowings 1,075 1,100 1,125 1,150 1,175
Federal funds 10,000 -- -- -- --
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 18,710 18,145 18,650 17,422 14,661
Total liabilities 959,199 914,018 921,068 922,742 918,954
STOCKHOLDERS' EQUITY:
Common stock 51,864 51,735 51,624 51,584 51,432
Capital in excess of par value 8,336 7,966 7,675 7,357 7,069
Retained earnings 47,354 45,523 43,566 41,232 39,437
Accumulated other comprehensive loss (102) (135) (159) (314) (419)
Total Monarch Financial Holdings, Inc. stockholders' equity 107,452 105,089 102,706 99,859 97,519
Noncontrolling interest 86 135 125 118 227
Total equity 107,538 105,224 102,831 99,977 97,746
Total liabilities and stockholders' equity $ 1,066,737 $ 1,019,242 $ 1,023,899 $ 1,022,719 $ 1,016,700
Common shares outstanding at period end 10,652,475 10,646,873 10,624,668 10,619,444 10,502,323
Nonvested shares of common stock included in commons shares outstanding 279,750 299,910 299,910 302,710 215,960
Book value per common share at period end (1) $ 10.10 $ 9.87 $ 9.67 $ 9.40 $ 9.29
Tangible book value per common share at period end (2) $ 10.02 $ 9.80 $ 9.59 $ 9.33 $ 9.20
Closing market price $ 13.75 $ 12.56 $ 11.72 $ 12.26 $ 12.31
Total risk based capital - Consolidated company 13.79% 14.16% 14.29% 14.27% 13.91%
Total risk based capital - Bank 13.81% 14.18% 14.31% 14.30% 13.95%
(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 Year Ended
December 31, December 31,
2014 2013 2014 2013
INTEREST INCOME:
Interest on federal funds sold $ 4,980 $ 42,283 $ 84,850 $ 115,963
Interest on other bank accounts 92,156 28,626 244,702 58,027
Dividends on equity securities 33,545 67,540 106,955 277,700
Interest on investment securities 100,957 60,311 359,604 230,496
Interest on mortgage loans held for sale 1,376,920 1,090,070 4,866,818 7,021,186
Interest and fees on loans held for investment 9,752,472 9,388,407 37,327,978 36,645,065
Total interest income 11,361,030 10,677,237 42,990,907 44,348,437
INTEREST EXPENSE:
Interest on deposits 722,537 905,970 3,185,965 3,936,203
Interest on trust preferred subordinated debt 46,337 122,850 416,233 491,910
Interest on other borrowings 16,615 15,002 58,966 358,345
Total interest expense 785,489 1,043,822 3,661,164 4,786,458
NET INTEREST INCOME 10,575,541 9,633,415 39,329,743 39,561,979
PROVISION FOR LOAN LOSSES -- -- -- --
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,575,541 9,633,415 39,329,743 39,561,979
NON-INTEREST INCOME:
Mortgage banking income 16,210,774 13,276,836 62,440,013 65,672,402
Service charges and fees 489,974 502,373 2,058,262 1,941,926
Title income 216,895 124,774 669,785 789,253
Investment and insurance income 382,774 336,002 1,592,398 1,053,429
Other income 72,366 111,924 318,783 425,261
Total non-interest income 17,372,783 14,351,909 67,079,241 69,882,271
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,798,996 8,772,157 34,134,998 34,112,834
Commissions and incentives 6,926,507 5,248,131 24,754,633 28,344,347
Occupancy and equipment 2,412,086 2,220,634 9,548,543 8,449,912
Loan expense 1,676,134 1,526,317 6,652,007 7,891,835
Marketing expense 990,383 807,717 3,111,535 2,873,259
Data processing 715,057 459,681 2,272,785 1,696,535
Telephone 296,396 314,984 1,226,389 1,184,894
Other expenses 1,789,789 1,212,731 6,778,966 6,357,202
Total non-interest expense 23,605,348 20,562,352 88,479,856 90,910,818
INCOME BEFORE TAXES 4,342,976 3,422,972 17,929,128 18,533,432
Income tax provision (1,616,093) (1,179,017) (6,490,273) (6,386,040)
NET INCOME 2,726,883 2,243,955 11,438,855 12,147,392
Less: Net income attributable to noncontrolling interest (43,720) (87,389) (227,005) (1,056,385)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC $2,683,163 $2,156,566 $11,211,850 $11,091,007
NET INCOME PER COMMON SHARE:
Basic $ 0.25 $ 0.21 $ 1.06 $ 1.09
Diluted $ 0.25 $ 0.20 $ 1.05 $ 1.08
Weighted average basic shares outstanding 10,648,184 10,486,056 10,619,443 10,167,156
Weighted average diluted shares outstanding 10,689,219 10,535,313 10,658,600 10,299,471
Return on average assets 1.04% 0.86% 1.13% 1.07%
Return on average stockholders' equity 10.03% 8.88% 10.95% 11.97%
Financial Highlights
Monarch Financial Holdings, Inc. and Subsidiaries
(Dollars in thousands, For the Quarter Ended
except per share data) December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
EARNINGS
Interest income $ 11,361 $ 10,639 $ 10,557 $ 10,434 $ 10,677
Interest expense (786) (928) (977) (971) (1,044)
Net interest income 10,575 9,711 9,580 9,463 9,633
Provision for loan losses -- -- -- -- --
Noninterest income - mortgage banking income 16,211 16,658 17,369 12,202 13,277
Noninterest income - other 1,162 1,241 1,130 1,106 1,075
Noninterest expense (23,605) (23,121) (23,007) (18,747) (20,562)
Pre-tax net income 4,343 4,489 5,072 4,024 3,423
Minority interest in net income (44) (46) (121) (16) (87)
Income taxes (1,616) (1,635) (1,767) (1,471) (1,179)
Net income $ 2,683 $ 2,808 $ 3,184 $ 2,537 $ 2,157
PER COMMON SHARE
Earnings per share - basic $ 0.25 $ 0.26 $ 0.30 $ 0.24 $ 0.21
Earnings per share - diluted 0.25 0.26 0.30 0.24 0.20
Common stock - per share dividends 0.08 0.08 0.08 0.07 0.07
Average Basic Shares Outstanding 10,648,184 10,635,275 10,620,869 10,600,766 10,486,056
Average Diluted Shares Outstanding 10,689,219 10,670,507 10,660,217 10,641,782 10,535,313
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 8,977 $ 9,070 $ 9,213 $ 9,061 $ 11,228
Provision for loan losses -- -- -- -- --
Charge-offs (174) (181) (184) (12) (2,252)
Recoveries 146 88 41 164 85
Net charge-offs (28) (93) (143) 152 (2,167)
Ending balance $ 8,949 $ 8,977 $ 9,070 $ 9,213 $ 9,061
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 175 $ 243 $ 499 $ 759 $ 472
Nonaccrual loans 2,705 2,180 3,028 1,718 1,740
OREO 144 767 144 302 302
Nonperforming assets 3,024 3,190 3,671 2,779 2,514
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.28% 0.31% 0.36% 0.27% 0.25%
Nonperforming loans to total loans 0.37 0.34 0.50 0.35 0.31
Allowance for loan losses to total loans held for investment 1.16 1.26 1.30 1.29 1.27
Allowance for loan losses to nonperforming loans 310.73 370.49 257.16 371.94 409.63
Annualized net charge-offs to average loans held for investment 0.02 0.05 0.08 -0.09 1.25
FINANCIAL RATIOS
Return on average assets 1.04% 1.11% 1.29% 1.06% 0.86%
Return on average stockholders' equity 10.03 10.72 12.63 10.46 8.88
Net interest margin (FTE) 4.42 4.18 4.18 4.25 4.13
Non-interest revenue/Total revenue 60.5 62.7 63.7 56.1 57.3
Efficiency - Consolidated 84.5 83.7 81.8 82.1 85.5
Efficiency - Bank only 61.2 61.7 63.9 59.9 60.4
Average equity to average assets 10.39 10.40 10.18 10.13 9.73
PERIOD END BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 147,690 $ 138,590 $ 156,584 $ 92,839 $ 99,718
Total loans held for investment 772,590 713,667 700,159 715,088 712,671
Interest-earning assets 1,003,332 945,697 949,872 956,160 952,981
Assets 1,066,737 1,019,242 1,023,899 1,022,719 1,016,700
Total deposits 919,414 884,773 891,293 894,170 893,118
Other borrowings 21,075 11,100 11,125 11,150 11,175
Stockholders' equity 107,451 105,089 102,706 99,859 97,519
AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 131,471 $ 138,382 $ 116,851 $ 70,856 $ 104,104
Total loans held for investment 725,093 701,137 698,851 704,917 695,074
Interest-earning assets 958,904 930,420 927,552 910,929 935,059
Assets 1,021,591 999,358 993,003 970,815 990,734
Total deposits 883,478 867,980 867,217 848,969 869,113
Other borrowings 14,575 11,124 11,150 11,174 11,199
Stockholders' equity 106,088 103,908 101,092 98,374 96,415
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 445,846 $ 440,784 $ 446,863 $ 271,233 $ 349,695
Percentage of refinance based on dollar volume 30.9% 16.0% 15.0% 19.1% 20.3%

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

Source:Monarch Financial Holdings, Inc.