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Monarch Financial Reports 36% Increase in Profits and Strong Balance Sheet Growth

CHESAPEAKE, Va., April 23, 2015 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported record first quarter net income and overall strong financial performance. First quarter 2015 highlights are:

  • Net income of $3,461,207, up 36%
  • Diluted earnings per share of $0.32, up 33%
  • Return on Average Equity of 12.98%
  • Deposit growth of $117 million, driving balance sheet growth
  • Non-performing assets low at 0.39% of total assets
  • Net Interest Margin remained strong at 4.32%
  • $487 million in mortgage loans closed, up 80%

"We are extremely pleased with our first quarter financial performance, with mortgage banking earnings driving the strong increase over the previous year. Loans held for investment grew in the first quarter at an annualized rate of over 7%, and our asset quality remains in the top quartile of banks. Total deposits exceeded $1 billion for the first time in our history, led by growth in checking, money market, and time deposit accounts," stated Brad E. Schwartz, Chief Executive Officer. "This is the best first quarter in our history and we are bullish on the prospects for the remainder of the year."

Net income was $3,461,207 for the first quarter of 2015 compared to $2,537,265 for the same period in 2014, a 36% increase. The quarterly annualized return on average equity (ROE) was 12.98% compared to 10.46% one year prior, and the annualized quarterly return on average assets (ROA) was 1.31% compared to 1.06% one year prior. Diluted earnings per share for the first quarter were $0.32, up 33% from the previous year's first quarter.

Total assets at March 31, 2015 were $1.18 billion, up 15% from the prior year. During the first quarter of 2015 loans held for investment increased $14.4 million to $787 million, and mortgage loans held for sale grew $12.2 million to $160 million. Total deposits grew 16% to $1.036 billion, with demand deposits growing $51 million or 18% year over year. Demand deposits represent 31% of total deposits, an achievement driven by our dedicated cash management and banking office teams.

"We continue to hire talented bankers and expand our banking teams to drive client acquisition and overall balance sheet growth. While deposit growth was at a record pace in the first quarter, one major client made a significant deposit at quarter-end that we anticipate will run-off over the next several months. We remain focused on quality loan and deposit growth, while our cash management and private banking teams continue to focus on growing core deposits," stated E. Neal Crawford Jr., President of Monarch Bank.

Non-performing assets were 0.39% as of March 31, 2015 compared to 0.27% one year prior. Non-performing assets were $4.6 million, comprised of $175 thousand in 90 days or more past due and still accruing interest, $4.3 million in non-accrual loans and $100,000 in one parcel of other real estate owned that is under contract to close in April. The allowance for loan losses represents 1.10% of total loans held for investment and 192% of non-performing loans.

Average equity to average assets was 10.10% and total risk-based capital to risk weighted assets was 13.52%, significantly higher than the required level to meet the highest rating of "Well Capitalized" by federal banking regulators. Cash dividends of $0.08 per share were paid in the first quarter of 2015, and tangible book value per share grew to $10.32. 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, grew 12.5% in the first quarter driven by higher average balances of earning assets and a decline in the cost of funding those assets. Our net interest margin was 4.32%, slightly up from 4.25% one year ago yet slightly down from 4.42% in the previous quarter. 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.

Non-interest income increased $9.0 million in the first quarter over the previous year driven primarily by mortgage and title company revenues. Mortgage revenue remains the number one driver of non-interest income. $487 million in mortgage loans were closed during the first quarter of 2015 (52% purchase) compared to $271 million in the first quarter of 2014. The first quarter is typically the weakest quarter for purchase money mortgage closings, and the drop in rates in January drove refinance volume to offset the seasonal purchase money decline.

"The first quarter of 2105 was the best quarter for closings over the past year, with both refinance and purchase volume higher. We anticipate, based on our current pipeline of expected loan closings, the beginning to a strong spring home selling season where our purchase closings should drive the majority of our volume," stated William T. Morrison, CEO of Monarch Mortgage.

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
March 31, December 31, September 30, June 30, March 31,
2015 2014 2014 2014 2014
ASSETS:
Cash and due from banks $ 13,870 $ 14,503 $ 21,083 $ 19,661 $ 18,510
Interest bearing bank balances 73,237 49,761 58,207 37,166 37,033
Federal funds sold 63,311 1,135 3,938 29,761 84,232
Investment securities, at fair value 20,283 23,725 25,137 23,773 23,197
Mortgage loans held for sale 159,899 147,690 138,590 156,584 92,839
Loans held for investment, net of unearned income 787,003 772,590 713,667 700,159 715,088
Less: allowance for loan losses (8,644) (8,949) (8,977) (9,070) (9,213)
Net loans 778,359 763,641 704,690 691,089 705,875
Bank premises and equipment, net 30,050 30,247 30,368 31,407 29,902
Restricted equity securities, at cost 3,243 3,633 3,179 3,169 3,156
Bank owned life insurance 9,950 9,687 9,587 7,526 7,467
Goodwill 775 775 775 775 775
Intangible assets, net -- -- -- 15 60
Accrued interest receivable and other assets 25,403 21,940 23,688 22,973 19,673
Total assets $ 1,178,380 $ 1,066,737 $ 1,019,242 $ 1,023,899 $ 1,022,719
LIABILITIES:
Demand deposits---non-interest bearing $ 269,451 $ 235,301 $ 252,286 $ 240,348 $ 221,357
Demand deposits---interest bearing 58,725 66,682 53,093 51,563 55,949
Money market deposits 417,329 369,221 365,041 377,096 367,590
Savings deposits 19,519 20,003 25,211 24,539 24,327
Time deposits 271,121 228,207 189,142 197,747 224,947
Total deposits 1,036,145 919,414 884,773 891,293 894,170
FHLB borrowings 1,050 11,075 1,100 1,125 1,150
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 19,653 18,710 18,145 18,650 17,422
Total liabilities 1,066,848 959,199 914,018 921,068 922,742
STOCKHOLDERS' EQUITY:
Common stock 51,950 51,864 51,735 51,624 51,584
Capital in excess of par value 9,550 8,336 7,966 7,675 7,357
Retained earnings 49,957 47,354 45,523 43,566 41,232
Accumulated other comprehensive loss (14) (102) (135) (159) (314)
Total Monarch Financial Holdings, Inc. stockholders' equity 111,443 107,452 105,089 102,706 99,859
Noncontrolling interest 89 86 135 125 118
Total equity 111,532 107,538 105,224 102,831 99,977
Total liabilities and stockholders' equity $ 1,178,380 $ 1,066,737 $ 1,019,242 $ 1,023,899 $ 1,022,719
Common shares outstanding at period end 10,736,947 10,652,475 10,646,873 10,624,668 10,619,444
Nonvested shares of common stock included in commons shares outstanding 346,950 279,750 299,910 299,910 302,710
Book value per common share at period end (1) $ 10.39 $ 10.10 $ 9.87 $ 9.67 $ 9.40
Tangible book value per common share at period end (2) $ 10.32 $ 10.02 $ 9.80 $ 9.59 $ 9.33
Closing market price $ 12.51 $ 13.75 $ 12.56 $ 11.72 $ 12.26
Total risk based capital - Consolidated company 13.52% 13.79% 14.16% 14.29% 14.27%
Total risk based capital - Bank 13.32% 13.81% 14.18% 14.31% 14.30%
(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,
2015 2014
INTEREST INCOME:
Interest on federal funds sold $ 8,253 $ 40,378
Interest on other bank accounts 102,029 36,032
Dividends on equity securities 39,000 30,000
Interest on investment securities 88,915 76,049
Interest on mortgage loans held for sale 1,307,037 772,732
Interest and fees on loans held for investment 9,840,336 9,478,892
Total interest income 11,385,570 10,434,083
INTEREST EXPENSE:
Interest on deposits 668,060 834,413
Interest on trust preferred subordinated debt 46,415 122,337
Interest on other borrowings 22,606 14,362
Total interest expense 737,081 971,112
NET INTEREST INCOME 10,648,489 9,462,971
PROVISION FOR LOAN LOSSES 250,000 --
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,398,489 9,462,971
NON-INTEREST INCOME:
Mortgage banking income 21,063,679 12,202,162
Service charges and fees 516,554 470,212
Title income 232,771 105,034
Investment and insurance income 344,126 445,472
Other income 109,033 85,771
Total non-interest income 22,266,163 13,308,651
NON-INTEREST EXPENSE:
Salaries and employee benefits 9,594,276 8,271,561
Commissions and incentives 9,445,138 4,010,964
Occupancy and equipment 2,288,508 2,276,703
Loan expense 2,458,663 1,363,141
Marketing expense 746,227 521,841
Data processing 629,750 479,278
Telephone 325,746 311,137
Other expenses 1,689,524 1,512,008
Total non-interest expense 27,177,832 18,746,633
INCOME BEFORE TAXES 5,486,820 4,024,989
Income tax provision (1,993,340) (1,471,240)
NET INCOME 3,493,480 2,553,749
Less: Net income attributable to noncontrolling interest (32,273) (16,484)
NET INCOME ATTRIBUTABLE TO MONARCH
FINANCIAL HOLDINGS, INC $3,461,207 $2,537,265
NET INCOME PER COMMON SHARE:
Basic $ 0.32 $ 0.24
Diluted $ 0.32 $ 0.24
Weighted average basic shares outstanding 10,728,206 10,572,435
Weighted average diluted shares outstanding 10,761,396 10,613,452
Return on average assets 1.31% 1.06%
Return on average stockholders' equity 12.98% 10.46%
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,
2015 2014 2014 2014 2014
EARNINGS
Interest income $ 11,385 $ 11,361 $ 10,639 $ 10,557 $ 10,434
Interest expense (737) (786) (928) (977) (971)
Net interest income 10,648 10,575 9,711 9,580 9,463
Provision for loan losses (250) -- -- -- --
Noninterest income - mortgage banking income 21,064 16,211 16,658 17,369 12,202
Noninterest income - other 1,202 1,162 1,241 1,130 1,106
Noninterest expense (27,178) (23,605) (23,121) (23,007) (18,747)
Pre-tax net income 5,486 4,343 4,489 5,072 4,024
Minority interest in net income (32) (44) (46) (121) (16)
Income taxes (1,993) (1,616) (1,635) (1,767) (1,471)
Net income $ 3,461 $ 2,683 $ 2,808 $ 3,184 $ 2,537
PER COMMON SHARE
Earnings per share - basic $ 0.32 $ 0.25 $ 0.26 $ 0.30 $ 0.24
Earnings per share - diluted 0.32 0.25 0.26 0.30 0.24
Common stock - per share dividends 0.08 0.08 0.08 0.08 0.07
Average Basic Shares Outstanding 10,728,206 10,648,184 10,635,275 10,620,869 10,572,435
Average Diluted Shares Outstanding 10,761,396 10,689,219 10,670,507 10,660,217 10,613,452
YIELDS
Loans held for investment 5.21% 5.34% 5.16% 5.22% 5.50%
Mortgage loans held for sale, net at fair value 3.90 4.16 4.14 4.37 4.42
Other earning assets 1.31 1.33 1.16 1.04 0.79
Total earning assets 4.62 4.75 4.58 4.61 4.69
Interest bearing checking 0.13 0.14 0.15 0.17 0.16
Money market and regular savings 0.30 0.31 0.36 0.39 0.38
Time deposits 0.61 0.81 0.88 0.88 0.90
Borrowings 1.33 1.71 4.92 4.95 4.96
Total interest-bearing liabilities 0.43 0.48 0.57 0.60 0.60
Interest rate spread 4.19 4.27 4.01 4.01 4.09
Net interest margin 4.32 4.42 4.18 4.18 4.25
FINANCIAL RATIOS
Return on average assets 1.31% 1.04% 1.11% 1.29% 1.06%
Return on average stockholders' equity 12.98 10.03 10.72 12.63 10.46
Non-interest revenue/Total revenue 66.2 60.5 62.7 63.7 56.1
Efficiency - Consolidated 82.6 84.5 83.7 81.8 82.1
Efficiency - Bank only 66.2 61.2 61.7 63.9 59.9
Average equity to average assets 10.10 10.39 10.40 10.18 10.13
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 8,949 $ 8,977 $ 9,070 $ 9,213 $ 9,061
Provision for loan losses 250 -- -- -- --
Charge-offs (598) (174) (181) (184) (12)
Recoveries 43 146 88 41 164
Net charge-offs (555) (28) (93) (143) 152
Ending balance $ 8,644 $ 8,949 $ 8,977 $ 9,070 $ 9,213
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 175 $ 175 $ 243 $ 499 $ 759
Nonaccrual loans 4,325 2,705 2,180 3,028 1,718
OREO 100 144 767 144 302
Nonperforming assets $ 4,600 $ 3,024 $ 3,190 $ 3,671 $ 2,779
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.39% 0.28% 0.31% 0.36% 0.27%
Nonperforming loans to total loans 0.57 0.37 0.34 0.50 0.35
Allowance for loan losses to total loans held for investment 1.10 1.16 1.26 1.30 1.29
Allowance for loan losses to nonperforming loans 192.09 310.73 370.49 257.16 371.94
Annualized net charge-offs to average loans held for investment 0.29 0.02 0.05 0.08 -0.09
AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 136,084 $ 131,471 $ 138,382 $ 116,851 $ 70,856
Total loans held for investment 771,587 725,093 701,137 698,851 704,917
Interest-earning assets 1,009,389 958,904 930,420 927,552 910,929
Assets 1,070,581 1,021,591 999,358 993,003 970,815
Total deposits 925,984 883,478 867,980 867,217 848,969
Other borrowings 21,049 14,575 11,124 11,150 11,174
Stockholders' equity 108,174 106,088 103,908 101,092 98,374
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 487,423 $ 445,846 $ 440,784 $ 446,863 $ 271,233
Percentage of refinance based on dollar volume 47.0% 30.9% 16.0% 15.0% 19.1%

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

Source:Monarch Financial Holdings, Inc.