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Monarch Financial Reports Record 2nd Quarter and Declares Cash Dividend

CHESAPEAKE, Va., July 23, 2015 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported record second quarter profit and continued strong financial performance. The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on August 31, 2015, to shareholders of record on August 7, 2015.

Second quarter 2015 highlights are:

  • 2nd quarter net income of $3,423,829, up 7.5%
  • Return on Equity of 12.28%
  • Net Interest Margin remained strong at 4.28%
  • Diluted earnings per share of $0.32
  • Non-performing assets at 0.23% of total assets
  • $605 million in mortgage loans closed, 76% purchase money

Year to date 2015 highlights are:

  • Net income of $6,885,036, up 20.4%
  • Return on Equity of 12.62%
  • Diluted earnings per share of $0.64

“We are pleased to report a record second quarter, as well as record results for the first six months of the year. Driving these gains is our mortgage operation, which closed over $1.09 billion in loans during the first half of the year, another first half of the year record. These higher mortgage loan closings, minimal credit costs, and a strong net interest margin continued to drive our bottom line results,” stated Brad E. Schwartz, Chief Executive Officer. “From a shareholder perspective our earnings per share are up over 18% for the year, we recently increased our cash dividend payout by 12.5%, and we were ranked as the 18th top performing community bank in the country. We are extremely pleased with our past performance, our national ranking, and our future opportunities for growing the Monarch franchise.”

Net income was $3,423,829 for the second quarter of 2015, a record second quarter for the company, up 7.5% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 12.28%, and the quarterly return on average assets (ROA) was 1.22%. Quarterly diluted earnings per share increased to $0.32, compared to $0.30 for the same quarter in 2014.

Net income was $6,885,036 for the first six months of 2015, up 20.4% from the previous year. The annualized return on average equity (ROE) was 12.62%, and the quarterly return on average assets (ROA) was 1.26%. Diluted earnings per share were $0.64, compared to $0.54 for the same period in 2014.

Total assets at June 30, 2015 were $1.17 billion, with both loans and deposits showing strong year over year growth. Year over year total loans held for investment grew $93 million or 13.3% and mortgage loans held for sale grew $37 million or 23.9%. For the second quarter total loans held for investment grew $6 million or 0.8% and mortgage loans held for sale grew $34 million or 21.3%. Together these two loan categories continue to drive earning asset growth. Funding continues to shift to a higher level of demand deposits, with 36% of our total deposit mix now in demand deposits. Demand deposit balances remain at record high levels. A shift to funding a portion of our seasonal mortgage pipeline with short-term fixed rate borrowings has allowed us to maintain our deposit pricing discipline to better manage our net interest margin.

“While I am thrilled with our year over year loan performance, the second quarter was a little more challenging as we had very strong loan production that was largely offset by principal payments and payoffs,” stated Neal Crawford, President of Monarch Bank. “Our cash management and retail deposit teams continue to drive deposit growth, with well over a third of our deposits now in demand deposits.”

Non-performing assets to total assets were 0.23%, which continues to remain significantly below that of our local, state, and national peer group. This is the lowest level of non-performing assets reported since 2008. Non-performing assets were $2.6 million which were down from the previous quarter and the same period in 2014. Non-performing assets were comprised of $2.3 million in non-accrual loans, $0 in loans more than 90 days past due, and $375 thousand in other assets. Net charge-offs for the year were $773 thousand, provision expense was $500 thousand, and the allowance for loan losses represents 1.09% of loans held for investment and 383% of non-performing loans.

The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on August 31, 2015, to shareholders of record on August 7, 2015. Average equity to average assets was 9.92%, and total risk-based capital to risk weighted assets at Monarch Bank equaled 13.52%, 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, increased 17.1% or $1.6 million during the second quarter of 2015 compared to the same quarter in 2014 driven by higher average balances of loans held for investment and mortgage loans held for sale. The net interest margin was 4.28% for the second quarter, which was up from 4.18% in the same quarter in 2014.

Non-interest income increased 27.7% or $5.1 million from the previous year driven by increased revenues from mortgage loans sold and related title insurance fees. Investment and insurance revenue increased 19.5% 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 $605 million in mortgage loans (76% purchase) during the second quarter of 2015 compared to $487 million (53% purchase) in the first quarter of 2015, a significant increase. We closed $1,092 million in mortgage loans (66% purchase) during the first half of 2015 compared to $718 million (83% purchase) in the first half of 2014. Total non-interest expense increased 26.7% or $6.1 million during the second quarter due to higher mortgage commissions, salaries and benefits expenses.

“We had a great quarter for mortgage originations and closings, and our operations are running more effectively than ever. Our realtor and builder focus, combined with helping many of our existing clients refinance into lower rates earlier in the year, was the key to driving our higher annual loan 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), Fitzgerald Financial, LLC (secondary mortgage origination), Advance 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, March 31, December 31, September 30, June 30,
2015 2015 2014 2014 2014
ASSETS:
Cash and due from banks $ 15,319 $ 13,870 $ 14,503 $ 21,083 $ 19,661
Interest bearing bank balances 84,225 73,237 49,761 58,207 37,166
Federal funds sold 2,377 63,311 1,135 3,938 29,761
Investment securities, at fair value 17,338 20,283 23,725 25,137 23,773
Mortgage loans held for sale 193,948 159,899 147,690 138,590 156,584
Loans held for investment, net of unearned income 792,962 787,003 772,590 713,667 700,159
Less: allowance for loan losses (8,676) (8,644) (8,949) (8,977) (9,070)
Net loans 784,286 778,359 763,641 704,690 691,089
Bank premises and equipment, net 30,117 30,050 30,247 30,368 31,407
Restricted equity securities, at cost 4,706 3,243 3,633 3,179 3,169
Bank owned life insurance 10,465 9,950 9,687 9,587 7,526
Goodwill 775 775 775 775 775
Intangible assets, net - - - - 15
Accrued interest receivable and other assets 27,119 25,403 21,940 23,688 22,973
Total assets $ 1,170,675 $ 1,178,380 $ 1,066,737 $ 1,019,242 $ 1,023,899
LIABILITIES:
Demand deposits--non-interest bearing $ 293,442 $ 270,446 $ 235,301 $ 252,286 $ 240,348
Demand deposits--interest bearing 54,580 58,725 66,682 53,093 51,563
Money market deposits 379,716 417,329 369,221 365,041 377,096
Savings deposits 19,431 19,519 20,003 25,211 24,539
Time deposits 231,854 271,121 228,207 189,142 197,747
Total deposits 979,023 1,037,140 919,414 884,773 891,293
FHLB borrowings 46,025 1,050 11,075 1,100 1,125
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 22,167 19,653 18,710 18,145 18,650
Total liabilities 1,057,215 1,067,843 959,199 914,018 921,068
STOCKHOLDERS' EQUITY:
Common stock 52,182 51,950 51,864 51,735 51,624
Capital in excess of par value 8,846 8,555 8,336 7,966 7,675
Retained earnings 52,412 49,957 47,354 45,523 43,566
Accumulated other comprehensive loss (65) (14) (102) (135) (159)
Total Monarch Financial Holdings, Inc. stockholders' equity 113,375 110,448 107,452 105,089 102,706
Noncontrolling interest 85 89 86 135 125
Total equity 113,460 110,537 107,538 105,224 102,831
Total liabilities and stockholders' equity $ 1,170,675 $ 1,178,380 $ 1,066,737 $ 1,019,242 $ 1,023,899
Common shares outstanding at period end 10,777,965 10,736,947 10,652,475 10,646,873 10,624,668
Nonvested shares of common stock included in commons shares outstanding 341,450 346,950 279,750 299,910 299,910
Book value per common share at period end (1) $ 10.52 $ 10.29 $ 10.09 $ 9.87 $ 9.67
Tangible book value per common share at period end (2) $ 10.45 $ 10.21 $ 10.01 $ 9.80 $ 9.59
Closing market price $ 12.55 $ 12.51 $ 13.75 $ 12.56 $ 11.72
Total risk based capital - Consolidated company 13.62% 13.57% 13.79% 14.16% 14.29%
Total risk based capital - Bank 13.52% 13.38% 13.81% 14.18% 14.31%
(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 Six Months Ended
June 30, June 30,
2015 2014 2015 2014
INTEREST INCOME:
Interest and fees on loans held for investment $ 10,032,923 $ 9,089,071 $ 19,873,259 $ 18,567,963
Interest on mortgage loans held for sale 1,746,435 1,274,498 3,053,472 2,047,230
Interest on investment securities 78,784 91,929 167,699 167,978
Interest on federal funds sold 7,207 24,179 15,460 64,557
Dividends on equity securities 41,713 22,410 80,713 52,410
Interest on other bank accounts 116,754 54,905 218,783 90,937
Total interest income 12,023,816 10,556,992 23,409,386 20,991,075
INTEREST EXPENSE:
Interest on deposits 738,767 839,303 1,406,827 1,673,716
Interest on trust preferred subordinated debt 47,867 123,359 94,282 245,696
Interest on other borrowings 23,467 14,224 46,073 28,586
Total interest expense 810,101 976,886 1,547,182 1,947,998
NET INTEREST INCOME 11,213,715 9,580,106 21,862,204 19,043,077
PROVISION FOR LOAN LOSSES 250,000 - 500,000 -
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,963,715 9,580,106 21,362,204 19,043,077
NON-INTEREST INCOME:
Mortgage banking income 22,240,973 17,369,228 43,304,652 29,571,390
Service charges and fees 558,790 538,579 1,075,344 1,008,791
Title income 241,919 167,454 474,690 272,488
Investment and insurance income 400,542 335,887 744,668 781,359
Other income 184,040 87,725 293,073 173,496
Total non-interest income 23,626,264 18,498,873 45,892,427 31,807,524
NON-INTEREST EXPENSE:
Salaries and employee benefits 10,097,518 8,492,446 19,691,794 16,764,007
Commissions and incentives 10,805,166 6,770,022 20,250,304 10,780,986
Occupancy and equipment 2,389,884 2,395,088 4,678,392 4,671,791
Loan origination expense 1,930,961 2,060,570 4,389,624 3,423,711
Marketing expense 902,932 797,908 1,649,159 1,319,749
Data processing 599,568 476,806 1,229,318 956,084
Telephone 353,163 293,451 678,909 604,588
Other expenses 2,074,321 1,720,693 3,763,845 3,232,701
Total non-interest expense 29,153,513 23,006,984 56,331,345 41,753,617
INCOME BEFORE TAXES 5,436,466 5,071,995 10,923,286 9,096,984
Income tax provision (1,961,763) (1,767,500) (3,955,103) (3,238,740)
NET INCOME 3,474,703 3,304,495 6,968,183 5,858,244
Less: Net income attributable to noncontrolling interest (50,874) (120,921) (83,147) (137,405)
NET INCOME ATTRIBUTABLE TO MONARCH
FINANCIAL HOLDINGS, INC $ 3,423,829 $ 3,183,574 $ 6,885,036 $ 5,720,839
NET INCOME PER COMMON SHARE:
Basic $ 0.32 $ 0.30 $ 0.64 $ 0.54
Diluted $ 0.32 $ 0.30 $ 0.64 $ 0.54
Weighted average basic shares outstanding 10,760,159 10,620,869 10,744,430 10,596,786
Weighted average diluted shares outstanding 10,771,660 10,660,217 10,766,776 10,636,968
Return on average assets 1.22% 1.29% 1.26% 1.18%
Return on average stockholders' equity 12.28% 12.63% 12.62% 11.57%


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,
2015 2015 2014 2014 2014
EARNINGS
Interest income$ 12,024 $ 11,385 $ 11,361 $ 10,639 $ 10,557
Interest expense (810) (737) (786) (928) (977)
Net interest income 11,214 10,648 10,575 9,711 9,580
Provision for loan losses (250) (250) - - -
Noninterest income - mortgage banking income 22,241 21,064 16,211 16,658 17,369
Noninterest income - other 1,385 1,202 1,162 1,241 1,130
Noninterest expense (29,154) (27,178) (23,605) (23,121) (23,007)
Pre-tax net income 5,436 5,486 4,343 4,489 5,072
Minority interest in net income (51) (32) (44) (46) (121)
Income taxes (1,961) (1,993) (1,616) (1,635) (1,767)
Net income$ 3,424 $ 3,461 $ 2,683 $ 2,808 $ 3,184
PER COMMON SHARE
Earnings per share - basic$ 0.32 $ 0.32 $ 0.25 $ 0.26 $ 0.30
Earnings per share - diluted 0.32 0.32 0.25 0.26 0.30
Common stock - per share dividends 0.09 0.08 0.08 0.08 0.08
Average Basic Shares Outstanding 10,760,159 10,728,206 10,648,184 10,635,275 10,620,869
Average Diluted Shares Outstanding 10,771,660 10,761,396 10,689,219 10,670,507 10,660,217
YIELDS
Loans held for investment 5.21 % 5.21 % 5.34 % 5.16 % 5.22 %
Mortgage loans held for sale, net at fair value 3.88 3.90 4.16 4.14 4.37
Other earning assets 1.38 1.31 1.33 1.16 1.04
Total earning assets 4.59 4.62 4.75 4.58 4.61
Interest bearing checking 0.13 0.13 0.14 0.15 0.17
Money market and regular savings 0.36 0.30 0.31 0.36 0.39
Time deposits 0.61 0.61 0.81 0.88 0.88
Borrowings 1.04 1.33 1.71 4.92 4.95
Total interest-bearing liabilities 0.44 0.43 0.48 0.57 0.60
Interest rate spread 4.15 4.19 4.27 4.01 4.01
Net interest margin 4.28 4.32 4.42 4.18 4.18
FINANCIAL RATIOS
Return on average assets 1.22 % 1.31 % 1.04 % 1.11 % 1.29 %
Return on average stockholders' equity 12.28 12.98 10.03 10.72 12.63
Non-interest revenue/Total revenue 66.3 66.2 60.5 62.7 63.7
Efficiency - Consolidated 83.7 82.6 84.5 83.7 81.8
Efficiency - Bank only 64.6 66.2 61.2 61.7 63.9
Average equity to average assets 9.92 10.10 10.39 10.40 10.18
ALLOWANCE FOR LOAN LOSSES
Beginning balance$ 8,644 $ 8,949 $ 8,977 $ 9,070 $ 9,213
Provision for loan losses 250 250 - - -
Charge-offs (287) (598) (174) (181) (184)
Recoveries 69 43 146 88 41
Net charge-offs (218) (555) (28) (93) (143)
Ending balance$ 8,676 $ 8,644 $ 8,949 $ 8,977 $ 9,070
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due$ - $ 175 $ 175 $ 243 $ 499
Nonaccrual loans 2,266 4,325 2,705 2,180 3,028
OREO and reposessed property 375 100 144 767 144
Nonperforming assets$ 2,641 $ 4,600 $ 3,024 $ 3,190 $ 3,671
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.23 % 0.39 % 0.28 % 0.31 % 0.36 %
Nonperforming loans to total loans 0.29 0.57 0.37 0.34 0.50
Allowance for loan losses to total loans held for investment 1.09 1.10 1.16 1.26 1.30
Allowance for loan losses to nonperforming loans 382.88 192.09 310.73 370.49 257.16
Annualized net charge-offs to average loans held for investment 0.11 0.29 0.02 0.05 0.08
AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale$ 180,485 $ 136,084 $ 131,471 $ 138,382 $ 116,851
Total loans held for investment 778,757 771,587 725,093 701,137 698,851
Interest-earning assets 1,062,119 1,009,389 958,904 930,420 927,552
Assets 1,126,749 1,070,581 1,021,591 999,358 993,003
Total deposits 969,144 925,984 883,478 867,980 867,217
Other borrowings 27,437 21,049 14,575 11,124 11,150
Stockholders' equity 111,824 108,174 106,088 103,908 101,092
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed$ 605,401 $ 487,423 $ 445,846 $ 440,784 $ 446,863
Percentage of refinance based on dollar volume 23.9 % 47.0 % 30.9 % 16.0 % 15.0 %


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

Source:Monarch Financial Holdings, Inc.