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Monarch Financial Reports 3rd Quarter Financial Performance and Declares Both Cash and Stock Dividends

CHESAPEAKE, Va., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported strong third quarter profit and continued financial performance. The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on November 30, 2015, to shareholders of record on November 12, 2015. Total cash dividends declared in 2015 increased 13% from the previous year.

The Board also declared an 11-for-10 stock split effected as a stock dividend. This was the company’s seventh stock split or stock dividend in its history, with the last split in December of 2012. This 11-for-10 stock split equals one additional share for every ten shares owned, and is payable December 4, 2015 to shareholders of record on November 12, 2015. The stock split should enhance shareholder total cash dividends payments, if declared in the future. The amount and declaration of future cash dividends is subject to Board of Director's approval in addition to regulatory restrictions. All earnings per share and share totals have been restated to reflect this upcoming stock split.

Third quarter 2015 highlights are:

  • 3rd quarter net income of $3,127,744, up 11.4%
  • Diluted earnings per share of $0.26, up 8.3%
  • Return on Equity of 10.82%
  • Net Interest Margin remains strong at 4.19%
  • Non-performing assets at 0.19% of total assets
  • $528 million in mortgage loans closed, 83% purchase money

Year to date 2015 highlights are:

  • Record net income of $10,012,780, up 17.4%
  • Diluted earnings per share of $0.84, up 15%
  • Return on Equity of 12.00%
  • $1.62 billion in mortgage loans closed, up 40%

“We are pleased to report a record year for net income, as well as both a cash and stock dividend for our shareholders. Our banking, mortgage and private wealth segments continue to perform well. Mortgage closings of $1.62 billion already exceed total mortgage loans closed for all of 2014. A solid net interest margin, strong mortgage production, minimal credit costs, and a focus on expense management continue to drive our above peer bottom line results.” stated Brad E. Schwartz, Chief Executive Officer. “From a shareholder perspective our earnings per share are up 15% for the year, cash dividends declared have grown by 13%, and our net income available to common shareholders is at record levels. We believe this common stock dividend will enhance the overall value of our company, as well as enhance the dividend payout for our shareholders in the future should additional cash dividends be declared. The year 2015 is shaping up to be another great year for the Butterfly Bank.”

Net income was $3,127,744 for the third quarter of 2015, up 11.4% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 10.82%, and the quarterly return on average assets (ROA) was 1.11%. Restated for the stock split, quarterly diluted earnings per share increased to $0.26 compared to $0.24 for the same quarter in 2014.

Net income was $10,012,780 for the first nine months of 2015, up 17.4% from the previous year. The annualized return on average equity (ROE) was 12.00%, and the quarterly return on average assets (ROA) was 1.21%. Restated for the stock split, diluted earnings per share were $0.84, up 15% when compared to $0.73 for the same period in 2014.

Total assets at September 30, 2015 were $1.12 billion, with both loans and deposits showing strong year over year growth. Year over year total loans held for investment grew $77 million or 10.8% and mortgage loans held for sale grew $15 million or 10.6%. For the third quarter total loans held for investment were flat due to the competitive and sometimes irrational lending environment. During the third quarter we funded $69 million in new loans and renewed $103 million in existing loans. Funding continues the shift to a higher level of demand deposits, with 35% of our total deposit mix now in demand deposits.

“While I am thrilled with our year over year loan performance, the market remains highly competitive and we are unwilling to accept the credit, future profitability, or term risk in the current market. Our pipeline remains strong and we will maintain our discipline and continue to look for quality banking relationships that value our client-focused style of doing business.” stated Neal Crawford, President of Monarch Bank. “Many bankers seem to have very short memories when it comes to lending.”

Non-performing assets to total assets were 0.19%, 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 $2.1 million which were down from the previous quarter and the same period in 2014. Non-performing assets were comprised of $1.8 million in non-accrual loans, $0 in loans more than 90 days past due, and $275 thousand in other repossessed assets. Net charge-offs for the year were $717 thousand, provision expense was $500 thousand, and the allowance for loan losses represents 1.10% of loans held for investment and 474% of non-performing loans.

The Board of Directors announced two capital actions at their October board meeting. A quarterly common stock cash dividend of $0.09 per common share, payable on November 30, 2015, to shareholders of record on November 12, 2015. They also announced an 11-for-10 stock split for shareholders of record on November 12, 2015 to be paid on December 4, 2015.

Average equity to average assets was 10.22%, and total risk-based capital to risk weighted assets at Monarch Bank equaled 14.02%, 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 14.6% or $1.4 million during the third 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. Net interest income increased for the full year by 14.7%. The net interest margin was 4.19% for the third quarter, one basis point higher than the margin from the same quarter in 2014. The net interest margin declined in the third quarter on a linked-quarter basis due to competitive pricing on new and renewed loans, yet remains well above our peer average.

Non-interest income in the third quarter increased 15.9% or $2.8 million from the previous year driven by increased revenues from mortgage loans sold, title insurance fees, investment and insurance revenue and service charges. Mortgage revenue continues to be the number one driver of non-interest income. We closed $528 million in mortgage loans (83% purchase) during the third quarter of 2015 compared to $441 million (84% purchase) in the same quarter one year prior. We closed $1.62 billion in mortgage loans (71% purchase) during the first nine months of 2015 compared to $1.16 billion (84% purchase) in the same period of 2014. Total non-interest expense increased 16.2% or $3.8 million during the third quarter due to higher mortgage commissions, salaries and benefits expenses.

“We had a strong third quarter for mortgage originations and closings. Excluding the volatility in our forward rate commitments, which are non-cash accounting entries we are required to book, our profits on a per loan basis increased, our yields remain strong, and the operation is well positioned for a potential rise in long-term interest rates.” stated William T. Morrison, CEO of Monarch Mortgage.

Also during the third quarter Monarch Bank, through its affiliated 503(c) Monarch Children’s Charities, held their annual fundraising golf tournament and raised over $260,000 from the local community to support local charitable causes. These funds will support over thirty local charities in their mission to improve the lives of children.

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
September 30, June 30, March 31, December 31, September 30,
2015 2015 2015 2014 2014
ASSETS:
Cash and due from banks $11,862 $15,319 $13,870 $14,503 $21,083
Interest bearing bank balances 75,658 84,225 73,237 49,761 58,207
Federal funds sold 14,188 2,377 63,311 1,135 3,938
Investment securities, at fair value 14,998 17,338 20,283 23,725 25,137
Mortgage loans held for sale 153,243 193,948 159,899 147,690 138,590
Loans held for investment, net of unearned income 790,704 792,962 787,003 772,590 713,667
Less: allowance for loan losses (8,733) (8,676) (8,644) (8,949) (8,977)
Net loans 781,971 784,286 778,359 763,641 704,690
Bank premises and equipment, net 29,513 30,117 30,050 30,247 30,368
Restricted equity securities, at cost 3,658 4,706 3,243 3,633 3,179
Bank owned life insurance 10,528 10,465 9,950 9,687 9,587
Goodwill 775 775 775 775 775
Accrued interest receivable and other assets 25,195 27,119 25,403 21,940 23,688
Total assets $1,121,589 $1,170,675 $1,178,380 $1,066,737 $1,019,242
LIABILITIES:
Demand deposits--non-interest bearing $276,706 $293,442 $270,446 $235,301 $252,286
Demand deposits--interest bearing 62,335 54,580 58,725 66,682 53,093
Money market deposits 365,615 379,716 417,329 369,221 365,041
Savings deposits 19,263 19,431 19,519 20,003 25,211
Time deposits 238,260 231,854 271,121 228,207 189,142
Total deposits 962,179 979,023 1,037,140 919,414 884,773
FHLB borrowings 10,000 46,025 1,050 11,075 1,100
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 23,376 22,167 19,653 18,710 18,145
Total liabilities 1,005,555 1,057,215 1,067,843 959,199 914,018
STOCKHOLDERS' EQUITY:
Common stock (3) 57,689 52,182 51,950 51,864 51,735
Capital in excess of par value (3) 17,115 8,846 8,555 8,336 7,966
Retained earnings (3) 41,183 52,412 49,957 47,354 45,523
Accumulated other comprehensive loss (38) (65) (14) (102) (135)
Total Monarch Financial Holdings, Inc. stockholders' equity 115,949 113,375 110,448 107,452 105,089
Noncontrolling interest 85 85 89 86 135
Total equity 116,034 113,460 110,537 107,538 105,224
Total liabilities and stockholders' equity $1,121,589 $1,170,675 $1,178,380 $1,066,737 $1,019,242
Common shares outstanding at period end (3) 11,884,060 10,777,965 10,736,947 10,652,475 10,646,873
Nonvested shares of common stock included in commons shares outstanding (3) 380,875 341,450 346,950 279,750 299,910
Book value per common share at period end (1)(4) $9.79 $9.56 $9.35 $9.17 $8.97
Tangible book value per common share at period end (2)(4) $9.72 $9.50 $9.29 $9.10 $8.91
Closing market price $12.39 $12.55 $12.51 $13.75 $12.56
Total risk based capital - Consolidated company 14.11% 13.62% 13.57% 13.79% 14.16%
Total risk based capital - Bank 14.02% 13.52% 13.38% 13.81% 14.18%
(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
(3) September 30, 2015 capital and common shares have been adjusted to reflect the 11 for 10 stock dividend.
(4) Per share values have been restated to reflect the 11 for 10 stock dividend

Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
INTEREST INCOME:
Interest and fees on loans held for investment $10,160,805 $9,007,543 $30,034,064 $27,575,506
Interest on mortgage loans held for sale 1,495,426 1,442,668 4,548,898 3,489,898
Interest on investment securities 70,650 90,669 238,349 258,647
Interest on federal funds sold 15,387 15,313 30,847 79,870
Dividends on equity securities 58,513 21,000 139,226 73,410
Interest on other bank accounts 135,473 61,609 354,256 152,546
Total interest income 11,936,254 10,638,802 35,345,640 31,629,877
INTEREST EXPENSE:
Interest on deposits 727,880 789,712 2,134,707 2,463,428
Interest on trust preferred subordinated debt 48,089 124,200 142,371 369,896
Interest on other borrowings 34,232 13,765 80,305 42,351
Total interest expense 810,201 927,677 2,357,383 2,875,675
NET INTEREST INCOME 11,126,053 9,711,125 32,988,257 28,754,202
PROVISION FOR LOAN LOSSES - - 500,000 -
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,126,053 9,711,125 32,488,257 28,754,202
NON-INTEREST INCOME:
Mortgage banking income 19,379,901 16,657,849 62,684,553 46,229,239
Service charges and fees 598,494 559,497 1,673,838 1,568,288
Title income 246,494 180,402 721,184 452,890
Investment and insurance income 471,182 428,265 1,215,850 1,209,624
Other income 42,957 72,921 336,030 246,417
Total non-interest income 20,739,028 17,898,934 66,631,455 49,706,458
NON-INTEREST EXPENSE:
Salaries and employee benefits 10,099,413 8,571,995 29,791,207 25,336,002
Commissions and incentives 9,113,787 7,047,140 29,364,091 17,828,126
Occupancy and equipment 2,426,534 2,464,666 7,104,926 7,136,247
Loan origination expense 1,617,713 1,552,162 6,007,337 4,975,873
Marketing expense 1,033,207 801,403 2,682,366 2,121,152
Data processing 529,144 601,644 1,758,462 1,557,728
Telephone 346,385 325,405 1,025,294 929,993
Other expenses 1,707,203 1,756,476 5,471,048 4,989,177
Total non-interest expense 26,873,386 23,120,891 83,204,731 64,874,298
INCOME BEFORE TAXES 4,991,695 4,489,168 15,914,981 13,586,362
Income tax provision (1,822,868) (1,635,440) (5,777,971) (4,874,180)
NET INCOME 3,168,827 2,853,728 10,137,010 8,712,182
Less: Net income attributable to noncontrolling interest (41,083) (45,880) (124,230) (183,285)
NET INCOME ATTRIBUTABLE TO MONARCH
FINANCIAL HOLDINGS, INC $3,127,744 $2,807,848 $10,012,780 $8,528,897
NET INCOME PER COMMON SHARE:
Basic (1) $0.26 $0.24 $0.85 $0.73
Diluted (1) $0.26 $0.24 $0.84 $0.73
Weighted average basic shares outstanding (1) 11,864,347 11,698,803 11,835,975 11,670,733
Weighted average diluted shares outstanding (1) 11,864,347 11,737,558 11,852,361 11,713,118
Return on average assets 1.11% 1.11% 1.21% 1.15%
Return on average stockholders' equity 10.82% 10.72% 12.00% 11.27%
(1) Per share values have been restated to reflect the 11 for 10 stock dividend

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,
2015 2015 2015 2014 2014
EARNINGS - COMMERCIAL AND OTHER BANKING SEGMENT
Interest income $11,497 $11,526 $10,999 $10,889 $10,146
Interest expense (810) (810) (737) (786) (928)
Net interest income 10,687 10,716 10,262 10,103 9,218
Provision for loan losses - (250) (250) - -
Noninterest income - other 1,359 1,385 1,202 1,162 1,241
Noninterest expense (7,605) (8,174) (7,815) (7,228) (6,783)
Pre-tax net income 4,441 3,677 3,399 4,037 3,676
Minority interest in net income (13) (15) (16) (13) (10)
Income taxes (1,622) (1,327) (1,235) (1,502) (1,339)
Net income $2,806 $2,335 $2,148 $2,522 $2,327
EARNINGS - MORTGAGE BANKING OPERATIONS
Interest income $1,495 $1,746 $1,307 $1,377 $1,443
Interest expense (1,056) (1,248) (921) (905) (950)
Net interest income 439 498 386 472 493
Noninterest income - mortgage banking income 20,595 22,449 18,307 16,910 17,124
Forward rate commitments and unrealized hedge gain (loss) (834) 341 1,267 (565) (62)
Noninterest expense (19,649) (21,529) (17,873) (16,511) (16,742)
Pre-tax net income 551 1,759 2,087 306 813
Minority interest in net income (28) (36) (16) (31) (36)
Income taxes (201) (634) (758) (114) (296)
Net income $322 $1,089 $1,313 $161 $481
INTERCOMPANY ELIMINATIONS
Interest income - Commercial and Other Banking Segment (1,056) (1,248) (921) (905) (950)
Interest expense - Mortgage Banking Operations 1,056 1,248 921 905 950
EARNINGS - CONSOLIDATED
Interest income $11,936 $12,024 $11,385 $11,361 $10,639
Interest expense (810) (810) (737) (786) (928)
Net interest income 11,126 11,214 10,648 10,575 9,711
Provision for loan losses - (250) (250) - -
Noninterest income - mortgage banking income 19,380 22,241 21,064 16,211 16,658
Noninterest income - other 1,359 1,385 1,202 1,162 1,241
Noninterest expense (26,873) (29,154) (27,178) (23,605) (23,121)
Pre-tax net income 4,992 5,436 5,486 4,343 4,489
Minority interest in net income (41) (51) (32) (44) (46)
Income taxes (1,823) (1,961) (1,993) (1,616) (1,635)
Net income $3,128 $3,424 $3,461 $2,683 $2,808
PER COMMON SHARE
Earnings per share - basic (1) $0.26 $0.29 $0.29 $0.23 $0.24
Earnings per share - diluted (1) 0.26 0.29 0.29 0.23 0.24
Common stock - per share dividends 0.09 0.09 0.08 0.08 0.08
Average Basic Shares Outstanding (1) 11,864,347 10,836,175 10,801,027 11,703,002 11,698,803
Average Diluted Shares Outstanding (1) 11,864,347 11,848,826 11,837,536 11,758,141 11,737,558
YIELDS
Loans held for investment 5.17% 5.21% 5.21% 5.34% 5.16%
Mortgage loans held for sale, net at fair value 4.02 3.88 3.90 4.16 4.14
Other earning assets 1.04 1.38 1.31 1.33 1.16
Total earning assets 4.49 4.59 4.62 4.75 4.58
Interest bearing checking 0.12 0.13 0.13 0.14 0.15
Money market and regular savings 0.35 0.36 0.30 0.31 0.36
Time deposits 0.65 0.61 0.61 0.81 0.88
Borrowings 0.96 1.04 1.33 1.71 4.92
Total interest-bearing liabilities 0.46 0.44 0.43 0.48 0.57
Interest rate spread 4.03 4.15 4.19 4.27 4.01
Net interest margin 4.19 4.28 4.32 4.42 4.18
FINANCIAL RATIOS
Return on average assets 1.11% 1.22% 1.31% 1.04% 1.11%
Return on average stockholders' equity 10.82 12.28 12.98 10.03 10.72
Non-interest revenue/Total revenue 63.5 66.3 66.2 60.5 62.7
Efficiency - Consolidated 84.3 83.7 82.6 84.5 83.7
Efficiency - Bank only 60.8 64.6 66.2 61.2 61.7
Average equity to average assets 10.22 9.92 10.10 10.39 10.40
(1) Per common share values have been restated to reflect the 11 for 10 stock dividend

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,
2015 2015 2015 2014 2014
ALLOWANCE FOR LOAN LOSSES
Beginning balance $8,676 $8,644 $8,949 $8,977 $9,070
Provision for loan losses - 250 250 - -
Charge-offs - (287) (598) (174) (181)
Recoveries 57 69 43 146 88
Net charge-offs 57 (218) (555) (28) (93)
Ending balance $8,733 $8,676 $8,644 $8,949 $8,977
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $- $- $175 $175 $243
Nonaccrual loans 1,841 2,266 4,325 2,705 2,180
OREO and reposessed assets 275 375 100 144 767
Nonperforming assets $2,116 $2,641 $4,600 $3,024 $3,190
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.19% 0.23% 0.39% 0.28% 0.31%
Nonperforming loans to total loans 0.23 0.29 0.57 0.37 0.34
Allowance for loan losses to total loans held for investment 1.10 1.09 1.10 1.16 1.26
Allowance for loan losses to nonperforming loans 474.36 382.88 192.09 310.73 370.49
Annualized net charge-offs to average loans held for investment (0.03) 0.11 0.29 0.02 0.05
PERIOD END BALANCES (Amounts in thousands)
Total mortgage loans held for sale $152,532 $193,948 $159,899 $147,690 $138,590
Total loans held for investment 790,663 792,962 787,003 772,590 713,667
Interest-earning assets 1,059,135 1,101,733 1,110,582 1,003,332 945,697
Assets 1,121,589 1,170,675 1,178,380 1,066,737 1,019,242
Total deposits 962,179 979,023 1,037,140 919,414 884,773
Other borrowings 20,000 56,025 11,050 21,075 11,100
Stockholders' equity 116,034 113,460 111,443 107,452 105,089
AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale $147,670 $180,485 $136,084 $131,471 $138,382
Total loans held for investment 783,113 778,757 771,587 725,093 701,137
Interest-earning assets 1,060,069 1,062,119 1,009,389 958,904 930,420
Assets 1,122,895 1,126,749 1,070,581 1,021,591 999,358
Total deposits 955,979 969,144 925,984 883,478 867,980
Other borrowings 33,872 27,437 21,049 14,575 11,124
Stockholders' equity 114,714 111,824 108,174 106,088 103,908
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $527,514 $605,401 $487,423 $445,846 $440,784
Percentage of refinance based on dollar volume 17.3% 23.9% 47.0% 30.9% 16.0%


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

Source:Monarch Financial Holdings, Inc.