Monarch Financial Reports Record Profitability and Declares Cash Dividend

CHESAPEAKE, Va., Jan. 27, 2016 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported record annual and increased fourth quarter profits, as well as strong loan and deposit growth.

The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on February 26, 2016, to shareholders of record on February 12, 2016. This quarterly payment represents a 24% increase over the dividend paid in first quarter of 2015 due to an increased payment amount and the effect of the December 2015 11-for-10 stock split. 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 the recent 11-for-10 stock split.

Annual 2015 highlights are:

  • Record net income of $13,214,821, up 17.9%
  • Diluted earnings per share of $1.11, up 15.6%
  • Return on equity of 11.71%
  • Net loans held for investment growth of $57 million, up 7.4%
  • Net deposit growth of $80 million, up 8.7%
  • $2.09 billion in mortgage loans closed, up 30.2%

Fourth quarter 2015 highlights are:

  • Net income of $3,202,041, up 19.3%
  • Diluted earnings per share of $0.27, up 17.4%
  • Return on equity of 10.89%
  • Net interest margin increased to 4.34%
  • Loans held for investment grew $38 million
  • Non-performing assets at 0.19% of total assets
  • $469 million in mortgage loans closed, 76% purchase money

“We are pleased to report the best year of profitability in our 17 year history, a new record. Our banking, mortgage and private wealth businesses continue to perform well with growth across all segments. A strong net interest margin, robust mortgage production, loan and demand deposit growth, zero 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 earnings per share were up 16% for the year, cash dividends paid grew by 13% year over year, and our net income available to common shareholders reached record levels. The announcement of our merger with TowneBank, expected to be completed by the end of the second quarter of 2016, drove a total shareholder return of 41% for the year. We are excited about the integration of the two very strong banking franchises, with Monarch directors and employees expected to play a key role in the combined company.”

Record net income was $13,214,821 for 2015 compared to $11,211,850 in 2014, an increase of $2,002,971, or 17.9% over the previous year. The annualized return on average equity (ROE) was 11.71%, and the return on average assets (ROA) was 1.20%. Diluted earnings per share were $1.11, up 15.6% when compared to $0.96 for 2014.

Net income was $3,202,041 for the fourth quarter of 2015, up 19.3% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 10.89%, and the quarterly return on average assets (ROA) was 1.16%. Quarterly diluted earnings per share increased to $0.27 compared to $0.23 for the same quarter in 2014.

Total assets at December 31, 2015 were $1.16 billion, with both loans and deposits showing strong year over year growth. Year over year total loans held for investment grew $57 million or 7.4% and mortgage loans held for sale grew $22 million or 14.7%. Deposits grew $79.7 million or 8.7% for the year, driven by growth in demand deposit accounts and time deposits. Demand deposit accounts grew $47 million or 15.6% for the year, with 35% of our total deposit mix in demand deposits.

“Loan growth increased dramatically late in the year driven by new loan volume as well as existing loan funding. Even with the recent merger announcement our bankers continue to attract quality banking relationships that value our client-focused style of doing business.” stated Neal Crawford, President of Monarch Bank.

Non-performing assets to total assets were 0.19% compared to 0.28% one year prior, 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 at year end since 2007. Non-performing assets were $2.2 million compared to $3.0 million at year end 2014. Non-performing assets were comprised of $2.0 million in non-accrual loans, $248 thousand in loans more than 90 days past due, and no other real estate or repossessed assets. Net charge-offs for the year were a negligible $65 thousand, with a large recovery of $724 thousand in the fourth quarter driving a reversal of $500 thousand in provision expense charged earlier in the year. The allowance for loan losses represents 1.07% of loans held for investment and 397% of non-performing loans.

The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on February 26, 2016, to shareholders of record on February 12, 2016. Due to the 11-for-10 stock split effected as a 10% stock dividend effective on December 4, 2015, the dividend represents a 10% increase in cash dividends over the previous quarterly dividend and a 24% increase over the dividend paid in the first quarter of 2015. Total dividend payments on a per share basis increased 13% in 2015 when compared to 2014. We have increased our cash dividend payout every year since we began paying cash dividends in 2010.

Average equity to average assets was 10.6%, and total risk-based capital to risk weighted assets at Monarch Bank equaled 13.60%, 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 for the full year by 12.5% driven by increased earning assets and management of our funding costs. Net interest income increased 6.5% or $684 thousand during the fourth quarter of 2015. An improved mix of earning assets in the fourth quarter along with higher loan fee recognition drove the improved fourth quarter performance. The net interest margin was 4.34% for the fourth quarter compared to 4.19% in the third quarter of 2015 and 4.42% in the fourth quarter of 2014.

Non-interest income in the fourth quarter increased 6.4% or $1.1 million from the previous year driven by increased revenues from mortgage loans sold, title insurance fees, investment and insurance revenue, service charges, and commercial mortgage placement fees. Mortgage revenue continues to be the number one driver of non-interest income. We closed $469 million in mortgage loans (76% purchase) during the fourth quarter of 2015 compared to $446 million (69% purchase) in the same quarter one year prior. We closed $2.09 billion in mortgage loans (72% purchase) during 2015 compared to $1.60 billion (80% purchase) in 2014, an increase of 30%. Total non-interest expense increased 6.6% or $1.6 million during the fourth quarter due to higher mortgage commissions, salaries and benefits expenses. During the fourth quarter of 2015 we expensed $457,000 of merger related legal and investment banking expenses.

“The year 2015 was the second best year in our history for total closings, and a record year for mortgage purchase loan closings. We closed $2.1 billion representing 7,996 loans. We also had a good fourth quarter for mortgage originations and closings despite the new disclosure regulations that have slowed many of our competitors.” 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”. On December 17, 2015 we announced the acquisition of Monarch Financial Holdings, Inc. and Monarch Bank by TowneBank of Portsmouth, Virginia.

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,
2015 2015 2015 2015 2014
ASSETS:
Cash and due from banks $ 13,946 $ 11,862 $15,319 $ 13,870 $ 14,503
Interest bearing bank balances 58,638 75,658 84,225 73,237 49,761
Federal funds sold 1,296 14,188 2,377 63,311 1,135
Investment securities, at fair value 30,219 14,998 17,338 20,283 23,725
Mortgage loans held for sale 169,345 153,243 193,948 159,899 147,690
Loans held for investment, net of unearned income 829,269 790,704 792,962 787,003 772,590
Less: allowance for loan losses (8,887) (8,733) (8,676) (8,644) (8,949)
Net loans 820,382 781,971 784,286 778,359 763,641
Bank premises and equipment, net 28,972 29,513 30,117 30,050 30,247
Restricted equity securities, at cost 3,881 3,658 4,706 3,243 3,633
Bank owned life insurance 10,635 10,528 10,465 9,950 9,687
Goodwill 775 775 775 775 775
Accrued interest receivable and other assets 23,365 25,195 27,119 25,403 21,940
Total assets $ 1,161,454 $ 1,121,589 $ 1,170,675 $ 1,178,380 $ 1,066,737
LIABILITIES:
Demand deposits--non-interest bearing $ 280,080 $ 276,706 $ 293,442 $ 270,446 $ 235,301
Demand deposits--interest bearing 68,963 62,335 54,580 58,725 66,682
Money market deposits 364,893 365,615 379,716 417,329 369,221
Savings deposits 19,517 19,263 19,431 19,519 20,003
Time deposits 265,641 238,260 231,854 271,121 228,207
Total deposits 999,094 962,179 979,023 1,037,140 919,414
FHLB borrowings 16,000 10,000 46,025 1,050 11,075
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 18,638 23,376 22,167 19,653 18,710
Total liabilities 1,043,732 1,005,555 1,057,215 1,067,843 959,199
STOCKHOLDERS' EQUITY:
Common stock 57,199 57,516 52,182 51,950 51,864
Capital in excess of par value 17,241 16,859 8,846 8,555 8,336
Retained earnings 43,350 41,612 52,412 49,957 47,354
Accumulated other comprehensive loss (157) (38) (65) (14) (102)
Total Monarch Financial Holdings, Inc. stockholders' equity 117,633 115,949 113,375 110,448 107,452
Noncontrolling interest 89 85 85 89 86
Total equity 117,722 116,034 113,460 110,537 107,538
Total liabilities and stockholders' equity $ 1,161,454 $ 1,121,589 $ 1,170,675 $ 1,178,380 $ 1,066,737
Common shares outstanding at period end (3) 11,880,909 11,884,060 11,855,761 11,810,641 11,717,722
Nonvested shares of common stock included in commons shares outstanding (3) 441,040 380,875 375,595 381,645 307,725
Book value per common share at period end (1)(4) $ 9.89 $ 9.79 $ 9.56 $ 9.35 $ 9.17
Tangible book value per common share at period end (2)(4) $ 9.82 $ 9.72 $ 9.50 $ 9.29 $ 9.10
Closing market price (4) $ 17.99 $ 11.27 $ 11.41 $ 11.37 $ 12.50
Total risk based capital - Consolidated company 13.69% 14.04% 13.62% 13.57% 13.79%
Total risk based capital - Bank 13.60% 13.95% 13.52% 13.38% 13.81%
(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 common shares outstanding
(3) Common shares have been adjusted to reflect the 11 for 10 stock split
(4) Per share values have been restated to reflect the 11 for 10 stock split

Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
Three Months Ended Year Ended
December 31, December 31,
2015 2014 2015 2014
INTEREST INCOME:
Interest and fees on loans held for investment $ 10,359,632 $ 9,752,472 $ 40,393,696 $ 37,327,978
Interest on mortgage loans held for sale 1,414,542 1,376,920 5,963,440 4,866,818
Interest on investment securities 86,572 100,957 324,921 359,604
Interest on federal funds sold 2,814 4,980 33,661 84,850
Dividends on equity securities 55,087 33,545 194,313 106,955
Interest on other bank accounts 130,896 92,156 485,152 244,702
Total interest income 12,049,543 11,361,030 47,395,183 42,990,907
INTEREST EXPENSE:
Interest on deposits 733,533 722,537 2,868,240 3,185,965
Interest on trust preferred subordinated debt 48,700 46,337 191,071 416,233
Interest on other borrowings 7,520 16,615 87,825 58,966
Total interest expense 789,753 785,489 3,147,136 3,661,164
NET INTEREST INCOME 11,259,790 10,575,541 44,248,047 39,329,743
(RECOVERY) PROVISION OF/FOR LOAN LOSSES (500,000) - - -
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,759,790 10,575,541 44,248,047 39,329,743
NON-INTEREST INCOME:
Mortgage banking income 17,094,779 16,210,774 79,578,461 62,440,013
Service charges and fees 553,386 489,974 2,227,224 2,058,262
Title income 246,039 216,895 967,223 669,785
Investment and insurance income 391,973 382,774 1,607,823 1,592,398
Other income 196,460 72,366 733,361 318,783
Total non-interest income 18,482,637 17,372,783 85,114,092 67,079,241
NON-INTEREST EXPENSE:
Salaries and employee benefits 9,557,882 8,798,996 39,349,089 34,134,998
Commissions and incentives 7,631,428 6,926,507 36,995,519 24,754,633
Occupancy and equipment 2,337,342 2,412,296 9,442,268 9,548,543
Loan origination expense 1,375,139 1,676,134 7,382,476 6,652,007
Marketing expense 943,259 990,383 3,625,625 3,111,535
Data processing 571,521 715,057 2,329,983 2,272,785
Telephone 348,285 296,396 1,373,579 1,226,389
Merger related expenses 456,919 - 456,919 -
Other expenses 1,945,205 1,789,789 7,416,253 6,778,966
Total non-interest expense 25,166,980 23,605,558 108,371,711 88,479,856
INCOME BEFORE TAXES 5,075,447 4,342,766 20,990,428 17,929,128
Income tax provision (1,805,849) (1,616,093) (7,583,820) (6,490,273)
NET INCOME 3,269,598 2,726,673 13,406,608 11,438,855
Less: Net income attributable to noncontrolling interest (67,557) (43,720) (191,787) (227,005)
NET INCOME ATTRIBUTABLE TO MONARCH
FINANCIAL HOLDINGS, INC $ 3,202,041 $ 2,682,953 $ 13,214,821 $ 11,211,850
NET INCOME PER COMMON SHARE:
Basic (1) $ 0.27 $ 0.23 $ 1.12 $ 0.96
Diluted (1) $ 0.27 $ 0.23 $ 1.11 $ 0.96
Weighted average basic shares outstanding (1) 11,856,180 11,713,002 11,840,837 11,681,387
Weighted average diluted shares outstanding (1) 11,856,180 11,758,140 11,853,128 11,724,460
Return on average assets 1.16% 1.04% 1.20% 1.13%
Return on average stockholders' equity 10.89% 10.03% 11.71% 10.95%
(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) December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
EARNINGS - COMMERCIAL AND OTHER BANKING SEGMENT
Interest income $ 11,652 $ 11,497 $ 11,526 $ 10,999 $ 10,889
Interest expense (790) (810) (810) (737) (786)
Net interest income 10,862 10,687 10,716 10,262 10,103
Recovery (provision) of/for loan losses 500 - (250) (250) -
Noninterest income - other 1,588 1,359 1,385 1,202 1,162
Noninterest expense (8,425) (7,605) (8,174) (7,815) (7,228)
Pre-tax net income 4,525 4,441 3,677 3,399 4,037
Noncontrolling interest in net income (19) (13) (15) (16) (13)
Income taxes (1,539) (1,622) (1,327) (1,235) (1,502)
Net income $ 2,967 $ 2,806 $ 2,335 $ 2,148 $ 2,522
EARNINGS - MORTGAGE BANKING OPERATIONS
Interest income $ 1,415 $ 1,495 $ 1,746 $ 1,307 $ 1,377
Interest expense (1,017) (1,056) (1,248) (921) (905)
Net interest income 398 439 498 386 472
Noninterest income - mortgage banking income 17,541 20,595 22,449 18,307 16,910
Forward rate commitments and unrealized hedge gain (loss) (288) (834) 341 1,267 (565)
Noninterest expense (17,101) (19,649) (21,529) (17,873) (16,511)
Pre-tax net income 550 551 1,759 2,087 306
Noncontrolling interest in net income (49) (28) (36) (16) (31)
Income taxes (266) (201) (634) (758) (114)
Net income $ 235 $ 322 $ 1,089 $ 1,313 $ 161
INTERCOMPANY ELIMINATIONS
Interest income - Commercial and Other Banking Segment (1,017) (1,056) (1,248) (921) (905)
Interest expense - Mortgage Banking Operations 1,017 1,056 1,248 921 905
EARNINGS - CONSOLIDATED
Interest income $ 12,050 $ 11,936 $ 12,024 $ 11,385 $ 11,361
Interest expense (790) (810) (810) (737) (786)
Net interest income 11,260 11,126 11,214 10,648 10,575
Recovery (provision) of/for loan losses 500 - (250) (250) -
Noninterest income - mortgage banking income 17,095 19,380 22,241 21,064 16,211
Noninterest income - other 1,388 1,359 1,385 1,202 1,162
Noninterest expense (25,168) (26,873) (29,154) (27,178) (23,605)
Pre-tax net income 5,075 4,992 5,436 5,486 4,343
Noncontrolling interest in net income (68) (41) (51) (32) (44)
Income taxes (1,805) (1,823) (1,961) (1,993) (1,616)
Net income $ 3,202 $ 3,128 $ 3,424 $ 3,461 $ 2,683
PER COMMON SHARE (1)
Earnings per share - basic $ 0.27 $ 0.26 $ 0.29 $ 0.29 $ 0.23
Earnings per share - diluted 0.27 0.26 0.29 0.29 0.23
Common stock - per share dividends 0.09 0.08 0.08 0.07 0.07
Average Basic Shares Outstanding 11,856,180 11,864,347 11,836,175 11,801,027 11,713,002
Average Diluted Shares Outstanding 11,856,180 11,864,347 11,848,826 11,837,536 11,758,140
YIELDS
Loans held for investment 5.19% 5.17% 5.21% 5.21% 5.34%
Mortgage loans held for sale, net at fair value 3.94 4.02 3.88 3.90 4.16
Other earning assets 1.53 1.04 1.38 1.31 1.33
Total earning assets 4.64 4.49 4.59 4.62 4.75
Interest bearing checking 0.12 0.12 0.13 0.13 0.14
Money market and regular savings 0.36 0.35 0.36 0.30 0.31
Time deposits 0.68 0.65 0.61 0.61 0.81
Borrowings 0.90 0.96 1.04 1.33 1.71
Total interest-bearing liabilities 0.46 0.46 0.44 0.43 0.48
Interest rate spread 4.18 4.03 4.15 4.19 4.27
Net interest margin 4.34 4.19 4.28 4.32 4.42
FINANCIAL RATIOS
Return on average assets 1.16% 1.11% 1.22% 1.31% 1.04%
Return on average stockholders' equity 10.89 10.82 12.28 12.98 10.03
Non-interest revenue/Total revenue 60.5 63.5 66.3 66.2 60.5
Efficiency - Consolidated 84.6 84.3 83.7 82.6 84.5
Efficiency - Bank only 60.9 60.8 64.6 66.2 61.2
Average equity to average assets 10.61 10.22 9.92 10.10 10.39
(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) December 31, September 30, June 30, March 31, December 31,
2015 2015 2015 2015 2014
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 8,733 $ 8,676 $ 8,644 $ 8,949 $ 8,977
(Recovery) provision of/for loan losses (500) - 250 250 -
Charge-offs (70) - (287) (598) (174)
Recoveries 724 57 69 43 146
Net recoveries (charge-offs) 654 57 (218) (555) (28)
Ending balance $ 8,887 $ 8,733 $ 8,676 $ 8,644 $ 8,949
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 248 $ - $ - $ 175 $ 175
Nonaccrual loans 1,990 1,841 2,266 4,325 2,705
OREO and reposessed assets 0 275 375 100 144
Nonperforming assets $ 2,238 $ 2,116 $ 2,641 $ 4,600 $ 3,024
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.19% 0.19% 0.23% 0.39% 0.28%
Nonperforming loans to total loans 0.27 0.23 0.29 0.57 0.37
Allowance for loan losses to total loans held for investment 1.07 1.10 1.09 1.10 1.16
Allowance for loan losses to nonperforming loans 397.10 474.36 382.88 192.09 310.73
Annualized net charge-offs to average loans held for investment (0.33) (0.03) 0.11 0.29 0.02
PERIOD END BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 169,345 $ 153,243 $ 193,948 $ 159,899 $ 147,690
Total loans held for investment 829,269 790,704 792,962 787,003 772,590
Interest-earning assets 1,099,316 1,059,135 1,101,733 1,110,582 1,003,332
Assets 1,161,454 1,121,589 1,170,675 1,178,380 1,066,737
Total deposits 999,094 962,179 979,023 1,037,140 919,414
Other borrowings 26,000 20,000 56,025 11,050 21,075
Stockholders' equity 117,633 116,034 113,460 111,443 107,452
AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale $ 142,363 $ 147,670 $ 180,485 $ 136,084 $ 131,471
Total loans held for investment 792,115 783,113 778,757 771,587 725,093
Interest-earning assets 1,040,577 1,060,069 1,062,119 1,009,389 958,904
Assets 1,099,252 1,122,895 1,126,749 1,070,581 1,021,591
Total deposits 939,400 955,979 969,144 925,984 883,478
Other borrowings 24,756 33,872 27,437 21,049 14,575
Stockholders' equity 116,634 114,714 111,824 108,174 106,088
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 468,606 $ 527,514 $ 605,401 $ 487,423 $ 445,846
Percentage of refinance based on dollar volume 24.3% 17.3% 23.9% 47.0% 30.9%

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

Source:Monarch Financial Holdings, Inc.