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Monarch Financial Reports Record Quarterly and Annual Financial Performance

CHESAPEAKE, Va., Jan. 31, 2013 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK) (Nasdaq:MNRKP), the bank holding company for Monarch Bank, reported record all-time quarterly and annual profits with total assets growing $307 million in 2012 to reach $1.21 billion at year end.

"We are excited to close out a record year for profitability and growth, with our 16th quarter of record year over year quarterly performance. Strong and profitable mortgage loan closings, improved credit costs, loan and demand deposit growth, and strong net interest income continues to drive our bottom line results," stated Brad E. Schwartz, Chief Executive Officer. "Non-performing assets hit their lowest level since 2008 with no foreclosed real estate owned at year-end. The market has responded to our standout performance with price appreciation in our common stock that, when combined with our dividend payments, produced a 30% annual shareholder return for 2012."

Fourth quarter 2012 highlights are:

  • Record 4th quarter net income of $3,768,373, up 93%
  • Net income available to common shareholders up 126%
  • Basic earnings per share of $0.44 up 100%
  • $765 million in mortgage loans closed

Full year 2012 highlights are:

  • Record annual net income of $12,824,869, up 80%
  • Net income available to common shareholders up 105%
  • Basic earnings per share of $1.54, up 97%
  • Total assets reach $1.21 billion mark
  • Non-performing assets drop to 0.30% of total assets
  • $2.7 billion in mortgage loans closed

Net income was $3,768,373 for the fourth quarter of 2012, up 93% from the same period in 2011, which was the Company's previous record fourth quarter with $1,954,034 in net income. The quarterly annualized return on average equity (ROE) was 17.51%, and the quarterly return on average assets (ROA) was 1.28%. Quarterly basic earnings per share were $0.44, compared to $0.22 per share in the same quarter of 2011, a 100% improvement. Diluted earnings per share were $0.37, compared to $0.19 per share in the same quarter of 2011, a 95% improvement.

For 2012 net income was a record $12,824,869 compared to $7,125,612 in 2011, an 80% increase. We exceeded our 2011 annual net income by $5.7 million. Our 2012 annual return on average equity (ROE) was 15.84%, and the return on average assets (ROA) was 1.26%. Annual basic earnings per share were $1.54 compared to $0.78 in 2011. Diluted earnings per share were $1.26 compared to $0.70 per share in 2011, an 80% improvement.

Total assets at December 31, 2012 increased to $1.21 billion driven primarily by growth in our mortgage loans held for sale portfolio. Loans held for investment grew $53 million year over year, while mortgage loans held for sale grew by $208 million. Deposits increased $162 million year over year, with $81 million of that growth in demand deposits. Short term time deposits and borrowings have been used to support the growth in our short-term loans held for sale portfolio, and they increased due to the high level of mortgage purchase and refinance activity. This funding strategy, coupled with our focus on generating commercial demand deposits through our cash management team, continues to support growth and drive down our overall funding costs.

"Our bankers delivered excellent performance this year, with 9% growth in our loan portfolio and a 46% growth in lower cost demand deposits. Our plans are to continue growing our loan portfolio and deposit base in our existing markets and with our expansion to the Peninsula region of Hampton Roads," stated Neal Crawford, President of Monarch Bank. "While announced earlier, we are proud of being recognized as the second largest community bank based on deposits in the Greater Hampton Roads Metropolitan Area."

Non-performing assets were 0.30%, which remains significantly below that of our local, state, and national peer group. Non-performing assets were $3.6 million which was down from $7.8 million or 0.85% of assets at year-end 2011. Non-performing assets were comprised of $3.5 million in non-accrual loans and $153 thousand in loans more than 90 days past due. The company had no other real estate owned as of year-end 2012. Provision expense for the fourth quarter was $517 thousand and net charge-offs were $497 thousand. The allowance for loan losses of $10.9 million represents 1.65% of loans held for investment and 300% of non-performing loans.

Average equity to average assets was 7.92% during 2012, down from 9.16% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 12.73%, significantly higher than the required level to meet the highest rating of "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.

Many of our preferred shareholders elected to convert their shares to common stock in the fourth quarter, with 318,877 shares of the original 800,000 shares now converted to common stock. The ongoing reduction in preferred shares outstanding will improve the income available for common shareholders in 2013. The company is reviewing options for redeeming the remaining outstanding shares at par or converting the shares to common stock during 2013.

Net interest income, our number one driver of profitability, increased 17% or $1.6 million during the fourth quarter of 2012 compared to the same quarter in 2011. Our 2012 net interest margin was 4.29% compared to 4.51% for 2011. Our net interest margin was 4.07% for the fourth quarter of 2012. Loans held for investment, our largest earning asset category, produced an average yield of 5.56% in the fourth quarter compared to 5.65% in the third quarter for a total nine basis point decline. Our total funding costs dropped to 0.72% in the fourth quarter compared to 0.74% in the third quarter. The lower rates and higher concentration of mortgage loans held for sale drove higher net interest income while at the same time pushing down the net interest margin ratio in the fourth quarter.

"Strong mortgage activity continued into the fourth quarter and drove our total closing volume to $2.7 billion for the year, a new company record. We are especially proud to have closed 42% of our annual volume for home purchases," stated William T. Morrison, CEO of Monarch Mortgage. "Home purchase mortgage loans represented 38% of total closed loans in the fourth quarter of 2012."

Non-interest income grew by $8.0 million during the fourth quarter over the previous year, and grew by $35.0 million for 2012 compared to the previous year. Total non-interest expenses grew by $8.0 million during the fourth quarter, and grew by $33.2 million for 2012 compared to the previous year. Two-thirds of the increases in non-interest expense are variable commissions and incentives primarily related to increased mortgage production. Mortgage revenue continues to be the number one driver of non-interest income. $765 million in mortgage loans were closed during the fourth quarter and $2.7 billion were closed for 2012. Total closed mortgage loans of $2.7 billion exceeded our previous record of $1.6 billion achieved in 2011.

Monarch Financial Holdings, Inc. is the one-bank holding company for Monarch Bank. Monarch Bank is a community bank with eleven banking offices in Chesapeake, Virginia Beach, Norfolk, Suffolk, and Williamsburg 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), Regional Home Mortgage, LLC (secondary mortgage origination), Monarch Home Funding, 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", and shares of our preferred stock are publicly traded on the Nasdaq Capital Market under the symbol "MNRKP".

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, December 31,
2012 2011
ASSETS:
Cash and due from banks $ 39,888 $ 20,091
Interest bearing bank balances 2,143 1,467
Federal funds sold 15,744 10,188
Investment securities, at fair value 14,634 9,187
Loans held for sale 419,075 211,555
Loans held for investment, net of unearned income 661,094 607,612
Less: allowance for loan losses (10,910) (9,930)
Net loans 650,184 597,682
Bank premises and equipment, net 25,448 23,094
Restricted equity securities, at cost 12,363 6,421
Bank owned life insurance 7,173 6,946
Goodwill 775 775
Intangible assets, net 283 461
Accrued interest receivable and other assets 27,868 20,920
Total assets $ 1,215,578 $ 908,787
LIABILITIES:
Demand deposits--non-interest bearing $ 190,120 $ 133,855
Demand deposits--interest bearing 65,369 40,930
Money market deposits 335,899 269,750
Savings deposits 22,127 17,916
Time deposits 288,267 277,641
Total deposits 901,782 740,092
FHLB borrowings 194,299 70,927
Short term borrowings 5,000 --
Trust preferred subordinated debt 10,000 10,000
Accrued interest payable and other liabilities 15,550 10,924
Total liabilities 1,126,631 831,943
STOCKHOLDERS' EQUITY:
Preferred stock, $5 par value, 1,185,300 shares authorized; none issued -- --
Noncumulative perpetual preferred stock, series B, liquidation value of $20.0 million, $5 par value; 800,000 shares authorized, 481,123 issued and outstanding at December 31, 2012, 800,000 issued and outstanding at December 31, 2011 2,406 4,000
Common stock, $5 par, 20,000,000 shares authorized; issued -- 8,557,939 shares (includes nonvested shares of 231,460) at December 31, 2012 and 7,199,608 shares (includes nonvested shares of 100,260) at December 31, 2011 (1) 41,632 35,497
Capital in excess of par value 12,718 16,558
Retained earnings 30,786 20,538
Accumulated other comprehensive loss (200) (363)
Total Monarch Financial Holdings, Inc. stockholders' equity 87,342 76,230
Noncontrolling interest 1,605 614
Total equity 88,947 76,844
Total liabilities and stockholders' equity $ 1,215,578 $ 908,787
(1) All share information has been adjusted to reflect the 6 for 5 stock split December 7, 2012.
Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
Three Months Ended Year Ended
December 31, December 31,
2012 2011 2012 2011
INTEREST INCOME:
Interest on federal funds sold $ 4,208 $ 2,657 $ 23,343 $ 53,256
Interest on other bank accounts 8,279 3,320 21,438 6,048
Dividends on equity securities 50,422 36,039 191,396 156,986
Interest on investment securities 50,294 43,885 200,285 183,288
Interest and fees on loans 12,577,364 10,882,740 46,032,003 40,019,749
Total interest income 12,690,567 10,968,641 46,468,465 40,419,327
INTEREST EXPENSE:
Interest on deposits 1,206,595 1,324,133 4,962,290 6,198,080
Interest on trust preferred subordinated debt 125,215 122,850 494,912 492,750
Interest on other borrowings 259,195 37,866 459,032 105,625
Total interest expense 1,591,005 1,484,849 5,916,234 6,796,455
NET INTEREST INCOME 11,099,562 9,483,792 40,552,231 33,622,872
PROVISION FOR LOAN LOSSES 517,456 2,479,916 4,831,133 6,319,887
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,582,106 7,003,876 35,721,098 27,302,985
NON-INTEREST INCOME:
Mortgage banking income 23,825,701 16,138,685 86,213,596 51,362,464
Service charges and fees 489,830 418,232 1,830,018 1,630,416
Other income 564,205 366,999 1,717,192 1,752,558
Total non-interest income 24,879,736 16,923,916 89,760,806 54,745,438
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,199,075 6,485,192 29,868,159 23,236,123
Commissions and incentives 12,986,177 8,146,992 46,572,529 25,093,001
Occupancy and equipment 1,948,464 1,646,251 7,089,757 5,911,658
Loan expense 2,461,957 2,022,888 8,487,520 6,785,814
Marketing expense 775,861 423,819 2,412,674 1,541,689
Data processing 455,784 308,174 1,525,400 1,197,085
Other expenses 2,230,718 2,052,007 8,299,574 7,278,996
Total non-interest expense 29,058,036 21,085,323 104,255,613 71,044,366
INCOME BEFORE TAXES 6,403,806 2,842,469 21,226,291 11,004,057
Income tax provision (2,337,743) (768,595) (7,426,785) (3,418,692)
NET INCOME 4,066,063 2,073,874 13,799,506 7,585,365
Less: Net income attributable to noncontrolling interest (297,690) (119,840) (974,637) (459,753)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC $ 3,768,373 $ 1,954,034 $12,824,869 $ 7,125,612
Preferred stock dividend and accretion of preferred stock discount (237,943) (390,000) (1,402,532) (1,560,000)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 3,530,430 $ 1,564,034 $11,422,337 $ 5,565,612
NET INCOME PER COMMON SHARE:
Basic (1) $ 0.44 $ 0.22 $ 1.54 $ 0.78
Diluted (1) $ 0.37 $ 0.19 $ 1.25 $ 0.70
(1) All share information has been adjusted to reflect the 6 for 5 stock split December 7, 2012.
Financial Highlights
Monarch Financial Holdings, Inc. and Subsidiaries
(Dollars in thousands,
except per share data) Three Months Ended December 31, Year Ended December 31,
2012 2011 2012 2011
EARNINGS
Interest income $ 12,690 $ 10,969 $ 46,468 $ 40,420
Interest expense 1,591 1,485 5,916 6,797
Net interest income 11,099 9,484 40,552 33,623
Provision for loan losses 517 2,480 4,831 6,320
Noninterest income 24,880 16,924 89,761 54,746
Noninterest expense 29,058 21,085 104,256 71,044
Pre-tax net income 6,404 2,843 21,226 11,005
Minority interest in net income 298 120 975 460
Income taxes 2,338 769 7,426 3,419
Net income 3,768 1,954 12,825 7,126
PER COMMON SHARE (1)
Earnings per share - basic $ 0.44 $ 0.22 $ 1.54 $ 0.78
Earnings per share - diluted 0.37 0.19 1.26 0.70
Common stock - per share dividends 0.05 0.04 0.19 0.16
Book value 8.80 7.81
Tangible book value 8.68 7.64
Closing market price (adjusted) 8.22 6.41
Average Basic Shares Outstanding 7,980,259 7,124,202 7,400,443 7,147,290
Average Diluted Shares Outstanding 10,315,360 10,139,520 10,262,775 10,165,105
FINANCIAL RATIOS
Return on average assets 1.28% 0.88% 1.26% 0.89%
Return on average stockholders' equity 17.51 10.26 15.84 9.66
Net interest margin (FTE) 4.07 4.69 4.29 4.51
Non-interest revenue/Total revenue 66.3 60.7 65.9 57.5
Efficiency - Consolidated 80.4 79.7 79.8 80.2
Efficiency - Bank only 54.5 49.0 53.6 54.5
Average equity to average assets 7.29 8.57 7.92 9.16
Total risk based capital - Consolidated 12.05 12.43
Total risk based capital - Bank only 12.73 11.97
PERIOD END BALANCES
Total loans held for sale $ 419,075 $ 211,555
Total loans held for investment 661,094 607,612
Interest-earning assets 1,128,656 849,148
Assets 1,215,578 908,787
Total deposits 901,782 740,092
Other borrowings 209,299 80,927
Stockholders' equity 88,947 76,844
AVERAGE BALANCES
Total loans held for sale $ 423,354 $ 189,622 $ 306,497 $ 129,279
Total loans held for investment 637,774 599,890 617,334 581,445
Interest-earning assets 1,092,332 810,881 953,102 754,883
Assets 1,173,820 881,794 1,021,836 804,842
Total deposits 945,297 749,402 865,333 704,461
Other borrowings 114,140 27,212 53,965 17,329
Stockholders' equity 85,584 75,594 80,984 73,755
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 10,890 $ 10,301 $ 9,930 $ 9,038
Provision for loan losses 517 2,480 4,831 6,320
Charge-offs 622 3,034 4,343 6,127
Recoveries 125 183 492 699
Ending balance 10,910 9,930 10,910 9,930
Net charge-off loans to average loans 0.08 0.48 0.62 0.93
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.30% 0.85%
Allowance for loan losses to total loans held for investment 1.65 1.63
Allowance for loan losses to nonperforming loans 300.06 225.94
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 153 $ 178
Nonaccrual & Restructured debt 3,483 4,217
OREO 0 3,369
Nonperforming assets 3,636 7,764
(1) All share information has been adjusted to reflect the 6 for 5 stock split December 7, 2012.

CONTACT: Brad E. Schwartz - (757) 389-5111, www.monarchbank.comSource:Monarch Financial Holdings, Inc.