Monarch Financial Reports Record First Quarter Financial Performance

CHESAPEAKE, Va., April 18, 2013 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported record first quarter profitability and continued loan growth. First quarter 2013 highlights are:

  • Record 1st quarter net income of $3,458,129, up 37%
  • Net income available to common shareholders up 63%
  • Basic earnings per share of $0.37 up 23%
  • Non-performing assets at 0.34% of total assets
  • $542 million in mortgage loans closed

"We begin 2013 with our 17th consecutive quarter of record year over year profitability. Solid mortgage loan closings, improved credit costs, loan and deposit growth, and strong net interest income continued to drive our bottom line results. These results, coupled with the conversion of our preferred shares to common stock, increased the net income available to our common shareholders and our earnings per share growth," stated Brad E. Schwartz, Chief Executive Officer.

Net income was $3,458,129 for the first quarter of 2013, up 37% from the same period in 2012. The quarterly annualized return on average equity (ROE) was 15.86%, and the quarterly return on average assets (ROA) was 1.27%. Quarterly diluted earnings per share were $0.33, compared to $0.25 per share in the same quarter of 2012, a 32% improvement.

Total assets at March 31, 2012 grew $117 million on an annual basis driven primarily by growth in our loans held for investment portfolio of $94 million, a 15.7% annual growth rate. Deposits grew by $120 million on an annual basis, with $66 million in demand deposit growth and $41 million in money market and savings account growth. Total assets declined from their record high at December 31, 2012 to $1.05 billion due to a decline in mortgage loans held for sale, which was partially offset by an increase in loans held for investment.

"Our talented team of bankers and their support teams continue to lend in the community. Our ability and willingness to lend to credit worthy clients over the past several years, when others were not, is beginning to pay big dividends for our shareholders. Loan demand continues to improve each quarter and our loan pipeline is looking strong," stated Neal Crawford, President of Monarch Bank.

Non-performing assets to total assets were 0.34%, which remains significantly below that of our local, state, and national peer group. Non-performing assets were $3.6 million which was down from $11.3 million or 1.20% of total assets one year prior. Non-performing assets were comprised of $3.1 million in non-accrual loans, $351 thousand in loans more than 90 days past due, and one $95 thousand foreclosed property. Net charge-offs were $122 thousand and the allowance for loan losses represents 1.56% of loans held for investment and 308% of non-performing loans.

Average equity to average assets improved to 8.00% during 2013, up from 7.29% at December 31, 2012. Total risk-based capital to risk weighted assets at Monarch Bank equaled 13.78%, 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. There were no shares of preferred stock outstanding at March 31, 2013 which reduced the need for any additional preferred stock dividends during the quarter.

Net interest income, our number one driver of profitability, increased 9.6% or $909 thousand during the first quarter of 2013 compared to the same quarter in 2012. The net interest margin increased to 4.12% for the first quarter, which was up from the previous quarter of 4.02%. The lower average volume of lower yielding mortgage loans held for sale drove the net interest margin higher in the first quarter. Non-interest income was flat year over year and down from the fourth quarter due to reduced mortgage loan production. Total non-interest expenses grew by $979 thousand during the first quarter due to expenses related to our market expansion to the Peninsula and the addition of Monarch Bank Private Wealth, which was partially offset by a reduction in mortgage-related commissions and incentives. Mortgage revenue continues to be the number one driver of non-interest income. We closed $542 million in mortgage loans during the first quarter of 2013 compared to $547 million in the first quarter of 2012, and $762 million in the fourth quarter of 2012.

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".

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,
2013 2012 2012 2012 2012
ASSETS:
Cash and due from banks $ 17,414 $ 27,364 $ 14,633 $ 16,263 $ 15,515
Interest bearing bank balances 14,099 14,667 12,043 4,295 21,536
Federal funds sold 21,937 15,744 8,191 6,142 1,644
Investment securities, at fair value 16,493 14,634 10,328 10,820 8,841
Loans held for sale 242,457 419,075 382,095 282,014 243,179
Loans held for investment, net of unearned income 692,410 661,094 627,256 626,464 598,358
Less: allowance for loan losses (10,788) (10,910) (10,890) (10,724) (10,400)
Net loans 681,622 650,184 616,366 615,740 587,958
Bank premises and equipment, net 27,507 25,448 23,449 23,210 23,086
Restricted equity securities, at cost 3,781 12,363 8,346 4,885 7,242
Bank owned life insurance 7,231 7,173 7,132 7,069 7,007
Goodwill 775 775 775 775 775
Intangible assets, net 238 283 327 372 417
Accrued interest receivable and other assets 21,421 27,868 26,727 23,649 20,621
Total assets $ 1,054,975 $ 1,215,578 $ 1,110,412 $ 995,234 $ 937,821
LIABILITIES:
Demand deposits---non-interest bearing $ 201,346 $ 190,120 $ 182,080 $ 178,520 $ 149,520
Demand deposits---interest bearing 57,074 65,369 40,865 41,219 43,282
Money market deposits 332,305 335,899 313,985 307,392 297,285
Savings deposits 23,579 22,127 21,531 19,633 17,262
Time deposits 317,181 288,267 329,246 306,649 304,333
Total deposits 931,485 901,782 887,707 853,413 811,682
FHLB borrowings 1,250 194,299 105,027 31,324 19,767
Short Term borrowings 5,000 5,000 5,000 5,000 --
Federal funds purchased -- -- -- -- 4,350
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 14,894 15,550 17,151 14,260 13,244
Total liabilities 962,629 1,126,631 1,024,885 913,997 859,043
STOCKHOLDERS' EQUITY:
Preferred Stock -- 2,406 3,945 3,945 4,000
Common stock 50,821 41,632 35,732 35,732 35,361
Capital in excess of par value 6,300 12,718 16,867 16,724 16,721
Retained earnings 33,790 30,786 27,586 24,512 22,424
Accumulated other comprehensive loss (174) (200) (218) (299) (342)
Total Monarch Financial Holdings, Inc. stockholders' equity 90,737 87,342 83,912 80,614 78,164
Noncontrolling interest 1,609 1,605 1,615 623 614
Total equity 92,346 88,947 85,527 81,237 78,778
Total liabilities and stockholders' equity $ 1,054,975 $ 1,215,578 $ 1,110,412 $ 995,234 $ 937,821
Preferred shares outstanding at period end -- 481,123 788,900 788,900 800,000
Common shares outstanding at period end (1) 10,398,073 8,557,939 7,251,491 7,251,491 7,240,528
Book value per common share at period end (1) (2) $ 8.73 $ 8.80 $ 8.85 $ 8.40 $ 8.03
Tangible book value per common share at period end (1) (3) $ 8.63 $ 8.68 $ 8.70 $ 8.24 $ 7.87
Closing market price (1) $ 10.61 $ 8.22 $ 8.13 $ 8.21 $ 7.28
Total risk based capital - Consolidated company 13.06% 12.05% 12.49% 12.17% 12.52%
Total risk based capital - Bank 13.78% 12.73% 13.23% 12.79% 12.58%
(1) All share information has been adjusted to reflect the 6 for 5 stock split granted December 7, 2012 and cash in lieu of fractional shares.
(2) Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding.
(3) Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted commons shares
outstanding.
Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
Three Months Ended
March 31,
2013 2012
INTEREST INCOME:
Interest on federal funds sold $ 5,158 $ 6,259
Interest on other bank accounts 8,142 3,548
Dividends on equity securities 74,435 37,500
Interest on investment securities 57,569 46,231
Interest and fees on loans 11,708,566 10,881,036
Total interest income 11,853,870 10,974,574
INTEREST EXPENSE:
Interest on deposits 1,029,462 1,281,787
Interest on trust preferred subordinated debt 119,042 122,850
Interest on other borrowings 289,178 62,507
Total interest expense 1,437,682 1,467,144
NET INTEREST INCOME 10,416,188 9,507,430
PROVISION FOR LOAN LOSSES -- 1,930,679
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,416,188 7,576,751
NON-INTEREST INCOME:
Mortgage banking income 16,165,936 16,584,211
Service charges and fees 451,154 414,051
Title income 254,351 114,258
Other income 309,577 283,488
Total non-interest income 17,181,018 17,396,008
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,205,075 6,630,518
Commissions and incentives 7,065,476 8,732,201
Occupancy and equipment 1,866,518 1,599,081
Loan expense 1,830,437 1,615,131
Marketing expense 512,958 410,291
Data processing 400,958 345,990
Other expenses 1,979,199 1,548,598
Total non-interest expense 21,860,621 20,881,810
INCOME BEFORE TAXES 5,736,585 4,090,949
Income tax provision (1,993,553) (1,421,541)
NET INCOME 3,743,032 2,669,408
Less: Net income attributable to noncontrolling interest (284,903) (153,302)
NET INCOME ATTRIBUTABLE TO MONARCH
FINANCIAL HOLDINGS, INC $3,458,129 $ 2,516,106
Preferred stock dividend and accretion of preferred stock discount -- (390,000)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $3,458,129 $ 2,126,106
NET INCOME PER COMMON SHARE:
Basic $ 0.37 $ 0.30
Diluted $ 0.33 $ 0.25
Weighted average basic shares outstanding 9,300,760 7,177,787
Weighted average diluted shares outstanding 10,451,897 10,203,781
Return on average assets 1.27% 1.10%
Return on average stockholders' equity 15.86% 13.10%
(1) All share information has been adjusted to reflect the 6 for 5 stock split granted December 7, 2012 and cash in lieu of fractional shares.
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,
2013 2012 2012 2012 2012
EARNINGS
Interest income $ 11,854 $ 12,690 $ 11,820 $ 10,983 $ 10,975
Interest expense (1,438) (1,591) (1,430) (1,428) (1,467)
Net interest income 10,416 11,099 10,390 9,555 9,508
Provision for loan losses -- (517) (899) (1,484) (1,931)
Noninterest income - mortgage banking income 16,166 23,826 25,652 20,152 16,584
Noninterest income - other 1,015 1,054 909 772 812
Noninterest expense (21,861) (29,058) (29,810) (24,506) (20,882)
Pre-tax net income 5,736 6,404 6,242 4,489 4,091
Minority interest in net income (285) (298) (368) (156) (153)
Income taxes (1,993) (2,338) (2,111) (1,556) (1,422)
Net income $ 3,458 $ 3,768 $ 3,763 $ 2,777 $ 2,516
PER COMMON SHARE
Earnings per share - basic $ 0.37 $ 0.44 $ 0.47 $ 0.33 $ 0.30
Earnings per share - diluted 0.33 0.37 0.37 0.27 0.25
Common stock - per share dividends 0.05 0.05 0.05 0.05 0.04
Average Basic Shares Outstanding 9,300,760 7,980,259 7,235,370 7,188,270 7,177,787
Average Diluted Shares Outstanding 10,451,897 10,315,360 10,255,285 10,205,401 10,203,781
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 10,910 $ 10,890 $ 10,724 $ 10,400 $ 9,930
Provision for loan losses -- 517 899 1,484 1,931
Charge-offs (554) (622) (823) (1,403) (1,494)
Recoveries 432 125 90 243 33
Net charge-offs (122) (497) (733) (1,160) (1,461)
Ending balance $ 10,788 $ 10,910 $ 10,890 $ 10,724 $ 10,400
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ 351 $ 153 $ -- $ 461 $ 1,736
Nonaccrual & Restructured debt 3,149 3,483 4,105 5,691 7,331
OREO 95 0 1,250 2,013 2,232
Nonperforming assets 3,595 3,636 5,355 8,165 11,299
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.34% 0.30% 0.48% 0.82% 1.20%
Nonperforming loans to total loans 0.51 0.55 0.65 0.98 1.52
Allowance for loan losses to total loans held for investment 1.56 1.65 1.74 1.71 1.74
Allowance for loan losses to nonperforming loans 308.23 300.06 265.29 174.32 114.70
Annualized net charge-offs to average loans held for investment 0.07 0.31 0.48 0.76 0.97
FINANCIAL RATIOS
Return on average assets 1.27% 1.28% 1.43% 1.18% 1.10%
Return on average stockholders' equity 15.86 17.51 18.24 14.14 13.10
Net interest margin (FTE) 4.12 4.02 4.27 4.36 4.44
Non-interest revenue/Total revenue 59.2 66.3 69.2 65.6 61.3
Efficiency - Consolidated 79.1 80.4 80.6 80.3 77.4
Efficiency - Bank only 53.1 54.5 52.6 57.0 51.4
Average equity to average assets 8.00 7.29 7.85 8.34 8.31
PERIOD END BALANCES (Amounts in thousands)
Total loans held for sale $ 242,457 $ 419,075 $ 382,095 $ 282,014 $ 243,179
Total loans held for investment 692,410 661,094 627,256 626,464 598,358
Interest-earning assets 994,946 1,141,180 1,051,145 935,908 880,447
Assets 1,054,975 1,215,578 1,110,412 995,234 937,821
Total deposits 931,485 901,782 887,707 853,413 811,682
Other borrowings 16,250 209,299 120,027 46,325 34,117
Stockholders' equity 90,737 87,342 83,912 80,614 78,164
AVERAGE BALANCES (Amounts in thousands)
Total loans held for sale $ 316,189 $ 423,354 $ 327,378 $ 239,558 $ 234,185
Total loans held for investment 665,542 637,774 616,728 613,334 601,282
Interest-earning assets 1,033,838 1,103,667 978,135 891,340 869,841
Assets 1,105,933 1,173,820 1,044,966 947,060 929,390
Total deposits 865,146 945,297 890,772 827,258 793,679
Other borrowings 123,291 114,140 46,320 20,367 34,454
Stockholders' equity 88,430 85,584 82,070 78,969 77,251
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 542,235 $ 762,131 $ 784,963 $ 605,926 $ 547,208
Percentage of refinance based on dollar volume 56.8% 61.4% 59.8% 47.5% 60.9%

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