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Monarch Financial Reports Record 2nd Quarter and Declares Cash Dividend

CHESAPEAKE, Va., July 25, 2013 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported their best second quarter profits in the Company's history. The Board of Directors also declared a cash dividend of $0.06 per share. Second quarter 2013 highlights are:

  • Net income available to common shareholders up 29%
  • Record quarterly net income of $3,066,638, up 10%
  • Diluted earnings per share of $0.29, up 7%
  • Net Interest Margin holding steady at 4.11%
  • Non-performing assets at 0.30% of total assets
  • $607 million in mortgage loans closed

"The second quarter of 2013 represents the 18th record quarterly improvement in our profitability. The leading drivers of our performance were improved credit quality, non-interest income growth, consistent mortgage loan closings and net interest income growth. Even with startup expenses related to Monarch Bank Private Wealth, expansion into the Williamsburg and Peninsula mortgage and banking markets, and our new mortgage venture with Rose and Womble Realty, we managed to improve our profitability and financial performance from the same period one year ago." stated Brad E. Schwartz, Chief Executive Officer. "Our shareholders have been rewarded this year with an improved stock price, increased cash dividends, and higher earnings per share."

The Board of Directors on July 24, 2013 declared a regular quarterly cash dividend of $0.06 per share of common stock. The dividend is payable on August 30, 2013 to shareholders of record on August 9, 2013. The amount and declaration of future cash dividends are subject to Board of Director's approval in addition to regulatory restrictions.

For the first six months of 2013 net income was a record $6,524,767 compared to $5,293,093 for the same period in 2012, a 23% increase. The six month annualized return on average equity (ROE) was 14.61%, and the annualized return on average assets (ROA) was 1.23%. Year to date diluted earnings per share were $0.62 compared to $0.52 per share in the same quarter of 2012, a 19% improvement.

Net income was $3,066,638 for the second quarter of 2013, up 10% from the same period in 2012, which was the Company's previous record second quarter with $2,776,987 in net income. The quarterly annualized return on average equity (ROE) was 13.42%, and the quarterly return on average assets (ROA) was 1.19%. Diluted earnings per share were $0.29, compared to $0.27 per share in the same quarter of 2012.

Total assets at June 30, 2013 were $1.02 billion, up from $995 million one year prior. While total asset growth was nominal year over year, the shift in assets continued with loans held for investment growing $70.9 million, cash and funds sold growing $64.5 million, and short-term mortgage loans held for sale declining $115.4 million. A major company focus in 2013 has been to improve delivery and funding times for mortgage loans sold to our correspondents to improve our liquidity position, reduce potential interest rate risk, and ensure adequate funding to grow loans held for investment.

Loans held for investment grew $70.9 million or 11% in the past year. Loans held for investment grew a net of $5 million during the second quarter of 2013 and have grown $36 million year to date. We booked and funded $63 million in new loans held for investment during the second quarter of 2013 and $117 million year to date. The majority of our second quarter new loan growth was offset by loan payments and payoffs.

Deposits increased $45.3 million or 5.3% year over year and now total $898.6 million. The positive shift between deposit categories continued with our focus on generating commercial demand deposits through our cash management team. Demand deposits grew $51.2 million to $271.0 million, money market accounts grew $33.7 million to $341.0 million, and higher-cost certificates of deposits declined $42.2 million to $264.5 million. At the same time borrowings declined $35.1 million. The shift in certificates of deposit and borrowings is a direct reflection on our streamlined process for delivering closed mortgage loans held for sale to improve funding turnaround. Demand deposits now represent 30.2% of our total deposits. While the current rate environment does not appropriately reward banks for a demand deposit-focused funding strategy, this strategy should deliver long-term net interest margin protection when rates eventually rise.

"We are pleased to report a great quarter and year for loan production and growth, with all of this accomplished to our higher credit standards. We continue to see credit standards in the marketplace loosen and pledge to lend as we have in the past to the top clients in our markets with properly structured and priced loans." stated Neal Crawford, President of Monarch Bank. "Our funding initiatives continue to improve our deposit mix and for the first time we have over 30% of our deposits in demand deposit accounts. We are very proud of our team in hitting this goal in the second quarter."

Non-performing assets were 0.30%, which remains below that of our local, state, and national peer group. This was down from 0.34% in the first quarter of 2013 and 0.82% one year ago. Non-performing assets were $3.0 million, comprised of no loans 90 days or more past due and still accruing interest, $2.9 million in non-accrual loans and $0.1 million in other real estate owned. There was one property held at quarter-end in other real estate owned. The Company recorded net loan loss recoveries in the second quarter of $532 thousand, and year to date net loan loss recoveries totaled $410 thousand. The allowance for loan losses represents 1.62% of total loans held for investment and 385% of non-performing loans.

Average equity to average assets was 8.88% during the second quarter of 2013, an increase from 8.34% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 13.66%, 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.

Net interest income, our number one driver of profitability, increased 2.5% or $236,000 during the second quarter of 2013 compared to the same quarter in 2012. Our net interest margin was 4.11% which improved from 4.02% at year-end 2012 and was in line with the previous quarter of 4.12%. Competition for loans for top credit clients continues to impact new loan pricing. Our focus on improving mortgage loan funding speeds also reduced our total earnings assets quarter over quarter.

Non-interest income increased $0.8 million during the second quarter over the previous year, while non-interest expenses grew by $1.7 million, increasing net overhead expense by $0.9 million for the second quarter compared to the previous year. Every category of non-interest income increased for the quarter and year to date. Investment revenues related to Monarch Bank Private Wealth totaled $452 thousand for the year compared to $31 thousand the previous year, a significant increase. The net overhead growth is attributed to the strategic growth of all our lines of business in the Williamsburg and Peninsula markets which opened in September 2012, the startup of Monarch Bank Private Wealth which began business in the third quarter of 2012, as well as mortgage and bank staffing growth. Salary and benefits expense, facilities expense, marketing expense, and the cost of governmental compliance expenses were the primary drivers of our net overhead growth.

Mortgage revenue continues to be the number one driver of non-interest income. $607 million in mortgage loans were closed during the second quarter of 2013, and home purchase mortgage loans represented 61% of total closed loans. We have closed $1.1 billion in mortgage loans during the first six months of 2013, which is in line with the same period in 2102. During the second quarter we also opened several mortgage banking offices of Advance Financial Group, our mortgage partnership with Rose and Womble Realty.

"We are pleased to report another quarter of strong mortgage production with over 60% of our volume from purchase mortgage loans. We have always structured our company to focus on purchase money mortgages and while we enjoyed the refinance volume in the past we are well positioned to continue our profit contribution in the current environment." stated William T. Morrison, CEO of Monarch Mortgage. "Our expansion in the Peninsula and Williamsburg markets is just beginning, with our Newport News mortgage office opening just last week. We remain focused on building relationships with the realtor and builder community, as well as our past clients to drive production volume."

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. Monarch Bank also has a loan production office in Newport News, 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), Advance Financial Group (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,
2013 2013 2012 2012 2012
ASSETS:
Cash and due from banks $ 19,050 $ 17,414 $ 27,364 $ 14,633 $ 16,263
Interest bearing bank balances 15,195 14,099 14,667 12,043 4,295
Federal funds sold 56,972 21,937 15,744 8,191 6,142
Investment securities, at fair value 16,573 16,493 14,634 10,328 10,820
Loans held for sale 166,586 242,457 419,075 382,095 282,014
Loans held for investment, net of unearned income 697,376 692,410 661,094 627,256 626,464
Less: allowance for loan losses (11,320) (10,788) (10,910) (10,890) (10,724)
Net loans 686,056 681,622 650,184 616,366 615,740
Bank premises and equipment, net 28,101 27,507 25,448 23,449 23,210
Restricted equity securities, at cost 3,792 3,781 12,363 8,346 4,885
Bank owned life insurance 7,290 7,231 7,173 7,132 7,069
Goodwill 775 775 775 775 775
Intangible assets, net 194 238 283 327 372
Accrued interest receivable and other assets 20,815 21,421 27,868 26,727 23,649
Total assets $ 1,021,399 $ 1,054,975 $ 1,215,578 $ 1,110,412 $ 995,234
LIABILITIES:
Demand deposits---non-interest bearing $ 218,880 $ 201,346 $ 190,120 $ 182,080 $ 178,520
Demand deposits---interest bearing 52,101 57,074 65,369 40,865 41,219
Money market deposits 341,042 332,305 335,899 313,985 307,392
Savings deposits 22,172 23,579 22,127 21,531 19,633
Time deposits 264,491 317,181 288,267 329,246 306,649
Total deposits 898,686 931,485 901,782 887,707 853,413
FHLB borrowings 1,225 1,250 194,299 105,027 31,324
Short Term borrowings -- 5,000 5,000 5,000 5,000
Federal funds purchased -- -- -- -- --
Trust preferred subordinated debt 10,000 10,000 10,000 10,000 10,000
Accrued interest payable and other liabilities 16,733 14,894 15,550 17,151 14,260
Total liabilities 926,644 962,629 1,126,631 1,024,885 913,997
STOCKHOLDERS' EQUITY:
Preferred Stock -- -- 2,406 3,945 3,945
Common stock 50,873 50,821 41,632 35,732 35,732
Capital in excess of par value 6,521 6,300 12,718 16,867 16,724
Retained earnings 36,233 33,790 30,786 27,586 24,512
Accumulated other comprehensive loss (480) (174) (200) (218) (299)
Total Monarch Financial Holdings, Inc. stockholders' equity 93,147 90,737 87,342 83,912 80,614
Noncontrolling interest 1,608 1,609 1,605 1,615 623
Total equity 94,755 92,346 88,947 85,527 81,237
Total liabilities and stockholders' equity $ 1,021,399 $ 1,054,975 $ 1,215,578 $ 1,110,412 $ 995,234
Preferred shares outstanding at period end -- -- 481,123 788,900 788,900
Common shares outstanding at period end (1) 10,408,544 10,398,073 8,557,939 7,251,491 7,251,491
Nonvested shares of common stock included in commons shares outstanding (1) 233,960 233,960 231,460 105,060 105,060
Book value per common share at period end (1) (2) $ 8.95 $ 8.73 $ 8.80 $ 8.85 $ 8.40
Tangible book value per common share at period end (1) (3) $ 8.86 $ 8.63 $ 8.68 $ 8.70 $ 8.24
Closing market price (1) $ 10.83 $ 10.61 $ 8.22 $ 8.13 $ 8.21
Total risk based capital - Consolidated company 13.42% 13.06% 12.05% 12.49% 12.17%
Total risk based capital - Bank 13.66% 13.78% 12.73% 13.23% 12.79%
(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 Six Months Ended
June 30, June 30,
2013 2012 2013 2012
INTEREST INCOME:
Interest on federal funds sold $ 25,312 $ 8,903 $ 30,470 $ 15,162
Interest on other bank accounts 9,952 4,898 18,094 8,446
Dividends on equity securities 69,225 64,974 143,660 102,474
Interest on investment securities 57,302 51,090 114,871 97,321
Interest and fees on loans 10,813,696 10,853,754 22,522,262 21,734,790
Total interest income 10,975,487 10,983,619 22,829,357 21,958,193
INTEREST EXPENSE:
Interest on deposits 1,020,913 1,266,904 2,050,375 2,548,691
Interest on trust preferred subordinated debt 124,200 123,425 243,242 246,275
Interest on other borrowings 38,810 37,607 327,988 100,114
Total interest expense 1,183,923 1,427,936 2,621,605 2,895,080
NET INTEREST INCOME 9,791,564 9,555,683 20,207,752 19,063,113
PROVISION FOR LOAN LOSSES -- 1,484,400 -- 3,415,079
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,791,564 8,071,283 20,207,752 15,648,034
NON-INTEREST INCOME:
Mortgage banking income 20,572,388 20,152,078 36,738,324 36,736,289
Service charges and fees 477,660 467,565 928,814 881,616
Title income 232,423 168,622 486,774 282,880
Investment and insurance income 245,524 16,676 452,460 31,312
Other income 146,276 118,992 248,917 387,844
Total non-interest income 21,674,271 20,923,933 38,855,289 38,319,941
NON-INTEREST EXPENSE:
Salaries and employee benefits 8,502,755 7,093,920 16,707,830 13,724,438
Commissions and incentives 9,703,820 10,352,665 16,769,296 19,084,866
Occupancy and equipment 2,130,445 1,715,098 3,996,963 3,314,179
Loan expense 2,630,295 2,184,323 4,460,732 3,799,454
Marketing expense 744,646 593,526 1,257,604 1,003,817
Data processing 435,771 363,342 836,729 709,332
Other expenses 2,025,152 2,202,905 4,004,351 3,751,503
Total non-interest expense 26,172,884 24,505,779 48,033,505 45,387,589
INCOME BEFORE TAXES 5,292,951 4,489,437 11,029,536 8,580,386
Income tax provision (1,797,773) (1,556,294) (3,791,326) (2,977,835)
NET INCOME 3,495,178 2,933,143 7,238,210 5,602,551
Less: Net income attributable to noncontrolling interest (428,540) (156,156) (713,443) (309,458)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC $ 3,066,638 $ 2,776,987 $ 6,524,767 $ 5,293,093
Preferred stock dividend and accretion of preferred stock discount -- (390,000) -- (780,000)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 3,066,638 $ 2,386,987 $ 6,524,767 $ 4,513,093
NET INCOME PER COMMON SHARE:
Basic $ 0.29 $ 0.33 $ 0.66 $ 0.63
Diluted $ 0.29 $ 0.27 $ 0.62 $ 0.52
Weighted average basic shares outstanding 10,401,992 7,188,270 9,854,418 7,183,028
Weighted average diluted shares outstanding 10,463,851 10,225,182 10,451,897 10,214,481
Return on average assets 1.19% 1.18% 1.23% 1.14%
Return on average stockholders' equity 13.42% 14.14% 14.61% 13.63%
(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, except per share data) For the Quarter Ended

June 30,

March 31,
December 31, September 30,
June 30,
2013 2013 2012 2012 2012
EARNINGS
Interest income $ 10,976 $ 11,854 $ 12,690 $ 11,820 $ 10,983
Interest expense (1,184) (1,438) (1,591) (1,430) (1,428)
Net interest income 9,792 10,416 11,099 10,390 9,555
Provision for loan losses -- -- (517) (899) (1,484)
Noninterest income - mortgage banking income 20,572 16,166 23,826 25,652 20,152
Noninterest income - other 1,102 1,015 1,054 909 772
Noninterest expense (26,173) (21,861) (29,058) (29,810) (24,506)
Pre-tax net income 5,293 5,736 6,404 6,242 4,489
Minority interest in net income (428) (285) (298) (368) (156)
Income taxes (1,798) (1,993) (2,338) (2,111) (1,556)
Net income $ 3,067 $ 3,458 $ 3,768 $ 3,763 $ 2,777
PER COMMON SHARE
Earnings per share - basic $ 0.29 $ 0.37 $ 0.44 $ 0.47 $ 0.33
Earnings per share - diluted 0.29 0.33 0.37 0.37 0.27
Common stock - per share dividends 0.06 0.05 0.05 0.05 0.05
Average Basic Shares Outstanding 10,401,992 9,300,760 7,980,259 7,235,370 7,188,270
Average Diluted Shares Outstanding 10,483,420 10,451,897 10,315,360 10,255,285 10,205,401
ALLOWANCE FOR LOAN LOSSES
Beginning balance $ 10,788 $ 10,910 $ 10,890 $ 10,724 $ 10,400
Provision for loan losses -- -- 517 899 1,484
Charge-offs (279) (554) (622) (823) (1,403)
Recoveries 811 432 125 90 243
Net charge-offs 532 (122) (497) (733) (1,160)
Ending balance $ 11,320 $ 10,788 $ 10,910 $ 10,890 $ 10,724
COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due $ -- $ 351 $ 153 $ -- $ 461
Nonaccrual & Restructured debt 2,933 3,149 3,483 4,105 5,691
OREO 95 95 0 1,250 2,013
Nonperforming assets 3,028 3,595 3,636 5,355 8,165
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.30% 0.34% 0.30% 0.48% 0.82%
Nonperforming loans to total loans 0.42 0.51 0.55 0.65 0.98
Allowance for loan losses to total loans held for investment 1.62 1.56 1.65 1.74 1.71
Allowance for loan losses to nonperforming loans 385.95 308.23 300.06 265.29 174.32
Annualized net charge-offs to average loans held for investment -0.31 0.07 0.31 0.48 0.76
FINANCIAL RATIOS
Return on average assets 1.19% 1.27% 1.28% 1.43% 1.18%
Return on average stockholders' equity 13.42 15.86 17.51 18.24 14.14
Net interest margin (FTE) 4.11 4.12 4.02 4.27 4.36
Non-interest revenue/Total revenue 66.4 59.2 66.3 69.2 65.6
Efficiency - Consolidated 83.0 79.1 80.4 80.6 80.3
Efficiency - Bank only 58.2 53.1 54.5 52.6 57.0
Average equity to average assets 8.88 8.00 7.29 7.85 8.34
PERIOD END BALANCES (Amounts in thousands)
Total loans held for sale $ 66,586 $ 242,457 $ 419,075 $ 382,095 $ 282,014
Total loans held for investment 697,376 692,410 661,094 627,256 626,464
Interest-earning assets 960,481 994,946 1,141,180 1,051,145 935,908
Assets 1,021,399 1,054,975 1,215,578 1,110,412 995,234
Total deposits 898,686 931,485 901,782 887,707 853,413
Other borrowings 11,225 16,250 209,299 120,027 46,325
Stockholders' equity 93,147 90,737 87,342 83,912 80,614
AVERAGE BALANCES (Amounts in thousands)
Total loans held for sale $ 200,733 $ 316,189 $ 423,354 $ 327,378 $ 239,558
Total loans held for investment 680,037 665,542 637,774 616,728 613,334
Interest-earning assets 964,872 1,033,838 1,103,667 978,135 891,340
Assets 1,032,345 1,105,933 1,173,820 1,044,966 947,060
Total deposits 908,229 865,146 945,297 890,772 827,258
Other borrowings 11,250 123,291 114,140 46,320 20,367
Stockholders' equity 91,638 88,430 85,584 82,070 78,969
MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed $ 607,189 $ 542,235 $ 762,131 $ 784,963 $ 605,926
Percentage of refinance based on dollar volume 39.2% 56.8% 61.4% 59.8% 47.5%

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