Monarch Financial Reports Financial Performance and Declares Cash Dividend


CHESAPEAKE, Va., Oct. 23, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported third quarter and annual financial performance. The Board of Directors also announced a quarterly common stock cash dividend of $0.08 per common share, payable on November 28, 2014, to shareholders of record on November 10, 2014.

Third quarter 2014 highlights are:

  • Net income of $2,807,848, up 16.5%
  • Diluted earnings per share of $0.26, up 13%
  • Quarterly cash dividend of $0.08 per share
  • Return on Equity of 10.72%
  • Return on Assets of 1.11%
  • Non-performing assets at 0.31% of total assets
  • $441 million in mortgage loans closed with 84% purchase

Year to date 2014 highlights are:

  • Net income of $8,528,687, for a return on equity of 11.27%
  • Diluted earnings per share of $0.80
  • $1.16 billion in mortgage loans closed with 84% purchase

"We are pleased to report another strong quarter for Monarch. Loan growth with a stable net interest margin, higher mortgage revenue, no credit costs, and focused expense management continue to drive our bottom line results." stated Brad E. Schwartz, Chief Executive Officer. "Our asset quality remains very strong, and we remain well positioned for an increase in interest rates that is anticipated sometime in 2015."

Net income was $2,807,848 for the third quarter of 2014, an increase of 16.5% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 10.72%, and the quarterly annualized return on average assets (ROA) was 1.11%. Quarterly diluted earnings per share increased to $0.26, compared to $0.23 in the previous quarter, a 13% increase. Net income was $8,528,687 for the first nine months of 2014. The annualized return on average equity (ROE) was 11.27%, and the annualized return on average assets (ROA) was 1.15%. Diluted earnings per share were $0.80, compared to $0.85 for the same period in 2013. 

Total assets at September 30, 2014 were $1.0 billion.  Loans held for investment grew 2.3% year over year, and mortgage loans held for sale grew 15.1%.  Loans held for investment also grew $13.5 million or 1.9% from the previous quarter. We hit a milestone with over $300 million in demand deposit accounts, which now comprise 35% of our total deposit portfolio. Our funding mix position should enhance and protect the net interest margin when interest rates rise in the future.

"Even with irrational loan competition we were able to grow our loans in the past quarter and from the same period one year prior. Our cash management and retail deposit teams continue to perform at a high level, with over a third of our deposits now in demand deposits – which also delivered positive growth in fee income" stated Neal Crawford, President of Monarch Bank.

Non-performing assets to total assets were 0.31%, remaining significantly below that of our local, state, and national peer group. Non-performing assets were $3.2 million which was down from the previous quarter. Non-performing assets were comprised of $2.2 million in non-accrual loans, $243 thousand in loans more than 90 days past due, and $767 thousand in two properties in other real estate owned. The larger of the two properties is already under contract to close in November. Net charge-offs for the calendar year were $84 thousand and the allowance for loan losses represents 1.26% of loans held for investment and 370% of non-performing loans.

The Board of Directors announced a quarterly common stock cash dividend of $0.08 per common share, payable on November 28, 2014, to shareholders of record on November 10, 2014. Tangible book value of $9.80 per share has increased 8.5% over the past year, with the stock closing at 128% of book value. 

Capital strength continues to grow by every metric. Average equity to average assets improved to 10.40%, up from 9.27% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 14.18%, 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 during the third quarter of 2014 was flat when compared to the same quarter in 2013.  The net interest margin was 4.18% for the third quarter, which despite market-driven pressure on loan rates was the same as the previous quarter. The third quarter net interest margin of 4.18% was up from 4.12% in the same quarter in 2013.

Non-interest income grew in every category in the third quarter. Mortgage revenue continues to be the number one driver of non-interest income. We closed $441 million in mortgage loans (84% purchase money) during the third quarter of 2014 compared to $478 million (77% purchase) in the third quarter of 2013, a slight decrease. Despite the slightly lower volume closed mortgage revenue grew by $1 million. There were also increases in service charges and fees, title income, investment and insurance revenue, and other income. Investment and insurance revenue increased 62% compared to the same quarter the previous year due to the continued growth of Monarch Bank Private Wealth. 

"We are extremely proud of our mortgage origination, support staff and leadership teams that have met the challenges of new regulations and a more traditional seasonal market. With slightly less volume in the third quarter we were able to grow revenue through stronger secondary pricing and efficiencies. Our past formula for success in a more traditional and seasonal market should continue to lead our continued market share growth." stated William T. Morrison, CEO of Monarch Mortgage.

Total non-interest expenses increased 3.6% during the third quarter due to increased commissions and incentives, occupancy and equipment expenses, and data processing expenses, which were partially offset by reduced loan expenses. Salaries and employee benefits remained stable with no growth, despite increases in health care expenses which were offset by lower salaries expense. Net overhead, the difference between non-interest income and non-interest expense, improved by $418 thousand or 7.4% in the third quarter compared to a year prior. During the third quarter we closed one banking office. 

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 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), 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, 
  2014 2014 2014 2013 2013
ASSETS:          
Cash and due from banks  $ 21,083  $ 19,661  $ 18,510  $ 18,971  $ 21,016
Interest bearing bank balances  58,207  37,166  37,033  31,955  24,504
Federal funds sold  3,938  29,761  84,232  53,985  83,454
           
Investment securities, at fair value  25,137  23,773  23,197  48,822  16,973
           
Mortgage loans held for sale  138,590  156,584  92,839  99,718  120,435
           
Loans held for investment, net of unearned income  713,667  700,159  715,088  712,671  697,541
Less: allowance for loan losses  (8,977)  (9,070)  (9,213)  (9,061)  (11,228)
Net loans  704,690  691,089  705,875  703,610  686,313
           
Bank premises and equipment, net  30,368  31,407  29,902  28,882  28,454
Restricted equity securities, at cost  3,179  3,169  3,156  3,683  3,666
Bank owned life insurance  9,587  7,526  7,467  7,409  7,351
Goodwill  775  775  775  775  775
Intangible assets, net  --  15  60  104  149
Accrued interest receivable and other assets  23,688  22,973  19,673  18,786  18,857
           
Total assets  $ 1,019,242  $ 1,023,899  $ 1,022,719  $ 1,016,700  $ 1,011,947
           
LIABILITIES:          
Demand deposits--non-interest bearing  $ 252,286  $ 240,348  $ 221,357  $ 206,891  $ 222,079
Demand deposits--interest bearing  53,093  51,563  55,949  55,528  48,244
Money market deposits  365,041  377,096  367,590  374,462  364,488
Savings deposits  25,211  24,539  24,327  22,137  22,665
Time deposits  189,142  197,747  224,947  234,100  228,652
Total deposits  884,773  891,293  894,170  893,118  886,128
           
FHLB borrowings  1,100  1,125  1,150  1,175  1,200
Short Term borrowings  --  --  --  --  --
Trust preferred subordinated debt  10,000  10,000  10,000  10,000  10,000
Accrued interest payable and other liabilities  18,145  18,650  17,422  14,661  17,855
Total liabilities  914,018  921,068  922,742  918,954  915,183
           
STOCKHOLDERS' EQUITY:          
Common stock  51,735  51,624  51,584  51,432  51,230
Capital in excess of par value  7,966  7,675  7,357  7,069  6,755
Retained earnings  45,523  43,566  41,232  39,437  38,014
Accumulated other comprehensive loss  (135)  (159)  (314)  (419)  (406)
Total Monarch Financial Holdings, Inc. stockholders' equity  105,089  102,706  99,859  97,519  95,593
Noncontrolling interest  135  125  118  227  1,171
Total equity  105,224  102,831  99,977  97,746  96,764
           
Total liabilities and stockholders' equity  $ 1,019,242  $ 1,023,899  $ 1,022,719  $ 1,016,700  $ 1,011,947
           
Common shares outstanding at period end  10,646,873  10,624,668  10,619,444  10,502,323  10,480,023
           
Nonvested shares of common stock included in commons shares outstanding  299,910  299,910  302,710  215,960  233,960
           
Book value per common share at period end (1)  $ 9.87  $ 9.67  $ 9.40  $ 9.29  $ 9.12
Tangible book value per common share at period end (2)  $ 9.80  $ 9.59  $ 9.33  $ 9.20  $ 9.03
Closing market price  $ 12.56  $ 11.72  $ 12.26  $ 12.31  $ 11.72
           
Total risk based capital - Consolidated company 14.16% 14.29% 14.27% 13.91% 13.68%
Total risk based capital - Bank 14.18% 14.31% 14.30% 13.95% 13.83%
           
(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
           
           
Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2014 2013 2014 2013
INTEREST INCOME:        
Interest on federal funds sold  $ 15,313  $ 43,210  $ 79,870  $ 73,680
Interest on other bank accounts  61,609  11,307  152,546  29,401
Dividends on equity securities  21,000  66,500  73,410  210,160
Interest on investment securities  90,669  55,314  258,647  170,185
Interest on mortgage loans held for sale  1,442,668  1,423,852  3,489,898  5,931,116
Interest and fees on loans held for investment  9,007,543  9,241,660  27,575,506  27,256,658
Total interest income  10,638,802  10,841,843  31,629,877  33,671,200
INTEREST EXPENSE:        
Interest on deposits  789,712  979,858  2,463,428  3,030,233
Interest on trust preferred subordinated debt  124,200  125,818  369,896  369,060
Interest on other borrowings  13,765  15,355  42,351  343,343
Total interest expense  927,677  1,121,031  2,875,675  3,742,636
NET INTEREST INCOME  9,711,125  9,720,812  28,754,202  29,928,564
PROVISION FOR LOAN LOSSES  --  --  --  --
         
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  9,711,125  9,720,812  28,754,202  29,928,564
         
NON-INTEREST INCOME:        
Mortgage banking income  16,657,849  15,657,242  46,229,239  52,395,566
Service charges and fees  559,497  510,739  1,568,288  1,439,553
Title income  180,402  177,705  452,890  664,479
Investment and insurance income  428,265  264,967  1,209,624  717,427
Other income  72,921  64,420  246,417  313,337
Total non-interest income  17,898,934  16,675,073  49,706,458  55,530,362
NON-INTEREST EXPENSE:        
Salaries and employee benefits  8,571,995  8,632,847  25,336,002  25,340,677
Commissions and incentives  7,047,140  6,326,920  17,828,126  23,096,216
Occupancy and equipment  2,464,666  2,232,315  7,136,457  6,229,278
Loan expense  1,552,162  1,904,786  4,975,873  6,365,518
Marketing expense  801,403  807,938  2,121,152  2,065,542
Data processing  601,644  400,125  1,557,728  1,236,854
Telephone  325,405  306,848  929,993  869,910
Other expenses  1,756,476  1,703,182  4,989,177  5,144,471
Total non-interest expense  23,120,891  22,314,961  64,874,508  70,348,466
         
INCOME BEFORE TAXES  4,489,168  4,080,924  13,586,152  15,110,460
Income tax provision  (1,635,440)  (1,415,697)  (4,874,180)  (5,207,023)
NET INCOME  2,853,728  2,665,227  8,711,972  9,903,437
         
Less: Net income attributable to noncontrolling interest  (45,880)  (255,553)  (183,285)  (968,996)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC  $2,807,848  $2,409,674  $8,528,687  $ 8,934,441
         
NET INCOME PER COMMON SHARE:        
         
Basic  $ 0.26  $ 0.23  $ 0.80  $ 0.89
Diluted  $ 0.26  $ 0.23  $ 0.80  $ 0.85
         
Weighted average basic shares outstanding  10,635,275  10,464,992  10,609,757  10,060,179
Weighted average diluted shares outstanding  10,670,507  10,519,472  10,648,289  10,482,651
         
Return on average assets 1.11% 0.94% 1.15% 1.14%
Return on average stockholders' equity 10.72% 10.18% 11.27% 13.07%
         
         
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,
  2014 2014 2014 2013 2013
EARNINGS          
Interest income  $ 10,639  $ 10,557  $ 10,434  $ 10,677  $ 10,842
Interest expense  (928)  (977)  (971)  (1,044)  (1,121)
Net interest income  9,711  9,580  9,463  9,633  9,721
Provision for loan losses  --   --   --   --   -- 
Noninterest income - mortgage banking income  16,658  17,369  12,202  13,277  15,657
Noninterest income - other  1,241  1,130  1,106  1,075  1,018
Noninterest expense  (23,121)  (23,007)  (18,747)  (20,562)  (22,315)
Pre-tax net income  4,489  5,072  4,024  3,423  4,081
Minority interest in net income  (46)  (121)  (16)  (87)  (255)
Income taxes  (1,635)  (1,767)  (1,471)  (1,179)  (1,416)
Net income  $ 2,808  $ 3,184  $ 2,537  $ 2,157  $ 2,410
           
PER COMMON SHARE          
Earnings per share - basic  $ 0.26  $ 0.30  $ 0.24  $ 0.21  $ 0.23
Earnings per share - diluted  0.26  0.30  0.24  0.20  0.23
Common stock - per share dividends  0.08  0.08  0.07  0.07  0.06
Average Basic Shares Outstanding 10,635,275 10,620,869 10,600,766 10,486,056 10,464,992
Average Diluted Shares Outstanding 10,670,507 10,660,217 10,641,782 10,535,313 10,519,472
           
ALLOWANCE FOR LOAN LOSSES          
Beginning balance  $ 9,070  $ 9,213  $ 9,061  $ 11,228  $ 11,320
Provision for loan losses  --   --   --   --   -- 
Charge-offs  (181)  (184)  (12)  (2,252)  (137)
Recoveries  88  41  164  85  45
Net charge-offs  (93)  (143)  152  (2,167)  (92)
Ending balance  $ 8,977  $ 9,070  $ 9,213  $ 9,061  $ 11,228
           
COMPOSITION OF RISK ASSETS          
Nonperforming loans:          
90 days past due  $ 243  $ 499  $ 759  $ 472  $ 82
Nonaccrual loans 2,180 3,028 1,718 1,740 2,814
OREO 767 144 302 302 95
Nonperforming assets  3,190  3,671  2,779  2,514  2,991
           
           
ASSET QUALITY RATIOS          
Nonperforming assets to total assets 0.31% 0.36% 0.27% 0.25% 0.30%
Nonperforming loans to total loans 0.34 0.50 0.35 0.31 0.42
Allowance for loan losses to total loans held for investment 1.26 1.30 1.29 1.27 1.61
Allowance for loan losses to nonperforming loans 370.49 257.16 371.94 409.63 387.71
Annualized net charge-offs to average loans held for investment 0.05 0.08 -0.09 1.25 0.05
           
FINANCIAL RATIOS          
Return on average assets  1.11%  1.29%  1.06%  0.86%  0.94%
Return on average stockholders' equity  10.72  12.63  10.46  8.88  10.18
Net interest margin (FTE)  4.18  4.18  4.25  4.13  4.12
Non-interest revenue/Total revenue  62.7  63.7  56.1  57.3  60.6
Efficiency - Consolidated  83.7  81.8  82.1  85.5  84.8
Efficiency - Bank only  61.7  63.9  59.9  60.4  59.1
Average equity to average assets  10.40  10.18  10.13  9.73  9.27
           
PERIOD END BALANCES (Amounts in thousands)          
Total mortgage loans held for sale  $ 138,590  $ 156,584  $ 92,839  $ 99,718  $ 120,435
Total loans held for investment  713,667  700,159  715,088  712,671  697,541
Interest-earning assets  945,697  949,872  956,160  952,981  950,760
Assets  1,019,242  1,023,899  1,022,719  1,016,700  1,011,947
Total deposits  884,773  891,293  894,170  893,118  886,128
Other borrowings  11,100  11,125  11,150  11,175  11,200
Stockholders' equity  105,089  102,706  99,859  97,519  95,593
           
AVERAGE BALANCES (Amounts in thousands)          
Total mortgage loans held for sale  $ 138,382  $ 116,851  $ 70,856  $ 104,104  $ 136,660
Total loans held for investment  701,137  698,851  704,917  695,074  692,731
Interest-earning assets  930,420  927,552  910,929  935,059  946,575
Assets  999,358  993,003  970,815  990,734  1,013,932
Total deposits  867,980  867,217  848,969  869,113  882,553
Other borrowings  11,124  11,150  11,174  11,199  11,257
Stockholders' equity  103,908  101,092  98,374  96,415  93,958
           
MORTGAGE PRODUCTION (Amounts in thousands)          
Dollar volume of mortgage loans closed  $ 440,784  $ 446,863  $ 271,233  $ 349,695  $ 478,304
Percentage of refinance based on dollar volume  16.0%  15.0%  19.1%  20.3%  22.6%
           

            

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