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 16^th 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 4^th 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.