CHESAPEAKE, Va., April 24, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported first quarter profitability and continued strong performance. First quarter 2014 highlights are:
- 1st quarter net income of $2,537,265
- Return on Equity of 10.46%
- Return on Assets of 1.06%
- Basic earnings per share of $0.24
- Non-performing assets at 0.27% of total assets
- $271 million in mortgage loans closed
"We are extremely pleased with our first quarter results. Efforts to manage our expenses and structure the company for the future resulted in improved profitability from the previous two quarters with slightly less top line revenue, a nice accomplishment. Solid bank and mortgage loan closings, non-existent credit costs, expense control, and a strong net interest margin continued to drive our bottom line results," stated Brad E. Schwartz, Chief Executive Officer. "In April we celebrate Monarch's 15th anniversary, in May we open our new Williamsburg banking, mortgage and private wealth office, and we are working on several other initiatives that will further our goal of remaining the top performing community bank in our market."
Net income was $2,537,265 for the first quarter of 2014, up from the previous two quarters but down from the record first quarter of 2013. The quarterly annualized return on average equity (ROE) was 10.46%, and the quarterly return on average assets (ROA) was 1.06%. Quarterly diluted earnings per share were $0.24, compared to $0.21 in the previous quarter and $0.33 in the same quarter in 2013.
Total assets at March 31, 2014 were $1.0 billion, with both loans and deposits showing nominal net growth since year-end 2013. Declines in our loans held for sale portfolio due to lower mortgage loan closings were offset on a quarterly and annual basis by growth in loans held for investment, investment securities, interest bearing bank balances, and federal funds balances. We anticipate much of this excess liquidity will be utilized to fund the spring and summer residential mortgage closing season based on growing mortgage loan applications, improvements in the weather, and continued favorable market loan rates. Funding continues to shift to a higher level of demand deposits and money market accounts, with 31% of our total deposits now in demand deposits. Our funding mix should enhance the net interest margin when rates are predicted to rise in the next 12-24 months.
"We continue to attract top quality clients with loan growth over the past year in commercial, construction, commercial real estate, and mortgage loans. Our loan pipeline is robust and we are excited about the growth prospects at our new Williamsburg and Newport News locations," stated Neal Crawford, President of Monarch Bank.
Non-performing assets to total assets were 0.27%, which remains significantly below that of our local, state, and national peer group. Non-performing assets were $2.8 million which was down from $3.5 million or 0.33% of total assets one year prior. Non-performing assets were comprised of $1.7 million in non-accrual loans, $759 thousand in loans more than 90 days past due, and $302 thousand in one foreclosed property. Net recoveries for the quarter were $152 thousand and the allowance for loan losses represents 1.29% of loans held for investment and 372% of non-performing loans.
Capital strength continues to grow by all measures. Average equity to average assets improved to 10.13%, up from 8.00% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 14.27%, 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, declined 9.1% or $953 thousand during the first quarter of 2014 compared to the same quarter in 2013 driven by reduced balances of mortgage loans held for sale. Mortgage loans held for sale interest income declined $1.9 million compared to the first quarter of 2013, which was partially offset by growth in loans held for investment interest income and a reduction in funding costs. The net interest margin increased to 4.25% for the first quarter, which was up from the previous quarter of 4.13% and from the first quarter of 2013 of 4.12%. The lower average volume of mortgage loans held for sale and the repayment of a discounted loan were the primary reason for the increased net interest margin.
Non-interest income declined 22.5% or $3.9 million from the previous year driven by reduced revenues from mortgage loans sold and related title insurance fees. Investment revenue more than doubled compared to the previous year due to the recent formation of Monarch Bank Private Wealth. Mortgage revenue continues to be the number one driver of non-interest income. We closed $271 million in mortgage loans (81% purchase) during the first quarter of 2014 compared to $542 million (43% purchase) in the first quarter of 2013, and $350 million (80% purchase) in the fourth quarter of 2013.
"All of our efforts over the past several months paid off in the first quarter, despite the multitude of snow storms that hit Washington, Richmond, Hampton Roads and even Charlotte. Our long-term focus has always been on purchase mortgage lending, with 81% of the loans closed in the first quarter of 2014 used to purchase homes," stated William T. Morrison, CEO of Monarch Mortgage. "Our pipeline is strong and we expect the traditional spring and summer sales cycle to return this year. Based on our application volume we anticipate an increase in loan closings going forward."
Total non-interest expenses declined 14.2% or $3.1 million during the first quarter due to reduced commissions and loan expenses. Net overhead, the difference between non-interest income and non-interest expense, increased $758 thousand driven by higher occupancy expenses and technology costs. The company is currently reviewing all physical locations to determine if any enhancements need to be made to improve operating efficiency.
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 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, | |
| 2014 | 2013 | 2013 | 2013 | 2013 | |
| ASSETS: | |||||
| Cash and due from banks | $ 18,510 | $ 18,971 | $ 21,016 | $ 19,050 | $ 17,414 |
| Interest bearing bank balances | 37,033 | 31,955 | 24,504 | 15,195 | 14,099 |
| Federal funds sold | 84,232 | 53,985 | 83,454 | 56,972 | 21,937 |
| Investment securities, at fair value | 23,197 | 48,822 | 16,973 | 16,573 | 16,493 |
| Loans held for sale | 92,839 | 99,718 | 120,435 | 166,586 | 242,457 |
| Loans held for investment, net of unearned income | 715,088 | 712,671 | 697,541 | 697,376 | 692,410 |
| Less: allowance for loan losses | (9,213) | (9,061) | (11,228) | (11,320) | (10,788) |
| Net loans | 705,875 | 703,610 | 686,313 | 686,056 | 681,622 |
| Bank premises and equipment, net | 29,902 | 28,882 | 28,454 | 28,101 | 27,507 |
| Restricted equity securities, at cost | 3,156 | 3,683 | 3,666 | 3,792 | 3,781 |
| Bank owned life insurance | 7,467 | 7,409 | 7,351 | 7,290 | 7,231 |
| Goodwill | 775 | 775 | 775 | 775 | 775 |
| Intangible assets, net | 60 | 104 | 149 | 194 | 238 |
| Accrued interest receivable and other assets | 19,673 | 18,786 | 18,857 | 20,815 | 21,421 |
| Total assets | $ 1,022,719 | $ 1,016,700 | $ 1,011,947 | $ 1,021,399 | $ 1,054,975 |
| LIABILITIES: | |||||
| Demand deposits---non-interest bearing | $ 221,357 | $ 206,891 | $ 222,079 | $ 218,880 | $ 201,346 |
| Demand deposits---interest bearing | 55,949 | 55,528 | 48,244 | 52,101 | 57,074 |
| Money market deposits | 367,590 | 374,462 | 364,488 | 341,042 | 332,305 |
| Savings deposits | 24,327 | 22,137 | 22,665 | 22,172 | 23,579 |
| Time deposits | 224,947 | 234,100 | 228,652 | 264,491 | 317,181 |
| Total deposits | 894,170 | 893,118 | 886,128 | 898,686 | 931,485 |
| FHLB borrowings | 1,150 | 1,175 | 1,200 | 1,225 | 1,250 |
| Short Term borrowings | -- | -- | -- | -- | 5,000 |
| Trust preferred subordinated debt | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 |
| Accrued interest payable and other liabilities | 17,422 | 14,661 | 17,855 | 16,733 | 14,894 |
| Total liabilities | 922,742 | 918,954 | 915,183 | 926,644 | 962,629 |
| STOCKHOLDERS' EQUITY: | |||||
| Common stock | 51,584 | 51,432 | 51,230 | 50,873 | 50,821 |
| Capital in excess of par value | 7,357 | 7,069 | 6,755 | 6,521 | 6,300 |
| Retained earnings | 41,232 | 39,437 | 38,014 | 36,233 | 33,790 |
| Accumulated other comprehensive loss | (314) | (419) | (406) | (480) | (174) |
| Total Monarch Financial Holdings, Inc. stockholders' equity | 99,859 | 97,519 | 95,593 | 93,147 | 90,737 |
| Noncontrolling interest | 118 | 227 | 1,171 | 1,608 | 1,609 |
| Total equity | 99,977 | 97,746 | 96,764 | 94,755 | 92,346 |
| Total liabilities and stockholders' equity | $ 1,022,719 | $ 1,016,700 | $ 1,011,947 | $ 1,021,399 | $ 1,054,975 |
| Preferred shares outstanding at period end | -- | -- | -- | -- | -- |
| Common shares outstanding at period end | 10,619,444 | 10,502,323 | 10,480,023 | 10,408,544 | 10,398,073 |
| Nonvested shares of common stock included in commons shares outstanding | 302,710 | 215,960 | 233,960 | 233,960 | 233,960 |
| Book value per common share at period end (1) | $ 9.40 | $ 9.29 | $ 9.12 | $ 8.95 | $ 8.73 |
| Tangible book value per common share at period end (2) | $ 9.33 | $ 9.20 | $ 9.03 | $ 8.86 | $ 8.63 |
| Closing market price | $ 12.26 | $ 12.31 | $ 11.72 | $ 10.83 | $ 10.61 |
| Total risk based capital - Consolidated company | 14.30% | 13.91% | 13.68% | 13.46% | 13.21% |
| Total risk based capital - Bank | 14.27% | 13.95% | 13.83% | 13.66% | 13.94% |
| (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 | ||
| March 31, | ||
| 2014 | 2013 | |
| INTEREST INCOME: | ||
| Interest on federal funds sold | $ 40,378 | $ 5,158 |
| Interest on other bank accounts | 36,032 | 8,142 |
| Dividends on equity securities | 30,000 | 74,435 |
| Interest on investment securities | 76,049 | 57,569 |
| Interest on loans held for sale | 772,732 | 2,733,572 |
| Interest and fees on loans held for investment | 9,478,892 | 8,974,994 |
| Total interest income | 10,434,083 | 11,853,870 |
| INTEREST EXPENSE: | ||
| Interest on deposits | 834,413 | 1,029,462 |
| Interest on trust preferred subordinated debt | 122,337 | 119,042 |
| Interest on other borrowings | 14,362 | 289,178 |
| Total interest expense | 971,112 | 1,437,682 |
| NET INTEREST INCOME | 9,462,971 | 10,416,188 |
| PROVISION FOR LOAN LOSSES | -- | -- |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 9,462,971 | 10,416,188 |
| NON-INTEREST INCOME: | ||
| Mortgage banking income | 12,202,162 | 16,165,936 |
| Service charges and fees | 470,212 | 451,154 |
| Title income | 105,034 | 254,351 |
| Investment and insurance income | 445,472 | 206,936 |
| Other income | 85,771 | 102,641 |
| Total non-interest income | 13,308,651 | 17,181,018 |
| NON-INTEREST EXPENSE: | ||
| Salaries and employee benefits | 8,271,561 | 8,205,075 |
| Commissions and incentives | 4,010,965 | 7,065,476 |
| Occupancy and equipment | 2,276,703 | 1,866,518 |
| Loan expense | 1,363,141 | 1,830,437 |
| Marketing expense | 521,841 | 512,958 |
| Data processing | 479,278 | 400,958 |
| Telephone | 311,137 | 254,924 |
| Other expenses | 1,512,007 | 1,724,275 |
| Total non-interest expense | 18,746,633 | 21,860,621 |
| INCOME BEFORE TAXES | 4,024,989 | 5,736,585 |
| Income tax provision | (1,471,240) | (1,993,553) |
| NET INCOME | 2,553,749 | 3,743,032 |
| Less: Net income attributable to noncontrolling interest | (16,484) | (284,903) |
| NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC | $2,537,265 | $3,458,129 |
| NET INCOME PER COMMON SHARE: | ||
| Basic | $ 0.24 | $ 0.37 |
| Diluted | $ 0.24 | $ 0.33 |
| Weighted average basic shares outstanding | 10,572,435 | 9,300,760 |
| Weighted average diluted shares outstanding | 10,613,452 | 10,451,897 |
| Return on average assets | 1.06% | 1.27% |
| Return on average stockholders' equity | 10.46% | 15.86% |
| 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, |
| 2014 | 2013 | 2013 | 2013 | 2013 | |
| EARNINGS | |||||
| Interest income | $ 10,434 | $ 10,677 | $ 10,842 | $ 10,976 | $ 11,854 |
| Interest expense | (971) | (1,044) | (1,121) | (1,184) | (1,438) |
| Net interest income | 9,463 | 9,633 | 9,721 | 9,792 | 10,416 |
| Provision for loan losses | -- | -- | -- | -- | -- |
| Noninterest income - mortgage banking income | 12,202 | 13,277 | 15,657 | 20,572 | 16,166 |
| Noninterest income - other | 1,106 | 1,075 | 1,018 | 1,102 | 1,015 |
| Noninterest expense | (18,747) | (20,562) | (22,315) | (26,173) | (21,861) |
| Pre-tax net income | 4,024 | 3,423 | 4,081 | 5,293 | 5,736 |
| Minority interest in net income | (16) | (87) | (255) | (428) | (285) |
| Income taxes | (1,471) | (1,179) | (1,416) | (1,798) | (1,993) |
| Net income | $ 2,537 | $ 2,157 | $ 2,410 | $ 3,067 | $ 3,458 |
| PER COMMON SHARE | |||||
| Earnings per share - basic | $ 0.24 | $ 0.21 | $ 0.23 | $ 0.29 | $ 0.37 |
| Earnings per share - diluted | 0.24 | 0.20 | 0.23 | 0.29 | 0.33 |
| Common stock - per share dividends | 0.07 | 0.07 | 0.06 | 0.06 | 0.05 |
| Average Basic Shares Outstanding | 10,600,766 | 10,486,056 | 10,464,992 | 10,401,992 | 9,300,760 |
| Average Diluted Shares Outstanding | 10,641,782 | 10,535,313 | 10,519,472 | 10,483,420 | 10,451,897 |
| ALLOWANCE FOR LOAN LOSSES | |||||
| Beginning balance | $ 9,061 | $ 11,228 | $ 11,320 | $ 10,788 | $ 10,910 |
| Provision for loan losses | -- | -- | -- | -- | -- |
| Charge-offs | (12) | (2,252) | (137) | (279) | (554) |
| Recoveries | 164 | 85 | 45 | 811 | 432 |
| Net charge-offs | 152 | (2,167) | (92) | 532 | (122) |
| Ending balance | $ 9,213 | $ 9,061 | $ 11,228 | $ 11,320 | $ 10,788 |
| COMPOSITION OF RISK ASSETS | |||||
| Nonperforming loans: | |||||
| 90 days past due | $ 759 | $ 472 | $ 82 | $ -- | $ 351 |
| Nonaccrual loans | 1,718 | 1,740 | 2,814 | 2,889 | 3,070 |
| OREO | 302 | 302 | 95 | 95 | 95 |
| Nonperforming assets | 2,779 | 2,514 | 2,991 | 2,984 | 3,516 |
| ASSET QUALITY RATIOS | |||||
| Nonperforming assets to total assets | 0.27% | 0.25% | 0.30% | 0.29% | 0.33% |
| Nonperforming loans to total loans | 0.35 | 0.31 | 0.42 | 0.41 | 0.49 |
| Allowance for loan losses to total loans held for investment | 1.29 | 1.27 | 1.61 | 1.62 | 1.56 |
| Allowance for loan losses to nonperforming loans | 371.94 | 409.63 | 387.71 | 391.83 | 315.35 |
| Annualized net charge-offs to average loans held for investment | -0.09 | 1.25 | 0.05 | -0.31 | 0.07 |
| FINANCIAL RATIOS | |||||
| Return on average assets | 1.06% | 0.86% | 0.94% | 1.19% | 1.27% |
| Return on average stockholders' equity | 10.46 | 8.88 | 10.18 | 13.42 | 15.86 |
| Net interest margin (FTE) | 4.25 | 4.13 | 4.11 | 4.11 | 4.12 |
| Non-interest revenue/Total revenue | 56.1 | 57.3 | 60.4 | 66.4 | 59.2 |
| Efficiency - Consolidated | 82.1 | 85.5 | 84.8 | 83.0 | 79.1 |
| Efficiency - Bank only | 59.9 | 60.4 | 59.1 | 58.2 | 53.1 |
| Average equity to average assets | 10.13 | 9.73 | 9.27 | 8.88 | 8.00 |
| PERIOD END BALANCES (Amounts in thousands) | |||||
| Total loans held for sale | $ 92,839 | $ 99,718 | $ 120,435 | $ 166,586 | $ 242,457 |
| Total loans held for investment | 715,088 | 712,671 | 697,541 | 697,376 | 692,410 |
| Interest-earning assets | 956,160 | 952,981 | 950,760 | 960,481 | 994,946 |
| Assets | 1,022,719 | 1,016,700 | 1,011,947 | 1,021,399 | 1,054,975 |
| Total deposits | 894,170 | 893,118 | 886,128 | 898,686 | 931,485 |
| Other borrowings | 11,150 | 11,175 | 11,200 | 11,225 | 16,250 |
| Stockholders' equity | 99,859 | 97,519 | 95,593 | 93,147 | 90,737 |
| AVERAGE BALANCES (Amounts in thousands) | |||||
| Total loans held for sale | $ 70,856 | $ 104,104 | $ 136,660 | $ 200,733 | $ 316,189 |
| Total loans held for investment | 704,917 | 695,074 | 692,731 | 680,037 | 665,542 |
| Interest-earning assets | 910,929 | 935,059 | 946,575 | 964,872 | 1,033,838 |
| Assets | 970,815 | 990,734 | 1,013,932 | 1,032,345 | 1,105,933 |
| Total deposits | 848,969 | 869,113 | 882,553 | 908,229 | 865,146 |
| Other borrowings | 11,174 | 11,199 | 11,257 | 11,250 | 123,291 |
| Stockholders' equity | 98,374 | 96,415 | 93,958 | 91,638 | 88,430 |
| MORTGAGE PRODUCTION (Amounts in thousands) | |||||
| Dollar volume of mortgage loans closed | $ 271,233 | $ 349,695 | $ 478,304 | $ 607,189 | $ 542,235 |
| Percentage of refinance based on dollar volume | 19.1% | 20.3% | 22.6% | 39.2% | 56.8% |