Monarch Financial Reports Financial Performance and Declares Cash Dividend

        Print
| Source: Monarch Financial Holdings, Inc.

CHESAPEAKE, Va., July 24, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported second quarter profitability and continued strong financial performance. The Board of Directors announced a quarterly common stock cash dividend of $0.08 per common share, payable on August 29, 2014, to shareholders of record on August 8, 2014.

Second quarter 2014 highlights are:

  • 2nd quarter net income of $3,183,574
  • Return on Equity of 12.63%
  • Return on Assets of 1.29%
  • Diluted earnings per share of $0.30
  • Equity Capital exceeds $100 million for first time
  • Non-performing assets at 0.36% of total assets
  • $447 million in mortgage loans closed with 85% purchase

Year to date 2014 highlights are:

  • Net income of $5,720,839, for a return on equity of 11.57%
  • Diluted earnings per share of $0.54
  • $718 million in mortgage loans closed with 84% purchase

"We are pleased to report our best quarter in the past year. Our efforts to structure the company for the future resulted in improved profitability for all of our business segments. Higher mortgage loan closings, non-existent credit costs, expense management, and a strong net interest margin continued to drive our bottom line results," stated Brad E. Schwartz, Chief Executive Officer. "Our challenge going forward is growing our loan portfolio with our disciplined style for both credit quality and interest rate risk, in an otherwise undisciplined market. We are up to this challenge."

Net income was $3,183,574 for the second quarter of 2014, a record for the past five quarters, and up 3.8% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 12.63%, and the quarterly return on average assets (ROA) was 1.29%. Quarterly diluted earnings per share increased to $0.30, compared to $0.24 in the previous quarter and $0.29 for the same quarter in 2013.

Net income was $5,720,839 for the first six months of 2014. The annualized return on average equity (ROE) was 11.57%, and the quarterly return on average assets (ROA) was 1.18%. Diluted earnings per share were $0.54, compared to $0.62 for the same period in 2013. 

Total assets at June 30, 2014 were $1.0 billion, with both loans held for investment and deposits slightly down since year-end 2013.  The decline in our loans held for investment portfolio was due to several large payoffs, with $95 million in new loans booked in the first six months of the year. This decline was more than offset by growth in our mortgage loans held for sale portfolio driven by stronger mortgage loan closings. Funding continues to shift to a higher level of demand deposits and money market accounts, with 33% of our total deposit mix now in demand deposits. Demand deposit balances are at a record high. Our funding mix should enhance and protect the net interest margin when rates are predicted to rise in the next 12-24 months.

"Our loan pipeline remains robust and we continue to attract top quality clients for their commercial, construction, commercial real estate, and mortgage loan needs. Our cash management and retail deposit teams continue to perform at a high level, with almost 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 0.36%, which remain significantly below that of our local, state, and national peer group. Non-performing assets were $3.7 million which was up slightly from the previous quarter and the same period in 2013. Non-performing assets were comprised of $3.0 million in non-accrual loans, $499 thousand in loans more than 90 days past due, and $144 thousand in one foreclosed property. Net recoveries for the year were $9 thousand and the allowance for loan losses represents 1.30% of loans held for investment and 257% of non-performing loans.

During the second quarter the Company's equity capital exceeded $100 million for the first time in its 15 year history. The Board of Directors announced a quarterly common stock cash dividend of $0.08 per common share, payable on August 29, 2014, to shareholders of record on August 8, 2014. Even with two increases in the quarterly cash dividend in the past year, tangible book value per share has increased 8.2% to $9.59, with the stock now trading at 122% of book value. We consider our stock to be undervalued.

Capital strength continues to grow by every metric. Average equity to average assets improved to 10.18%, up from 8.88% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 14.29%, 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, our number one driver of profitability, declined 2.1% or $211 thousand during the second quarter of 2014 compared to the same quarter in 2013 driven by reduced balances in mortgage loans held for sale.  Mortgage loans held for sale interest income declined $499 thousand compared to the same quarter of 2013, which was partially offset by growth in loans held for investment, investment income and a reduction in funding costs. The net interest margin was 4.18% for the second quarter, which was down from the previous quarter of 4.25% but up from 4.11% in the same quarter in 2013.

Non-interest income declined 14.7% or $3.2 million from the previous year driven by reduced revenues from mortgage loans sold and related title insurance fees. Investment and insurance revenue increased 37% compared to the previous year due to the continued growth of Monarch Bank Private Wealth. Mortgage revenue continues to be the number one driver of non-interest income. We closed $447 million in mortgage loans (85% purchase) during the second quarter of 2014 compared to $271 million (81% purchase) in the first quarter of 2014, a significant increase. 

"The month of June was the best month in our company's history for purchase mortgage closings, and our realtor and builder focus drove our higher second quarter volume. We are a leaner and more nimble mortgage operation that never stopped investing in our training, technology, marketing or our people when volumes were low. This formula should continue to differentiate us in our markets and lead to continued market share growth," stated William T. Morrison, CEO of Monarch Mortgage.

Total non-interest expense declined 12.1% or $3.2 million during the second quarter due to reduced commissions and loan expenses. Net overhead, the difference between non-interest income and non-interest expense, improved by $10 thousand. To further improve our efficiency we have decided to close one banking office and one mortgage office in July, and soon plan to announce the relocation of two banking offices to improve our footprint and growth opportunities. These initiatives and many others have allowed us to improve our technology delivery, meet growing compliance burdens, and meet our client service expectations all while keeping our expense structure in line with revenue growth.

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), 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,
2014
March 31, 
2014
December 31,
2013
September 30,
2013
June 30, 
2013
ASSETS:          
Cash and due from banks  $ 19,661  $ 18,510  $ 18,971  $ 21,016  $ 19,050
Interest bearing bank balances  37,166  37,033  31,955  24,504  15,195
Federal funds sold  29,761  84,232  53,985  83,454  56,972
           
Investment securities, at fair value  23,773  23,197  48,822  16,973  16,573
           
Loans held for sale  156,584  92,839  99,718  120,435  166,586
           
Loans held for investment, net of unearned income  700,159  715,088  712,671  697,541  697,376
Less: allowance for loan losses  (9,070)  (9,213)  (9,061)  (11,228)  (11,320)
Net loans  691,089  705,875  703,610  686,313  686,056
           
Bank premises and equipment, net  31,407  29,902  28,882  28,454  28,101
Restricted equity securities, at cost  3,169  3,156  3,683  3,666  3,792
Bank owned life insurance  7,526  7,467  7,409  7,351  7,290
Goodwill  775  775  775  775  775
Intangible assets, net  15  60  104  149  194
Accrued interest receivable and other assets  22,973  19,673  18,786  18,857  20,815
           
Total assets  $ 1,023,899  $ 1,022,719  $ 1,016,700  $ 1,011,947  $ 1,021,399
           
LIABILITIES:          
Demand deposits---non-interest bearing  $ 240,348  $ 221,357  $ 206,891  $ 222,079  $ 218,880
Demand deposits---interest bearing  51,563  55,949  55,528  48,244  52,101
Money market deposits  377,096  367,590  374,462  364,488  341,042
Savings deposits  24,539  24,327  22,137  22,665  22,172
Time deposits  197,747  224,947  234,100  228,652  264,491
Total deposits  891,293  894,170  893,118  886,128  898,686
           
FHLB borrowings  1,125  1,150  1,175  1,200  1,225
Short Term borrowings  --  --  --  --  --
Trust preferred subordinated debt  10,000  10,000  10,000  10,000  10,000
Accrued interest payable and other liabilities  18,650  17,422  14,661  17,855  16,733
Total liabilities  921,068  922,742  918,954  915,183  926,644
           
STOCKHOLDERS' EQUITY:          
Common stock  51,624  51,584  51,432  51,230  50,873
Capital in excess of par value  7,675  7,357  7,069  6,755  6,521
Retained earnings  43,566  41,232  39,437  38,014  36,233
Accumulated other comprehensive loss  (159)  (314)  (419)  (406)  (480)
Total Monarch Financial Holdings, Inc. stockholders' equity  102,706  99,859  97,519  95,593  93,147
Noncontrolling interest  125  118  227  1,171  1,608
Total equity  102,831  99,977  97,746  96,764  94,755
           
Total liabilities and stockholders' equity  $ 1,023,899  $ 1,022,719  $ 1,016,700  $ 1,011,947  $ 1,021,399
           
Common shares outstanding at period end  10,624,668  10,619,444  10,502,323  10,480,023  10,408,544
Nonvested shares of common stock included in commons shares outstanding   299,910  302,710  215,960  233,960  233,960
           
Book value per common share at period end (1)  $ 9.67  $ 9.40  $ 9.29  $ 9.12  $ 8.95
Tangible book value per common share at period end (2)  $ 9.59  $ 9.33  $ 9.20  $ 9.03  $ 8.86
Closing market price  $ 11.72  $ 12.26  $ 12.31  $ 11.72  $ 10.83
           
Total risk based capital - Consolidated company 14.29% 14.27% 13.91% 13.68% 13.46%
Total risk based capital - Bank 14.31% 14.30% 13.95% 13.83% 13.66%
           
(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
June 30,
Six Months Ended
June 30,
  2014 2013 2014 2013
INTEREST INCOME:        
Interest on federal funds sold  $ 24,179  $ 25,312  $ 64,557  $ 30,470
Interest on other bank accounts  54,905  9,952  90,937  18,094
Dividends on equity securities  22,410  69,225  52,410  143,660
Interest on investment securities  91,929  57,302  167,978  114,871
Interest on loans held for sale  1,274,498  1,773,692  2,047,230  4,507,264
Interest and fees on loans held for investment  9,089,071  9,040,004  18,567,963  18,014,998
Total interest income  10,556,992  10,975,487  20,991,075  22,829,357
INTEREST EXPENSE:        
Interest on deposits  839,303  1,020,913  1,673,716  2,050,375
Interest on trust preferred subordinated debt  123,359  124,200  245,696  243,242
Interest on other borrowings  14,224  38,810  28,586  327,988
Total interest expense  976,886  1,183,923  1,947,998  2,621,605
NET INTEREST INCOME  9,580,106  9,791,564  19,043,077  20,207,752
PROVISION FOR LOAN LOSSES  --  --  --  --
         
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  9,580,106  9,791,564  19,043,077  20,207,752
         
NON-INTEREST INCOME:        
Mortgage banking income  17,369,228  20,572,388  29,571,390  36,738,324
Service charges and fees  538,579  477,660  1,008,791  928,814
Title income  167,454  232,423  272,488  486,774
Investment and insurance income  335,887  245,524  781,359  452,460
Other income  87,725  146,276  173,496  248,917
Total non-interest income  18,498,873  21,674,271  31,807,524  38,855,289
NON-INTEREST EXPENSE:        
Salaries and employee benefits  8,492,446  8,502,755  16,764,007  16,707,830
Commissions and incentives  6,770,022  9,703,820  10,780,986  16,769,296
Occupancy and equipment  2,395,088  2,130,445  4,671,791  3,996,963
Loan expense  2,060,570  2,630,295  3,423,711  4,460,732
Marketing expense  797,908  744,646  1,319,749  1,257,604
Data processing  476,806  435,771  956,084  836,729
Telephone  293,451  308,138  604,588  563,062
Other expenses  1,720,693  1,717,014  3,232,701  3,441,289
Total non-interest expense  23,006,984  26,172,884  41,753,617  48,033,505
         
INCOME BEFORE TAXES  5,071,995  5,292,951  9,096,984  11,029,536
Income tax provision  (1,767,500)  (1,797,773)  (3,238,740)  (3,791,326)
NET INCOME  3,304,495  3,495,178  5,858,244  7,238,210
         
Less: Net income attributable to noncontrolling interest  (120,921)  (428,540)  (137,405)  (713,443)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC.  $3,183,574  $3,066,638  $5,720,839  $ 6,524,767
         
NET INCOME PER COMMON SHARE:         
         
Basic  $ 0.30  $ 0.29  $ 0.54  $ 0.66
Diluted  $ 0.30  $ 0.29  $ 0.54  $ 0.62
         
Weighted average basic shares outstanding  10,620,869  10,401,992  10,596,786  9,854,418
Weighted average diluted shares outstanding  10,660,217  10,483,420  10,636,968  10,467,707
         
Return on average assets 1.29% 1.19% 1.18% 1.23%
Return on average stockholders' equity 12.63% 13.42% 11.57% 14.61%
           
Financial Highlights          
Monarch Financial Holdings, Inc. and Subsidiaries        
           
(Dollars in thousands, For the Quarter Ended
 except per share data) June 30, March 31,  December 31, September 30,  June 30,
  2014 2014 2013 2013 2013
EARNINGS          
Interest income  $ 10,557  $ 10,434  $ 10,677  $ 10,842  $ 10,976
Interest expense  (977)  (971)  (1,044)  (1,121)  (1,184)
Net interest income  9,580  9,463  9,633  9,721  9,792
Provision for loan losses  --   --   --   --   -- 
Noninterest income - mortgage banking income  17,369  12,202  13,277  15,657  20,572
Noninterest income - other  1,130  1,106  1,075  1,018  1,102
Noninterest expense  (23,007)  (18,747)  (20,562)  (22,315)  (26,173)
Pre-tax net income  5,072  4,024  3,423  4,081  5,293
Minority interest in net income   (121)  (16)  (87)  (255)  (428)
Income taxes   (1,767)  (1,471)  (1,179)  (1,416)  (1,798)
Net income   $ 3,184  $ 2,537  $ 2,157  $ 2,410  $ 3,067
           
PER COMMON SHARE           
Earnings per share - basic  $ 0.30  $ 0.24  $ 0.21  $ 0.23  $ 0.29
Earnings per share - diluted  0.30  0.24  0.20  0.23  0.29
Common stock - per share dividends  0.08  0.07  0.07  0.06  0.06
Average Basic Shares Outstanding 10,620,869 10,600,766 10,486,056 10,464,992 10,401,992
Average Diluted Shares Outstanding 10,660,217 10,641,782 10,535,313 10,519,472 10,483,420
           
ALLOWANCE FOR LOAN LOSSES          
Beginning balance  $ 9,213  $ 9,061  $ 11,228  $ 11,320  $ 10,788
Provision for loan losses  --   --   --   --   -- 
 Charge-offs  (184)  (12)  (2,252)  (137)  (279)
 Recoveries  41  164  85  45  811
Net charge-offs  (143)  152  (2,167)  (92)  532
Ending balance  $ 9,070  $ 9,213  $ 9,061  $ 11,228  $ 11,320
           
COMPOSITION OF RISK ASSETS          
Nonperforming loans:          
 90 days past due  $ 499  $ 759  $ 472  $ 82  $ --
 Nonaccrual loans 3,028 1,718 1,740 2,814 2,889
OREO 144 302 302 95 95
Nonperforming assets  3,671  2,779  2,514  2,991  2,984
           
           
ASSET QUALITY RATIOS          
Nonperforming assets to total assets 0.36 % 0.27 % 0.25 % 0.30 % 0.29 %
Nonperforming loans to total loans 0.50 0.35 0.31 0.42 0.41
Allowance for loan losses to total loans held for investment 1.30 1.29 1.27 1.61 1.62
Allowance for loan losses to nonperforming loans 257.16 371.94 409.63 387.71 391.83
Annualized net charge-offs to average loans held for investment 0.08 -0.09 1.25 0.05 -0.31
           
FINANCIAL RATIOS          
Return on average assets  1.29 %  1.06 %  0.86 %  0.94 %  1.19 %
Return on average stockholders' equity  12.63  10.46  8.88  10.18  13.42
Net interest margin (FTE)  4.18  4.25  4.13  4.11  4.11
Non-interest revenue/Total revenue  63.7  56.1  57.3  60.4  66.4
Efficiency - Consolidated  81.8  82.1  85.5  84.8  83.0
Efficiency - Bank only  63.9  59.9  60.4  59.1  58.2
Average equity to average assets  10.18  10.13  9.73  9.27  8.88
           
PERIOD END BALANCES (Amounts in thousands)          
Total loans held for sale  $ 156,584  $ 92,839  $ 99,718  $ 120,435  $ 166,586
Total loans held for investment  700,159  715,088  712,671  697,541  697,376
Interest-earning assets  949,872  956,160  952,981  950,760  960,481
Assets  1,023,899  1,022,719  1,016,700  1,011,947  1,021,399
Total deposits  891,293  894,170  893,118  886,128  898,686
Other borrowings  11,125  11,150  11,175  11,200  11,225
Stockholders' equity  102,706  99,859  97,519  95,593  93,147
           
AVERAGE BALANCES (Amounts in thousands)          
Total loans held for sale  $ 116,851  $ 70,856  $ 104,104  $ 136,660  $ 200,733
Total loans held for investment  698,851  704,917  695,074  692,731  680,037
Interest-earning assets  927,552  910,929  935,059  946,575  964,872
Assets  993,003  970,815  990,734  1,013,932  1,032,345
Total deposits  867,217  848,969  869,113  882,553  908,229
Other borrowings  11,150  11,174  11,199  11,257  11,250
Stockholders' equity  101,092  98,374  96,415  93,958  91,638
           
MORTGAGE PRODUCTION (Amounts in thousands)          
Dollar volume of mortgage loans closed  $ 446,863  $ 271,233  $ 349,695  $ 478,304  $ 607,189
Percentage of refinance based on dollar volume  15.0 %  19.1 %  20.3 %  22.6 %  39.2 %
Brad E. Schwartz - (757) 389-5111, www.monarchbank.com