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 % | |||||