CHESAPEAKE, Va., Oct. 18, 2012 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK) (Nasdaq:MNRKP), the bank holding company for Monarch Bank, reported their best all-time and third quarter profits in the Company's history. Third quarter 2012 highlights are:
- Record 3rd quarter net income of $3,763,403, up 76%
- Net income available to common shareholders was up 93%
- Basic earnings per share of $0.56, up 93%
- Total assets reach $1.1 billion
- Non-performing assets drop to 0.48% of total assets
- $788 million in mortgage loans closed
"The third quarter of 2012 was a fantastic period for Monarch in so many ways and represents our 15th quarter of record performance. Strong and profitable mortgage loan closings, improved credit costs, and strong net interest income drove our bottom line results," stated Brad E. Schwartz, Chief Executive Officer. "Our asset quality continues to improve with non-performing assets dropping below one-half of one percent, the lowest level of non-performing assets in four years. Monarch's conservative approach to risk, combined with our aggressive focus on smart and profitable growth, continues to drive our performance. Our recently announced expansion into the Williamsburg/Peninsula markets, the launch of Monarch Bank Private Wealth, and our affiliation with Raymond James Financial are all designed to further drive our franchise value and non-interest income growth."
Net income was $3,763,403 for the third quarter of 2012, up 76% from the same period in 2011, which was the Company's previous record third quarter with $2,137,230 in net income. The quarterly annualized return on average equity (ROE) was 18.24%, and the quarterly return on average assets (ROA) was 1.43%. Quarterly basic earnings per share were $0.56, compared to $0.29 per share in the same quarter of 2011, a 93% improvement. Diluted earnings per share were $0.44, compared to $0.25 per share in the same quarter of 2011, a 76% improvement.
For the first nine months of 2012 net income was a record $9,056,496 compared to $5,171,578 for the same period in 2011, a 75% increase. We have exceeded our 2011 annual net income by almost $2 million. The nine month annualized return on average equity (ROE) was 15.23%, and the annualized return on average assets (ROA) was 1.25%. Year to date basic earnings per share were $1.31 compared to $0.67 for the same period in 2011. Diluted earnings per share were $1.06 compared to $0.60 per share in the same quarter of 2011, a 77% improvement.
Total assets at September 30, 2012 increased to $1.11 billion driven primarily by growth in our mortgage loans held for sale portfolio. Loans held for investment grew $31 million year over year, while mortgage loans held for sale grew by $224 million. Deposits increased $170 million year over year, with strong 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 which has 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 drive down overall funding costs and protect our net interest margin.
"We are pleased to report net loan growth given the extremely competitive lending environment and our higher credit standards. Core deposits continue to grow, with checking and money market account growth leading the way. Checking accounts now represent over 30% of our core deposits," stated Neal Crawford, President of Monarch Bank. "We are also proud of recently being recognized as the second largest community bank in the entire Hampton Roads MSA by deposits."
Non-performing assets were 0.48%, which remains significantly below that of our local, state, and national peer group. This was down from 0.85% in the second quarter of 2012, 0.85% at year-end 2011, and 0.99% one year ago. Non-performing assets were $5.4 million, comprised of $4.1 million in non-accrual loans and $1.3 million in other real estate owned. There were only two residential properties held at quarter end in other real estate owned. The Company was aggressive in recognizing losses and disposing of non-performing assets during the quarter. Provision expense for the third quarter was $899 thousand compared to $1.7 million for the same period in 2011. The allowance for loan losses represents 1.74% of total loans held for investment and 265% of non-performing loans.
Average equity to average assets was 8.18% during 2012, down from 9.25% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank equaled 13.28%, 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, increased 22% or $1.9 million during the third quarter of 2012 compared to the same quarter in 2011. Our net interest margin was 4.30% compared to 4.51% in 2011, and was 4.38% year to date compared to 4.44% during the same period of 2011. The higher volume of lower rate mortgage loans held for sale, while providing interest income growth, contributed to the decline in this ratio during each period in 2012.
Non-interest income grew by $10.4 million during the third quarter over the previous year, while non-interest expenses grew by $10.0 million, reducing net overhead expense by $319 thousand for the third quarter 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. $788 million in mortgage loans were closed during the quarter, which was a new Company record. Home purchase mortgage loans represented 40% of total closed loans for the quarter.
"Not only did we surpass 2011's record $1.6 billion in volume of mortgage loan closings, but we are on track to hit the $2 billion mark in closings in October. As of September 30, 2012 we have closed 7,309 loans for a total volume of $1.94 billion," stated William T. Morrison, CEO of Monarch Mortgage. "The recent activities by the Federal Reserve Bank to reduce long-term rates drove our refinance volume higher in the third quarter. We are proud to have closed 45% of our year to date volume for new and existing home purchases."
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. Services are also provided through over fifty ATMs located in the South Hampton Roads area and the Outer Banks of 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 convertible 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.
| Consolidated Balance Sheets | |||
| Monarch Financial Holdings, Inc. and Subsidiaries | |||
| (In thousands) | |||
| Unaudited | |||
| September 30, | December 31, | September 30, | |
| 2012 | 2011 | 2011 | |
| ASSETS: | |||
| Cash and due from banks | $ 26,035 | $ 20,091 | $ 16,625 |
| Interest bearing bank balances | 641 | 1,467 | 575 |
| Federal funds sold | 8,191 | 10,188 | 12,199 |
| Investment securities, at fair value | 10,328 | 9,187 | 8,778 |
| Loans held for sale | 382,095 | 211,555 | 158,577 |
| Loans held for investment, net of unearned income | 627,256 | 607,612 | 596,333 |
| Less: allowance for loan losses | (10,890) | (9,930) | (10,301) |
| Net loans | 616,366 | 597,682 | 586,032 |
| Bank premises and equipment, net | 23,449 | 23,094 | 22,884 |
| Restricted equity securities, at cost | 8,346 | 6,421 | 6,177 |
| Bank owned life insurance | 7,132 | 6,946 | 6,886 |
| Goodwill | 775 | 775 | 775 |
| Intangible assets, net | 327 | 461 | 506 |
| Accrued interest receivable and other assets | 26,727 | 20,920 | 19,220 |
| Total assets | $ 1,110,412 | $ 908,787 | $ 839,234 |
| LIABILITIES: | |||
| Demand deposits---non-interest bearing | $ 182,080 | $ 133,855 | $ 125,481 |
| Demand deposits---interest bearing | 40,865 | 40,930 | 28,364 |
| Money market deposits | 313,985 | 269,750 | 281,250 |
| Savings deposits | 21,531 | 17,916 | 20,579 |
| Time deposits | 329,246 | 277,641 | 261,878 |
| Total deposits | 887,707 | 740,092 | 717,552 |
| FHLB borrowings | 105,027 | 70,927 | 24,400 |
| Short term borrowings | 5,000 | -- | -- |
| Trust preferred subordinated debt | 10,000 | 10,000 | 10,000 |
| Accrued interest payable and other liabilities | 17,148 | 10,921 | 11,434 |
| Total liabilities | 1,024,882 | 831,940 | 763,386 |
| STOCKHOLDERS' EQUITY: | |||
| Preferred stock, $5 par value, 1,185,300 shares authorized; none issued | -- | -- | -- |
| Noncumulative perpetual preferred stock, series B, liquidation value of $20.0 million, $5 par value; 800,000 shares authorized, 793,300 issued and outstanding at September 30, 2012, 800,000 issued and outstanding at December 31, 2011 and September 30, 2011 | 3,967 | 4,000 | 4,000 |
| Common stock, $5 par, 20,000,000 shares authorized; issued - 6,029,475 shares (includes nonvested shares of 87,550) at September 30, 2012 and 5,999,989 shares (includes nonvested shares of 83,550) at December 31, 2011 and 5,950,639 shares (includes nonvested shares of 4,500) at September 30, 2011 | 29,709 | 29,582 | 29,731 |
| Capital in excess of par value | 22,871 | 22,476 | 22,455 |
| Retained earnings | 27,586 | 20,538 | 19,449 |
| Accumulated other comprehensive loss | (218) | (363) | (401) |
| Total Monarch Financial Holdings, Inc. stockholders' equity | 83,915 | 76,233 | 75,234 |
| Noncontrolling interest | 1,615 | 614 | 614 |
| Total equity | 85,530 | 76,847 | 75,848 |
| Total liabilities and stockholders' equity | $ 1,110,412 | $ 908,787 | $ 839,234 |
| Consolidated Statements of Income | ||||
| Monarch Financial Holdings, Inc. and Subsidiaries | ||||
| Unaudited | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2012 | 2011 | 2012 | 2011 | |
| INTEREST INCOME: | ||||
| Interest on federal funds sold | $ 3,973 | $ 10,598 | $ 19,135 | $ 50,599 |
| Interest on other bank accounts | 4,713 | 1,624 | 13,159 | 2,728 |
| Dividends on equity securities | 38,500 | 37,499 | 140,974 | 120,947 |
| Interest on investment securities | 52,670 | 49,263 | 149,991 | 139,403 |
| Interest and fees on loans | 11,719,849 | 10,093,295 | 33,454,639 | 29,137,009 |
| Total interest income | 11,819,705 | 10,192,279 | 33,777,898 | 29,450,686 |
| INTEREST EXPENSE: | ||||
| Interest on deposits | 1,207,004 | 1,541,184 | 3,755,695 | 4,873,947 |
| Interest on trust preferred subordinated debt | 123,422 | 124,200 | 369,697 | 369,900 |
| Interest on other borrowings | 99,723 | 25,666 | 199,837 | 67,759 |
| Total interest expense | 1,430,149 | 1,691,050 | 4,325,229 | 5,311,606 |
| NET INTEREST INCOME | 10,389,556 | 8,501,229 | 29,452,669 | 24,139,080 |
| PROVISION FOR LOAN LOSSES | 898,598 | 1,738,821 | 4,313,677 | 3,839,971 |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 9,490,958 | 6,762,408 | 25,138,992 | 20,299,109 |
| NON-INTEREST INCOME: | ||||
| Mortgage banking income | 25,651,606 | 15,014,519 | 62,387,895 | 35,223,779 |
| Service charges and fees | 458,572 | 401,035 | 1,340,188 | 1,212,184 |
| Other income | 450,951 | 788,082 | 1,152,987 | 1,385,559 |
| Total non-interest income | 26,561,129 | 16,203,636 | 64,881,070 | 37,821,522 |
| NON-INTEREST EXPENSE: | ||||
| Salaries and employee benefits | 7,944,646 | 5,736,339 | 21,669,084 | 16,750,931 |
| Commissions and incentives | 14,501,486 | 7,912,804 | 33,586,352 | 16,946,009 |
| Occupancy and equipment | 1,827,114 | 1,492,494 | 5,141,293 | 4,265,407 |
| Loan expense | 2,226,109 | 1,811,906 | 6,025,563 | 4,762,926 |
| Marketing expense | 632,996 | 413,842 | 1,636,813 | 1,117,870 |
| Data processing | 360,284 | 305,063 | 1,069,616 | 888,911 |
| Other expenses | 2,317,353 | 2,098,964 | 6,068,856 | 5,226,989 |
| Total non-interest expense | 29,809,988 | 19,771,412 | 75,197,577 | 49,959,043 |
| INCOME BEFORE TAXES | 6,242,099 | 3,194,632 | 14,822,485 | 8,161,588 |
| Income tax provision | (2,111,207) | (969,166) | (5,089,042) | (2,650,097) |
| NET INCOME | 4,130,892 | 2,225,466 | 9,733,443 | 5,511,491 |
| Less: Net income attributable to noncontrolling interest | (367,489) | (88,236) | (676,947) | (339,913) |
| NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC | $ 3,763,403 | $ 2,137,230 | $ 9,056,496 | $ 5,171,578 |
| Preferred stock dividend and accretion of preferred stock discount | (386,734) | (390,000) | (1,166,734) | (1,170,000) |
| NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ 3,376,669 | $ 1,747,230 | $ 7,889,762 | $ 4,001,578 |
| NET INCOME PER COMMON SHARE: | ||||
| Basic | $ 0.56 | $ 0.29 | $ 1.31 | $ 0.67 |
| Diluted | $ 0.44 | $ 0.25 | $ 1.06 | $ 0.60 |
| Financial Highlights | ||||
| Monarch Financial Holdings, Inc. and Subsidiaries | ||||
| (Dollars in thousands, | ||||
| except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | ||
| 2012 | 2011 | 2012 | 2011 | |
| EARNINGS | ||||
| Interest income | $ 11,820 | $ 10,192 | $ 33,778 | $ 29,451 |
| Interest expense | 1,430 | 1,691 | 4,325 | 5,312 |
| Net interest income | 10,390 | 8,501 | 29,453 | 24,139 |
| Provision for loan losses | 899 | 1,739 | 4,314 | 3,840 |
| Noninterest income | 26,561 | 16,204 | 64,881 | 37,822 |
| Noninterest expense | 29,810 | 19,772 | 75,198 | 49,959 |
| Pre-tax net income | 6,242 | 3,194 | 14,822 | 8,162 |
| Minority interest in net income | 368 | 88 | 677 | 340 |
| Income taxes | 2,111 | 969 | 5,089 | 2,650 |
| Net income | 3,763 | 2,137 | 9,056 | 5,172 |
| PER COMMON SHARE | ||||
| Earnings per share - basic | $ 0.56 | $ 0.29 | $ 1.31 | $ 0.67 |
| Earnings per share - diluted | 0.44 | 0.25 | 1.06 | 0.60 |
| Common stock - per share dividends | 0.05 | -- | 0.14 | 0.08 |
| Book value | 10.63 | 9.28 | ||
| Tangible book value | 10.45 | 9.06 | ||
| Closing market price (adjusted) | 9.75 | 6.51 | ||
| Average Basic Shares Outstanding | 6,029,475 | 5,953,747 | 6,000,502 | 5,962,559 |
| Average Diluted Shares Outstanding | 8,546,071 | 8,657,230 | 8,523,509 | 8,670,440 |
| FINANCIAL RATIOS | ||||
| Return on average assets | 1.43% | 1.04% | 1.25% | 0.88% |
| Return on average stockholders' equity | 18.24 | 11.39 | 15.23 | 9.46 |
| Net interest margin (FTE) | 4.30 | 4.51 | 4.38 | 4.44 |
| Non-interest revenue/Total revenue | 69.2 | 61.4 | 65.8 | 56.2 |
| Efficiency - Consolidated | 80.6 | 79.9 | 79.6 | 80.4 |
| Efficiency - Bank only | 52.6 | 54.6 | 53.2 | 56.6 |
| Average equity to average assets | 7.85 | 9.13 | 8.18 | 9.25 |
| Total risk based capital - Consolidated | 12.55 | 13.43 | ||
| Total risk based capital - Bank only | 13.28 | 12.94 | ||
| PERIOD END BALANCES | ||||
| Total loans held for sale | $ 382,095 | $ 158,577 | ||
| Total loans held for investment | 627,256 | 596,333 | ||
| Interest-earning assets | 1,039,743 | 783,415 | ||
| Assets | 1,110,412 | 838,884 | ||
| Total deposits | 887,707 | 717,552 | ||
| Other borrowings | 120,027 | 34,400 | ||
| Stockholders' equity | 83,915 | 75,234 | ||
| AVERAGE BALANCES | ||||
| Total loans held for sale | $ 327,378 | $ 118,011 | $ 267,261 | $ 108,944 |
| Total loans held for investment | 616,728 | 592,590 | 610,471 | 575,230 |
| Interest-earning assets | 969,687 | 757,481 | 906,354 | 736,012 |
| Assets | 1,044,966 | 815,178 | 971,361 | 790,666 |
| Total deposits | 890,772 | 709,374 | 837,432 | 689,317 |
| Other borrowings | 46,320 | 15,471 | 33,759 | 12,998 |
| Stockholders' equity | 82,070 | 74,408 | 79,440 | 73,135 |
| ALLOWANCE FOR LOAN LOSSES | ||||
| Beginning balance | $ 10,724 | $ 9,480 | $ 9,930 | $ 9,038 |
| Provision for loan losses | 899 | 1,739 | 4,314 | 3,840 |
| Charge-offs | 823 | 958 | 3,720 | 3,093 |
| Recoveries | 90 | 40 | 366 | 516 |
| Ending balance | 10,890 | 10,301 | 10,890 | 10,301 |
| Net charge-off loans to average loans | 0.12 | 0.15 | 0.55 | 0.45 |
| ASSET QUALITY RATIOS | ||||
| Nonperforming assets to total assets | 0.48% | 0.99% | ||
| Allowance for loan losses to total loans held for investment | 1.74 | 1.73 | ||
| Allowance for loan losses to nonperforming loans | 265.16 | 165.56 | ||
| COMPOSITION OF RISK ASSETS | ||||
| Nonperforming loans: | ||||
| 90 days past due | $ -- | $ 75 | ||
| Nonaccrual & Restructured debt | 4,107 | 6,147 | ||
| OREO | 1,250 | 2,106 | ||
| Nonperforming assets | 5,357 | 8,328 | ||