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.
 
Consolidated Balance Sheets
Monarch Financial Holdings, Inc. and Subsidiaries
(In thousands)
Unaudited
     
  December 31,  December 31,
  2012 2011
ASSETS:    
Cash and due from banks  $ 39,888  $ 20,091
Interest bearing bank balances  2,143  1,467
Federal funds sold  15,744  10,188
     
Investment securities, at fair value  14,634  9,187
     
Loans held for sale  419,075  211,555
     
Loans held for investment, net of unearned income  661,094  607,612
Less: allowance for loan losses  (10,910)  (9,930)
Net loans  650,184  597,682
     
Bank premises and equipment, net  25,448  23,094
Restricted equity securities, at cost  12,363  6,421
Bank owned life insurance  7,173  6,946
Goodwill  775  775
Intangible assets, net  283  461
Accrued interest receivable and other assets  27,868  20,920
     
Total assets  $ 1,215,578  $ 908,787
     
LIABILITIES:    
Demand deposits--non-interest bearing  $ 190,120  $ 133,855
Demand deposits--interest bearing  65,369  40,930
Money market deposits  335,899  269,750
Savings deposits  22,127  17,916
Time deposits  288,267  277,641
Total deposits  901,782  740,092
     
FHLB borrowings  194,299  70,927
Short term borrowings  5,000  --
Trust preferred subordinated debt  10,000  10,000
Accrued interest payable and other liabilities  15,550  10,924
Total liabilities  1,126,631  831,943
     
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, 481,123 issued and outstanding at December 31, 2012, 800,000 issued and outstanding at December 31, 2011  2,406  4,000
Common stock, $5 par, 20,000,000 shares authorized; issued -- 8,557,939 shares (includes nonvested shares of 231,460) at December 31, 2012 and 7,199,608 shares (includes nonvested shares of 100,260) at December 31, 2011 (1)  41,632  35,497
Capital in excess of par value  12,718  16,558
Retained earnings  30,786  20,538
Accumulated other comprehensive loss  (200)  (363)
Total Monarch Financial Holdings, Inc. stockholders' equity  87,342  76,230
Noncontrolling interest  1,605  614
Total equity  88,947  76,844
     
Total liabilities and stockholders' equity  $ 1,215,578  $ 908,787
     
(1) All share information has been adjusted to reflect the 6 for 5 stock split December 7, 2012.
 
 
Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
  Three Months Ended Year Ended
  December 31, December 31,
  2012 2011 2012 2011
INTEREST INCOME:        
Interest on federal funds sold  $ 4,208  $ 2,657  $ 23,343  $ 53,256
Interest on other bank accounts  8,279  3,320  21,438  6,048
Dividends on equity securities  50,422  36,039  191,396  156,986
Interest on investment securities  50,294  43,885  200,285  183,288
Interest and fees on loans  12,577,364  10,882,740  46,032,003  40,019,749
Total interest income  12,690,567  10,968,641  46,468,465  40,419,327
INTEREST EXPENSE:        
Interest on deposits  1,206,595  1,324,133  4,962,290  6,198,080
Interest on trust preferred subordinated debt  125,215  122,850  494,912  492,750
Interest on other borrowings  259,195  37,866  459,032  105,625
Total interest expense  1,591,005  1,484,849  5,916,234  6,796,455
NET INTEREST INCOME  11,099,562  9,483,792  40,552,231  33,622,872
PROVISION FOR LOAN LOSSES  517,456  2,479,916  4,831,133  6,319,887
         
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  10,582,106  7,003,876  35,721,098  27,302,985
         
NON-INTEREST INCOME:        
Mortgage banking income  23,825,701  16,138,685  86,213,596  51,362,464
Service charges and fees  489,830  418,232  1,830,018  1,630,416
Other income  564,205  366,999  1,717,192  1,752,558
Total non-interest income  24,879,736  16,923,916  89,760,806  54,745,438
NON-INTEREST EXPENSE:        
Salaries and employee benefits  8,199,075  6,485,192  29,868,159  23,236,123
Commissions and incentives  12,986,177  8,146,992  46,572,529  25,093,001
Occupancy and equipment  1,948,464  1,646,251  7,089,757  5,911,658
Loan expense  2,461,957  2,022,888  8,487,520  6,785,814
Marketing expense  775,861  423,819  2,412,674  1,541,689
Data processing  455,784  308,174  1,525,400  1,197,085
Other expenses  2,230,718  2,052,007  8,299,574  7,278,996
Total non-interest expense  29,058,036  21,085,323  104,255,613  71,044,366
         
INCOME BEFORE TAXES  6,403,806  2,842,469  21,226,291  11,004,057
Income tax provision  (2,337,743)  (768,595)  (7,426,785)  (3,418,692)
NET INCOME  4,066,063  2,073,874  13,799,506  7,585,365
         
Less: Net income attributable to noncontrolling interest  (297,690)  (119,840)  (974,637)  (459,753)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC  $ 3,768,373  $ 1,954,034  $12,824,869  $ 7,125,612
         
Preferred stock dividend and accretion of preferred stock discount  (237,943)  (390,000)  (1,402,532)  (1,560,000)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS  $ 3,530,430  $ 1,564,034  $11,422,337  $ 5,565,612
NET INCOME PER COMMON SHARE:         
Basic (1)  $ 0.44  $ 0.22  $ 1.54  $ 0.78
Diluted (1)  $ 0.37  $ 0.19  $ 1.25  $ 0.70
         
(1) All share information has been adjusted to reflect the 6 for 5 stock split December 7, 2012.
 
 
Financial Highlights
Monarch Financial Holdings, Inc. and Subsidiaries
 
(Dollars in thousands,        
except per share data) Three Months Ended December 31,  Year Ended December 31, 
  2012 2011 2012 2011
EARNINGS        
Interest income  $ 12,690  $ 10,969  $ 46,468  $ 40,420
Interest expense 1,591 1,485 5,916 6,797
Net interest income 11,099 9,484 40,552 33,623
Provision for loan losses 517 2,480 4,831 6,320
Noninterest income 24,880 16,924 89,761 54,746
Noninterest expense 29,058 21,085 104,256 71,044
Pre-tax net income 6,404 2,843 21,226 11,005
Minority interest in net income  298 120 975 460
Income taxes  2,338 769 7,426 3,419
Net income  3,768 1,954 12,825 7,126
         
PER COMMON SHARE (1)        
Earnings per share - basic  $ 0.44  $ 0.22  $ 1.54  $ 0.78
Earnings per share - diluted  0.37  0.19  1.26  0.70
Common stock - per share dividends  0.05  0.04  0.19  0.16
Book value      8.80  7.81
Tangible book value      8.68  7.64
Closing market price (adjusted)      8.22  6.41
Average Basic Shares Outstanding 7,980,259 7,124,202 7,400,443 7,147,290
Average Diluted Shares Outstanding 10,315,360 10,139,520 10,262,775 10,165,105
         
FINANCIAL RATIOS        
Return on average assets  1.28%  0.88%  1.26%  0.89%
Return on average stockholders' equity  17.51  10.26  15.84  9.66
Net interest margin (FTE)  4.07  4.69  4.29  4.51
Non-interest revenue/Total revenue  66.3  60.7  65.9  57.5
Efficiency - Consolidated  80.4  79.7  79.8  80.2
Efficiency - Bank only  54.5  49.0  53.6  54.5
Average equity to average assets  7.29  8.57  7.92  9.16
Total risk based capital - Consolidated      12.05  12.43
Total risk based capital - Bank only      12.73  11.97
         
PERIOD END BALANCES        
Total loans held for sale      $ 419,075  $ 211,555
Total loans held for investment      661,094  607,612
Interest-earning assets      1,128,656  849,148
Assets      1,215,578  908,787
Total deposits      901,782  740,092
Other borrowings      209,299  80,927
Stockholders' equity      88,947  76,844
         
AVERAGE BALANCES        
Total loans held for sale  $ 423,354  $ 189,622  $ 306,497  $ 129,279
Total loans held for investment  637,774  599,890  617,334  581,445
Interest-earning assets  1,092,332  810,881  953,102  754,883
Assets  1,173,820  881,794  1,021,836  804,842
Total deposits  945,297  749,402  865,333  704,461
Other borrowings  114,140  27,212  53,965  17,329
Stockholders' equity  85,584  75,594  80,984  73,755
         
ALLOWANCE FOR LOAN LOSSES        
Beginning balance  $ 10,890  $ 10,301  $ 9,930  $ 9,038
Provision for loan losses  517  2,480  4,831  6,320
Charge-offs  622  3,034  4,343  6,127
Recoveries  125  183  492  699
Ending balance  10,910  9,930  10,910  9,930
Net charge-off loans to average loans 0.08 0.48 0.62 0.93
         
ASSET QUALITY RATIOS        
Nonperforming assets to total assets     0.30% 0.85%
Allowance for loan losses to total loans held for investment   1.65 1.63
Allowance for loan losses to nonperforming loans   300.06 225.94
         
COMPOSITION OF RISK ASSETS        
Nonperforming loans:        
90 days past due      $ 153  $ 178
Nonaccrual & Restructured debt     3,483 4,217
OREO     0 3,369
Nonperforming assets      3,636  7,764
         
(1) All share information has been adjusted to reflect the 6 for 5 stock split December 7, 2012.
CONTACT: Brad E. Schwartz - (757) 389-5111, www.monarchbank.com

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