Monarch Financial Reports Record First Quarter Financial Performance

CHESAPEAKE, Va., April 18, 2013 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported record first quarter profitability and continued loan growth. First quarter 2013 highlights are:
  • Record 1st quarter net income of $3,458,129, up 37%
  • Net income available to common shareholders up 63%
  • Basic earnings per share of $0.37 up 23%
  • Non-performing assets at 0.34% of total assets
  • $542 million in mortgage loans closed

"We begin 2013 with our 17 th consecutive quarter of record year over year profitability. Solid mortgage loan closings, improved credit costs, loan and deposit growth, and strong net interest income continued to drive our bottom line results. These results, coupled with the conversion of our preferred shares to common stock, increased the net income available to our common shareholders and our earnings per share growth," stated Brad E. Schwartz, Chief Executive Officer.

Net income was $3,458,129 for the first quarter of 2013, up 37% from the same period in 2012. The quarterly annualized return on average equity (ROE) was 15.86%, and the quarterly return on average assets (ROA) was 1.27%. Quarterly diluted earnings per share were $0.33, compared to $0.25 per share in the same quarter of 2012, a 32% improvement.

Total assets at March 31, 2012 grew $117 million on an annual basis driven primarily by growth in our loans held for investment portfolio of $94 million, a 15.7% annual growth rate. Deposits grew by $120 million on an annual basis, with $66 million in demand deposit growth and $41 million in money market and savings account growth. Total assets declined from their record high at December 31, 2012 to $1.05 billion due to a decline in mortgage loans held for sale, which was partially offset by an increase in loans held for investment.

"Our talented team of bankers and their support teams continue to lend in the community. Our ability and willingness to lend to credit worthy clients over the past several years, when others were not, is beginning to pay big dividends for our shareholders. Loan demand continues to improve each quarter and our loan pipeline is looking strong," stated Neal Crawford, President of Monarch Bank.

Non-performing assets to total assets were 0.34%, which remains significantly below that of our local, state, and national peer group. Non-performing assets were $3.6 million which was down from $11.3 million or 1.20% of total assets one year prior. Non-performing assets were comprised of $3.1 million in non-accrual loans, $351 thousand in loans more than 90 days past due, and one $95 thousand foreclosed property. Net charge-offs were $122 thousand and the allowance for loan losses represents 1.56% of loans held for investment and 308% of non-performing loans.

Average equity to average assets improved to 8.00% during 2013, up from 7.29% at December 31, 2012. Total risk-based capital to risk weighted assets at Monarch Bank equaled 13.78%, 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. There were no shares of preferred stock outstanding at March 31, 2013 which reduced the need for any additional preferred stock dividends during the quarter.

Net interest income, our number one driver of profitability, increased 9.6% or $909 thousand during the first quarter of 2013 compared to the same quarter in 2012. The net interest margin increased to 4.12% for the first quarter, which was up from the previous quarter of 4.02%. The lower average volume of lower yielding mortgage loans held for sale drove the net interest margin higher in the first quarter. Non-interest income was flat year over year and down from the fourth quarter due to reduced mortgage loan production. Total non-interest expenses grew by $979 thousand during the first quarter due to expenses related to our market expansion to the Peninsula and the addition of Monarch Bank Private Wealth, which was partially offset by a reduction in mortgage-related commissions and incentives. Mortgage revenue continues to be the number one driver of non-interest income. We closed $542 million in mortgage loans during the first quarter of 2013 compared to $547 million in the first quarter of 2012, and $762 million in the fourth quarter of 2012.

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".

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,
  2013 2012 2012 2012 2012
ASSETS:          
Cash and due from banks  $ 17,414  $ 27,364  $ 14,633  $ 16,263  $ 15,515
Interest bearing bank balances  14,099  14,667  12,043  4,295  21,536
Federal funds sold  21,937  15,744  8,191  6,142  1,644
           
Investment securities, at fair value  16,493  14,634  10,328  10,820  8,841
           
Loans held for sale  242,457  419,075  382,095  282,014  243,179
           
Loans held for investment, net of unearned income  692,410  661,094  627,256  626,464  598,358
Less: allowance for loan losses  (10,788)  (10,910)  (10,890)  (10,724)  (10,400)
Net loans  681,622  650,184  616,366  615,740  587,958
           
Bank premises and equipment, net  27,507  25,448  23,449  23,210  23,086
Restricted equity securities, at cost  3,781  12,363  8,346  4,885  7,242
Bank owned life insurance  7,231  7,173  7,132  7,069  7,007
Goodwill  775  775  775  775  775
Intangible assets, net  238  283  327  372  417
Accrued interest receivable and other assets  21,421  27,868  26,727  23,649  20,621
           
Total assets  $ 1,054,975  $ 1,215,578  $ 1,110,412  $ 995,234  $ 937,821
           
LIABILITIES:          
Demand deposits---non-interest bearing  $ 201,346  $ 190,120  $ 182,080  $ 178,520  $ 149,520
Demand deposits---interest bearing  57,074  65,369  40,865  41,219  43,282
Money market deposits  332,305  335,899  313,985  307,392  297,285
Savings deposits  23,579  22,127  21,531  19,633  17,262
Time deposits  317,181  288,267  329,246  306,649  304,333
Total deposits  931,485  901,782  887,707  853,413  811,682
           
FHLB borrowings  1,250  194,299  105,027  31,324  19,767
Short Term borrowings  5,000  5,000  5,000  5,000  --
Federal funds purchased  --  --  --  --  4,350
Trust preferred subordinated debt  10,000  10,000  10,000  10,000  10,000
Accrued interest payable and other liabilities  14,894  15,550  17,151  14,260  13,244
Total liabilities  962,629  1,126,631  1,024,885  913,997  859,043
           
STOCKHOLDERS' EQUITY:          
Preferred Stock  --  2,406  3,945  3,945  4,000
Common stock  50,821  41,632  35,732  35,732  35,361
Capital in excess of par value  6,300  12,718  16,867  16,724  16,721
Retained earnings  33,790  30,786  27,586  24,512  22,424
Accumulated other comprehensive loss  (174)  (200)  (218)  (299)  (342)
Total Monarch Financial Holdings, Inc. stockholders' equity  90,737  87,342  83,912  80,614  78,164
Noncontrolling interest  1,609  1,605  1,615  623  614
Total equity  92,346  88,947  85,527  81,237  78,778
           
Total liabilities and stockholders' equity  $ 1,054,975  $ 1,215,578  $ 1,110,412  $ 995,234  $ 937,821
           
Preferred shares outstanding at period end  --   481,123  788,900  788,900  800,000
Common shares outstanding at period end (1)  10,398,073  8,557,939  7,251,491  7,251,491  7,240,528
           
Book value per common share at period end (1) (2)  $ 8.73  $ 8.80  $ 8.85  $ 8.40  $ 8.03
Tangible book value per common share at period end (1) (3)  $ 8.63  $ 8.68  $ 8.70  $ 8.24  $ 7.87
Closing market price (1)  $ 10.61  $ 8.22  $ 8.13  $ 8.21  $ 7.28
           
Total risk based capital - Consolidated company 13.06% 12.05% 12.49% 12.17% 12.52%
Total risk based capital - Bank 13.78% 12.73% 13.23% 12.79% 12.58%
           
(1) All share information has been adjusted to reflect the 6 for 5 stock split granted December 7, 2012 and cash in lieu of fractional shares.
(2) Book value per common share is defined as stockholders' equity divided by as-converted common shares outstanding.
(3) Tangible book value per common share is defined as stockholders' equity less goodwill and other intangibles divided by as-converted commons shares
outstanding.          
           
 
Consolidated Statements of Income
Monarch Financial Holdings, Inc. and Subsidiaries
Unaudited
  Three Months Ended
  March 31,
  2013 2012
INTEREST INCOME:    
Interest on federal funds sold  $ 5,158  $ 6,259
Interest on other bank accounts  8,142  3,548
Dividends on equity securities  74,435  37,500
Interest on investment securities  57,569  46,231
Interest and fees on loans  11,708,566  10,881,036
Total interest income  11,853,870  10,974,574
INTEREST EXPENSE:    
Interest on deposits  1,029,462  1,281,787
Interest on trust preferred subordinated debt  119,042  122,850
Interest on other borrowings  289,178  62,507
Total interest expense  1,437,682  1,467,144
NET INTEREST INCOME  10,416,188  9,507,430
PROVISION FOR LOAN LOSSES  --  1,930,679
     
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  10,416,188  7,576,751
     
NON-INTEREST INCOME:    
Mortgage banking income  16,165,936  16,584,211
Service charges and fees  451,154  414,051
Title income  254,351  114,258
Other income  309,577  283,488
Total non-interest income  17,181,018  17,396,008
NON-INTEREST EXPENSE:    
Salaries and employee benefits  8,205,075  6,630,518
Commissions and incentives  7,065,476  8,732,201
Occupancy and equipment  1,866,518  1,599,081
Loan expense  1,830,437  1,615,131
Marketing expense  512,958  410,291
Data processing  400,958  345,990
Other expenses  1,979,199  1,548,598
Total non-interest expense  21,860,621  20,881,810
     
INCOME BEFORE TAXES  5,736,585  4,090,949
Income tax provision  (1,993,553)  (1,421,541)
NET INCOME  3,743,032  2,669,408
     
Less: Net income attributable to noncontrolling interest  (284,903)  (153,302)
NET INCOME ATTRIBUTABLE TO MONARCH    
FINANCIAL HOLDINGS, INC  $3,458,129  $ 2,516,106
     
Preferred stock dividend and accretion of preferred stock discount  --   (390,000)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS  $3,458,129  $ 2,126,106
     
NET INCOME PER COMMON SHARE:    
Basic  $ 0.37  $ 0.30
Diluted  $ 0.33  $ 0.25
     
Weighted average basic shares outstanding  9,300,760  7,177,787
Weighted average diluted shares outstanding  10,451,897  10,203,781
     
Return on average assets 1.27% 1.10%
Return on average stockholders' equity 15.86% 13.10%
     
(1) All share information has been adjusted to reflect the 6 for 5 stock split granted December 7, 2012 and cash in lieu of fractional shares.
 
 
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, 
  2013 2012 2012 2012 2012
EARNINGS          
Interest income  $ 11,854  $ 12,690  $ 11,820  $ 10,983  $ 10,975
Interest expense  (1,438)  (1,591)  (1,430)  (1,428)  (1,467)
Net interest income  10,416  11,099  10,390  9,555  9,508
Provision for loan losses  --   (517)  (899)  (1,484)  (1,931)
Noninterest income - mortgage banking income  16,166  23,826  25,652  20,152  16,584
Noninterest income - other  1,015  1,054  909  772  812
Noninterest expense  (21,861)  (29,058)  (29,810)  (24,506)  (20,882)
Pre-tax net income  5,736  6,404  6,242  4,489  4,091
Minority interest in net income   (285)  (298)  (368)  (156)  (153)
Income taxes   (1,993)  (2,338)  (2,111)  (1,556)  (1,422)
Net income   $ 3,458  $ 3,768  $ 3,763  $ 2,777  $ 2,516
           
PER COMMON SHARE           
Earnings per share - basic  $ 0.37  $ 0.44  $ 0.47  $ 0.33  $ 0.30
Earnings per share - diluted  0.33  0.37  0.37  0.27  0.25
Common stock - per share dividends  0.05  0.05  0.05  0.05  0.04
Average Basic Shares Outstanding 9,300,760 7,980,259 7,235,370 7,188,270 7,177,787
Average Diluted Shares Outstanding 10,451,897 10,315,360 10,255,285 10,205,401 10,203,781
           
ALLOWANCE FOR LOAN LOSSES          
Beginning balance  $ 10,910  $ 10,890  $ 10,724  $ 10,400  $ 9,930
Provision for loan losses  --   517  899  1,484  1,931
Charge-offs  (554)  (622)  (823)  (1,403)  (1,494)
Recoveries  432  125  90  243  33
Net charge-offs  (122)  (497)  (733)  (1,160)  (1,461)
Ending balance  $ 10,788  $ 10,910  $ 10,890  $ 10,724  $ 10,400
           
COMPOSITION OF RISK ASSETS          
Nonperforming loans:          
90 days past due  $ 351  $ 153  $ --  $ 461  $ 1,736
Nonaccrual & Restructured debt 3,149 3,483 4,105 5,691 7,331
OREO 95 0 1,250 2,013 2,232
Nonperforming assets  3,595  3,636  5,355  8,165  11,299
           
ASSET QUALITY RATIOS          
Nonperforming assets to total assets 0.34% 0.30% 0.48% 0.82% 1.20%
Nonperforming loans to total loans 0.51 0.55 0.65 0.98 1.52
Allowance for loan losses to total loans held for investment 1.56 1.65 1.74 1.71 1.74
Allowance for loan losses to nonperforming loans 308.23 300.06 265.29 174.32 114.70
Annualized net charge-offs to average loans held for investment 0.07 0.31 0.48 0.76 0.97
           
FINANCIAL RATIOS          
Return on average assets  1.27%  1.28%  1.43%  1.18%  1.10%
Return on average stockholders' equity  15.86  17.51  18.24  14.14  13.10
Net interest margin (FTE)  4.12  4.02  4.27  4.36  4.44
Non-interest revenue/Total revenue  59.2  66.3  69.2  65.6  61.3
Efficiency - Consolidated  79.1  80.4  80.6  80.3  77.4
Efficiency - Bank only  53.1  54.5  52.6  57.0  51.4
Average equity to average assets  8.00  7.29  7.85  8.34  8.31
           
PERIOD END BALANCES (Amounts in thousands)          
Total loans held for sale  $ 242,457  $ 419,075  $ 382,095  $ 282,014  $ 243,179
Total loans held for investment  692,410  661,094  627,256  626,464  598,358
Interest-earning assets  994,946  1,141,180  1,051,145  935,908  880,447
Assets  1,054,975  1,215,578  1,110,412  995,234  937,821
Total deposits  931,485  901,782  887,707  853,413  811,682
Other borrowings  16,250  209,299  120,027  46,325  34,117
Stockholders' equity  90,737  87,342  83,912  80,614  78,164
           
AVERAGE BALANCES (Amounts in thousands)          
Total loans held for sale  $ 316,189  $ 423,354  $ 327,378  $ 239,558  $ 234,185
Total loans held for investment  665,542  637,774  616,728  613,334  601,282
Interest-earning assets  1,033,838  1,103,667  978,135  891,340  869,841
Assets  1,105,933  1,173,820  1,044,966  947,060  929,390
Total deposits  865,146  945,297  890,772  827,258  793,679
Other borrowings  123,291  114,140  46,320  20,367  34,454
Stockholders' equity  88,430  85,584  82,070  78,969  77,251
           
MORTGAGE PRODUCTION (Amounts in thousands)          
Dollar volume of mortgage loans closed  $ 542,235  $ 762,131  $ 784,963  $ 605,926  $ 547,208
Percentage of refinance based on dollar volume  56.8%  61.4%  59.8%  47.5%  60.9%
CONTACT: Brad E. Schwartz - (757) 389-5111, www.monarchbank.com

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