Monarch Financial Reports 2013 Financial Results And Declares Cash Dividend

CHESAPEAKE, Va., Jan. 30, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (Nasdaq:MNRK), the bank holding company for Monarch Bank, reported annual and fourth quarter financial results and declared a quarterly cash dividend. The Board of Directors announced the quarterly common stock cash dividend of $0.07 per common share, payable on February 28, 2014, to shareholders of record on February 10, 2014.

Annual 2013 highlights are:
  • Net income of $11,091,007, for a return on equity of 11.97%
  • Diluted earnings per share of $1.08
  • Net Loans held for investment grew $51.6 million, up 7.8%
  • Non-performing assets at 0.26% of total assets
  • Net Interest Margin of 4.13%
  • $1.98 billion in mortgage loans closed, 65% for home purchases

Fourth quarter 2013 highlights are:
  • Quarterly net income of $2,156,566, for a return on equity of 8.88%
  • Diluted earnings per share of $0.20
  • $350 million in mortgage loans closed, 80% for home purchases

"We are proud to announce the best year in our history for total shareholder return, and the second best year for company financial performance. Market-driven declines in mortgage production, which was at an all-time high in 2012, resulted in a much lower mortgage banking contribution in 2013. Our banking and investment operations produced record results, with loans held for investment, core deposits, and assets under management all growing, driving higher revenue and net income for those segments," stated Brad E. Schwartz, Chief Executive Officer. "Non-performing assets hit a five-year low of 0.26% of total assets. The market has responded to our standout performance with price appreciation in our common stock that, when combined with two increases in our common stock dividends during the year, produced a 52% total shareholder return for 2013."

For 2013 net income was $11,091,007 compared to $12,824,869 for the same period in 2012. For 2013 net income available to common shareholders was $11,091,007 compared to $11,422,337 for the same period in 2012 when preferred stock dividends were paid. The 2013 return on average equity (ROE) was 11.97%, and the annualized return on average assets (ROA) was 1.07%. Annual diluted earnings per share were $1.08 compared to $1.25 per share in 2012. 

Net income was $2,156,566 for the fourth quarter of 2013, down from the same period in 2012 which was the best quarter in the Company's history, driven by large mortgage refinance activity. The quarterly annualized return on average equity (ROE) was 8.88%, and the quarterly return on average assets (ROA) was 0.86%. Diluted earnings per share were $0.20.

Total assets at December 31, 2013 were $1.02 billion. In 2013 loans held for investment grew 7.8% to $712 million while mortgage loans held for sale declined 76% to $100 million. While total deposit growth was flat compared to one year ago, the mix of deposits changed and we had solid growth in local core deposits. Demand deposit and money market accounts grew while time deposits were reduced. Demand deposits represent 29% of total deposits. Monarch Bank remains the second largest community bank by deposit market share in the Greater Hampton Roads Metropolitan Area. Borrowings declined $198 million or 99% from one year prior. At December 31, 2012 the Bank utilized non-core deposits and borrowings to fund the historically high volume of mortgage loans closed and that funding is no longer necessary. 

"We are pleased with our 7.8% year over year loan growth, and the fact we grew while maintaining a strong net interest margin and superior asset quality," stated E. Neal Crawford Jr., President of Monarch Bank. "Our peninsula expansion is going well, along with the integration of Monarch Bank Private Wealth into our client base. We will continue to focus on building lasting relationships with our clients through exceptional service."

Non-performing assets were 0.26% as of December 31, 2013 compared to 0.30% one year prior, and non-performing loans to loans held for investment were 0.32% compared to 0.55% one year prior. Non-performing assets were $2.6 million, comprised of $472 thousand in loans 90 days or more past due and still accruing interest, $1.8 million in non-accrual loans and $0.3 million in other real estate owned. The allowance for loan losses represents 1.27% of total loans held for investment and 395% of non-performing loans. 

Capital strength continues to grow by all measures. Average equity to average assets rose to 9.73% at year-end 2013, a 33% increase from 7.29% one year prior. Total risk-based capital to risk weighted assets at Monarch Bank rose to 13.95%, meaningfully higher than the required level to meet the highest rating of "Well Capitalized" by federal banking regulators. Cash dividends of $0.07 per share were paid in the fourth quarter of 2013, and a total of $0.24 per share was paid during the year, an increase of 26% over 2012. 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, decreased 2% or $990,000 during 2013 compared to 2012. A decrease in the average balance of our mortgage loans held for sale of 38% was partially offset by increases in the average balance of our loans held for investment portfolio and a reduction in our funding costs. Our net interest margin for the year 2013 and for the fourth quarter of 2013 was 4.13%.

Non-interest income decreased $19.9 million or 22% in 2013 over the previous year, while non-interest expenses declined by $13.3 million, increasing net overhead expense by $6.6 million compared to the previous year. A decline in mortgage banking revenues was the driver of the decline in non-interest income. Investment revenues related to Monarch Bank Private Wealth totaled $1.1 million for the year compared to $173 thousand the previous year, a significant increase.  The Company was recently recognized by Raymond James Financial Services as having a top performing investment program, with $185 million in assets under management accumulated since the formation of Monarch Bank Private Wealth in September of 2012.

Mortgage revenue remains the number one driver of non-interest income. $350 million in mortgage loans were closed during the fourth quarter of 2013 (80% purchase) compared to $762 million in the fourth quarter of 2012 (39% purchase). Monarch closed $1.98 billion in mortgage loans during 2013 compared to $2.7 billion in 2012. The reduction in mortgage revenue was due to lower margins driven by competition and loan mix, a lower volume of closings, and reduced balances and related earnings from our loans held for sale portfolio. Ongoing and aggressive expense reductions are being made in our mortgage operations to better align our expense structure with current and forecasted mortgage production levels.

"Our current focus is to continue to grow market share in a declining market environment. Our long-term focus has always been on purchase mortgage lending, with 80% of the loans closed in the fourth quarter of 2013 used to purchase homes," stated William T. Morrison, CEO of Monarch Mortgage. "We continue to make adjustments to our delivery system and expense structure that should drive improved profitability to the bottom line in 2014."

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-five 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), Advance Financial Group (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
     
  December 31,  September 30,  June 30,  March 31,  December 31,
  2013 2013 2013 2013 2012
ASSETS:          
Cash and due from banks  $ 18,971  $ 21,016  $ 19,050  $ 17,414  $ 27,364
Interest bearing bank balances  31,955  24,504  15,195  14,099  14,667
Federal funds sold  53,985  83,454  56,972  21,937  15,744
           
Investment securities, at fair value  48,822  16,973  16,573  16,493  14,634
           
Loans held for sale  99,718  120,435  166,586  242,457  419,075
           
Loans held for investment, net of unearned income  712,671  697,541  697,376  692,410  661,094
Less: allowance for loan losses  (9,061)  (11,228)  (11,320)  (10,788)  (10,910)
Net loans  703,610  686,313  686,056  681,622  650,184
           
Bank premises and equipment, net  28,882  28,454  28,101  27,507  25,448
Restricted equity securities, at cost  3,683  3,666  3,792  3,781  12,363
Bank owned life insurance  7,409  7,351  7,290  7,231  7,173
Goodwill  775  775  775  775  775
Intangible assets, net  104  149  194  238  283
Accrued interest receivable and other assets  18,786  18,857  20,815  21,421  27,868
           
Total assets  $ 1,016,700  $ 1,011,947  $ 1,021,399  $ 1,054,975  $ 1,215,578
           
LIABILITIES:          
Demand deposits--non-interest bearing  $ 206,891  $ 222,021  $ 218,880  $ 201,346  $ 190,120
Demand deposits--interest bearing  55,528  48,302  52,101  57,074  65,369
Money market deposits  374,462  364,488  341,042  332,305  335,899
Savings deposits  22,137  22,665  22,172  23,579  22,127
Time deposits  234,100  228,652  264,491  317,181  288,267
Total deposits  893,118  886,128  898,686  931,485  901,782
           
FHLB borrowings  1,175  1,200  1,225  1,250  194,299
Short Term borrowings  --  --  --  5,000  5,000
Federal funds purchased  --  --  --  --  --
Trust preferred subordinated debt  10,000  10,000  10,000  10,000  10,000
Accrued interest payable and other liabilities  14,661  17,855  16,733  14,894  15,550
Total liabilities  918,954  915,183  926,644  962,629  1,126,631
           
STOCKHOLDERS' EQUITY:          
Preferred Stock  --  --  --  --  2,406
Common stock  51,432  51,230  50,873  50,821  41,632
Capital in excess of par value  7,069  6,755  6,521  6,300  12,718
Retained earnings  39,437  38,014  36,233  33,790  30,786
Accumulated other comprehensive loss  (419)  (406)  (480)  (174)  (200)
Total Monarch Financial Holdings, Inc. stockholders' equity  97,519  95,593  93,147  90,737  87,342
Noncontrolling interest  227  1,171  1,608  1,609  1,605
Total equity  97,746  96,764  94,755  92,346  88,947
           
Total liabilities and stockholders' equity  $ 1,016,700  $ 1,011,947  $ 1,021,399  $ 1,054,975  $ 1,215,578
           
Preferred shares outstanding at period end  --   --   --   --   481,123
Common shares outstanding at period end (1)  10,502,323  10,480,023  10,408,544  10,398,073  8,557,939
           
Nonvested shares of common stock included in commons shares outstanding (1)  215,960  233,960  233,960  233,960  231,460
           
Book value per common share at period end (1) (2)  $ 9.29  $ 9.12  $ 8.95  $ 8.73  $ 8.80
Tangible book value per common share at period end (1) (3)  $ 9.20  $ 9.03  $ 8.86  $ 8.63  $ 8.68
Closing market price (1)  $ 12.31  $ 11.72  $ 10.83  $ 10.61  $ 8.22
           
Total risk based capital - Consolidated company 13.91% 13.70% 13.42% 13.21% 12.05%
Total risk based capital - Bank 13.95% 13.84% 13.66% 13.94% 12.73%
           
(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 Year Ended
  December 31, December 31,
  2013 2012 2013 2012
INTEREST INCOME:        
Interest on federal funds sold  $ 42,283  $ 4,208  $ 115,963  $ 23,343
Interest on other bank accounts  28,626  8,279  58,027  21,438
Dividends on equity securities  67,540  50,422  277,700  191,396
Interest on investment securities  60,311  50,294  230,496  200,285
Interest and fees on loans  10,478,477  12,577,364  43,666,251  46,032,003
Total interest income  10,677,237  12,690,567  44,348,437  46,468,465
INTEREST EXPENSE:        
Interest on deposits  905,970  1,206,595  3,936,203  4,962,290
Interest on trust preferred subordinated debt  122,850  125,214  491,910  494,911
Interest on other borrowings  15,002  259,195  358,345  459,032
Total interest expense  1,043,822  1,591,004  4,786,458  5,916,233
NET INTEREST INCOME  9,633,415  11,099,563  39,561,979  40,552,232
PROVISION FOR LOAN LOSSES  --  517,456  --  4,831,133
         
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  9,633,415  10,582,107  39,561,979  35,721,099
         
NON-INTEREST INCOME:        
Mortgage banking income  13,276,836  23,950,026  65,672,402  86,337,921
Service charges and fees  502,373  489,830  1,941,926  1,830,018
Title income  124,774  237,238  789,253  814,487
Investment and insurance income  336,002  106,529  1,053,429  172,667
Other income  111,924  96,113  425,261  605,713
Total non-interest income  14,351,909  24,879,736  69,882,271  89,760,806
NON-INTEREST EXPENSE:        
Salaries and employee benefits  8,772,157  8,199,075  34,112,834  29,868,159
Commissions and incentives  5,248,131  12,986,177  28,344,347  46,572,529
Occupancy and equipment  2,220,634  1,948,464  8,449,912  7,089,757
Loan expense  1,526,317  2,461,957  7,891,835  8,487,520
Marketing expense  807,717  775,861  2,873,259  2,412,674
Data processing  459,681  455,785  1,696,535  1,525,401
Other expenses  1,527,715  2,230,718  7,542,096  8,299,574
Total non-interest expense  20,562,352  29,058,037  90,910,818  104,255,614
         
INCOME BEFORE TAXES  3,422,972  6,403,806  18,533,432  21,226,291
Income tax provision  (1,179,017)  (2,337,743)  (6,386,040)  (7,426,785)
NET INCOME  2,243,955  4,066,063  12,147,392  13,799,506
         
Less: Net income attributable to noncontrolling interest  (87,389)  (297,690)  (1,056,385)  (974,637)
NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC  $2,156,566  $3,768,373  $11,091,007  $ 12,824,869
         
Preferred stock dividend and accretion of preferred stock discount  --   (237,943)  --   (1,402,532)
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS  $2,156,566  $3,530,430  $11,091,007  $ 11,422,337
         
NET INCOME PER COMMON SHARE:         
         
Basic  $ 0.21  $ 0.44  $ 1.09  $ 1.54
Diluted  $ 0.20  $ 0.37  $ 1.08  $ 1.25
         
Weighted average basic shares outstanding  10,486,056  7,980,259  10,167,156  7,400,443
Weighted average diluted shares outstanding  10,535,313  10,315,360  10,299,471  10,255,992
         
Return on average assets 0.86% 1.28% 1.07% 1.26%
Return on average stockholders' equity 8.88% 17.51% 11.97% 15.84%
         
(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) December 31, September 30, June 30, March 31, December 31,
  2013 2013 2013 2013 2012
EARNINGS          
Interest income  $ 10,677  $ 10,842  $ 10,976  $ 11,854  $ 12,690
Interest expense  (1,044)  (1,121)  (1,184)  (1,438)  (1,591)
Net interest income  9,633  9,721  9,792   10,416  11,099
Provision for loan losses  --   --   --   --   (517)
Noninterest income - mortgage banking income  13,277  15,510  20,572  16,166  23,826
Noninterest income - other  1,075  1,018   1,102  1,015  1,054
Noninterest expense  (20,562)  (22,315)  (26,173)  (21,861)  (29,058)
Pre-tax net income   3,423  3,934  5,293  5,736  6,404
Minority interest in net income  (87)  (108)  (428)   (285)  (298)
Income taxes  (1,179)  (1,416)  (1,798)  (1,993)  (2,338)
Net income  $ 2,157  $ 2,410  $ 3,067  $ 3,458  $ 3,768
           
PER COMMON SHARE          
Earnings per share - basic  $ 0.21  $ 0.23  $ 0.29  $  0.37  $ 0.44
Earnings per share - diluted  0.20  0.23  0.29  0.33  0.37
Common stock - per share dividends   0.07  0.06  0.06  0.05  0.05
Average Basic Shares Outstanding 10,486,056 10,464,992 10,401,992 9,300,760 7,980,259
Average Diluted Shares Outstanding 10,535,313 10,519,472 10,483,420 10,451,897 10,315,360
           
ALLOWANCE FOR LOAN LOSSES          
Beginning balance  $ 11,228  $ 11,320  $  10,788  $ 10,910  $ 10,890
Provision for loan losses  --   --   --   --   517
Charge-offs  (2,252)  (137)  (279)  (554)  (622)
Recoveries  85  45  811   432  125
Net charge-offs  (2,167)  (92)  532  (122)  (497)
Ending balance  $ 9,061  $  11,228  $ 11,320  $ 10,788  $ 10,910
           
COMPOSITION OF RISK ASSETS          
Nonperforming loans:          
90 days past due  $ 472  $  82  $ --  $ 351  $ 153
Nonaccrual loans 1,824 2,883 2,933 3,149 3,483
OREO 302 95 95 95 0
Nonperforming assets  2,598  3,060  3,028  3,595  3,636
           
           
ASSET QUALITY RATIOS          
Nonperforming assets to total assets 0.26% 0.30% 0.30% 0.34% 0.30%
Nonperforming loans to total loans 0.32 0.43 0.42 0.51 0.55
Allowance for loan losses to total loans held for investment 1.27 1.61 1.62 1.56 1.65
Allowance for loan losses to nonperforming loans 394.64 378.68 385.95 308.23 300.06
Annualized net charge-offs to average loans held for investment 1.25 0.05 -0.31 0.07 0.31
           
FINANCIAL RATIOS          
Return on average assets  0.86%  0.94%  1.19%  1.27%  1.28%
Return on average stockholders' equity   8.88  10.18  13.42  15.86  17.51
Net interest margin (FTE)  4.13  4.11  4.11  4.12  4.02
Non-interest revenue/Total revenue  57.3  60.4  66.4  59.2  66.3
Efficiency - Consolidated   85.5  84.8  83.0  79.1  80.4
Efficiency - Bank only  60.4  59.1  58.2  53.1  54.5
Average equity to average assets  9.73  9.27  8.88  8.00  7.29
           
PERIOD END BALANCES (Amounts in thousands)          
Total loans held for sale  $ 99,718  $ 120,435  $ 166,586  $ 242,457  $ 419,075
Total loans held for investment  712,671  697,541  697,376  692,410  661,094
Interest-earning assets  952,981  950,760  960,481  994,946  1,141,180
Assets  1,016,700  1,011,947  1,021,399  1,054,975  1,215,578
Total deposits  893,118  886,128  898,686  931,485  901,782
Other borrowings  11,175  11,200  11,225  16,250  209,299
Stockholders' equity  97,519  95,593  93,147   90,737  87,342
           
AVERAGE BALANCES (Amounts in thousands)          
Total loans held for sale  $ 104,104  $ 136,660  $ 200,733  $ 316,189  $ 423,354
Total loans held for investment  695,074  692,731  680,037  665,542  637,774
Interest-earning assets  935,059  946,575   964,872  1,033,838  1,103,667
Assets  990,734  1,013,932  1,032,345  1,105,933  1,173,820
Total deposits  869,113  882,553   908,229  865,146  945,297
Other borrowings  11,199  11,257  11,250  123,291  114,140
Stockholders' equity  96,415  93,958  91,638  88,430  85,584
           
MORTGAGE PRODUCTION (Amounts in thousands)          
Dollar volume of mortgage loans closed  $ 349,695  $ 478,304  $ 607,189  $ 542,235  $ 762,131
Percentage of refinance based on dollar volume  20.3%  22.6%  39.2%  56.8%   61.4%
CONTACT: Brad E. Schwartz         (757) 389-5111         www.monarchbank.com

Monarch Financial Holdings, Inc. logo