Monarch Financial Reports 2013 Financial Results and Declares Cash Dividend

GlobeNewswire

CHESAPEAKE, Va., Jan. 30, 2014 (GLOBE NEWSWIRE) -- Monarch Financial Holdings, Inc. (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
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