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Monarch Financial Reports Higher Income, Strong Loan Growth, and Declares Cash Dividend

CHESAPEAKE, Va., Jan. 30, 2015 (GLOBE NEWSWIRE) — Monarch Financial Holdings, Inc. (MNRK), the bank holding company for Monarch Bank, reported improved fourth quarter and annual financial performance. The Board of Directors also announced a quarterly common stock cash dividend of $0.08 per common share, payable on February 27, 2015, to shareholders of record on February 10, 2015.

Annual 2014 highlights are:

Net income of $11,211,850, for Return on Equity of 10.95%

Diluted earnings per share of $1.05

Cash dividends of $0.31 paid per share, up 29% from 2013

Loans held for investment grew $59.9 million, up 8.4%

Non-performing assets at 0.28% of total assets

Net Interest Margin was 4.25%

$1.6 billion in mortgage loans closed, with 80% home purchases

Fourth quarter 2014 highlights are:

Quarterly net income of $2,683,163, up 24%

Return on equity of 10.03%

Diluted earnings per share of $0.25

Loans held for investment grew $58.9 million

$446 million in mortgage loans closed with 69% home purchase

“We are pleased with our quarterly and annual financial performance, with very strong organic loan growth finally taking hold in the fourth quarter. Unlike many of our peers we have grown loans with our bankers, in our markets, and have not purchased loans to drive this growth. Mortgage production was in line with the previous year with our best year ever for purchase mortgage loan closings. We improved our performance in all three lines of business to include banking, mortgage, and wealth management,” stated Brad E. Schwartz, Chief Executive Officer. “Non-performing assets remained low, our margin improved due to asset mix and pricing discipline, and our capital grew stronger with our retention of earnings. The market has responded to our performance with price appreciation in our common stock that, when combined with the increase in our common stock dividends, produced a 14% total shareholder return for 2014.”

For 2014 net income was $11,211,850 compared to $11,091,007 for the same period in 2013, a 1% increase. The 2014 return on average equity (ROE) was 10.95%, and the return on average assets (ROA) was 1.13%. Annual diluted earnings per share were $1.05 compared to $1.08 in 2013, as our higher earnings were more than offset by the number of additional outstanding shares.

Net income was $2,683,163 for the fourth quarter of 2014 compared to $2,156,566 for the same period in 2013, a 24% increase. The quarterly annualized return on average equity (ROE) was 10.03%, and the annualized quarterly return on average assets (ROA) was 1.04 %, both metrics up from the same period a year ago. Diluted earnings per share for the fourth quarter were $0.25, up 25% from the previous year.

Total assets at December 31, 2014 were $1.07 billion, up 5% from the prior year. In 2014 loans held for investment grew 8% to $773 million and mortgage loans held for sale grew 48% to $148 million. The vast majority of the net loan growth occurred in the fourth quarter. Total deposits grew 3% to $919 million, with demand deposits growing $40 million or 15% for the year. Demand deposits now represent 33% of total deposits, an achievement driven by our dedicated cash management and banking office teams. While the current rate environment does not appropriately reward banks for a transaction-focused funding strategy, this strategy should deliver net interest margin protection when rates eventually rise.

“We are pleased to deliver over 8% quarterly and year over year loan growth. We are equally proud that we produced each and every loan and have not been tempted by participation loans or other loan purchase programs we see in the marketplace,” stated E. Neal Crawford Jr., President of Monarch Bank. “We continue to hire talented bankers and expect to continue expanding the banking team into 2015. Our Richmond and Peninsula expansion is driving quality loan growth and deposit growth while our cash management and private banking teams continue to focus on growing core deposits.”

Non-performing assets were 0.28% as of December 31, 2014 compared to 0.25% one year prior, and non-performing loans to loans held for investment were 0.37% compared to 0.31% one year prior. Non-performing assets were $3.0 million, comprised of $175 thousand 90 days or more past due and still accruing interest, $2.7 million in non-accrual loans and $144,000 in one parcel of other real estate owned that is already under contract for sale. The allowance for loan losses represents 1.16% of total loans held for investment and 311% of non-performing loans.

Average equity to average assets rose to 10.39% at year-end 2014, an increase from 9.73% one year prior. Cash dividends of $0.08 per share were paid in the fourth quarter of 2014, and a total of $0.31 per share was paid during the year, an increase of 29% over 2013. Total risk-based capital to risk weighted assets at Monarch Bank equaled 13.79%, significantly higher than the required level to meet the highest rating of “Well Capitalized” by federal banking regulators. We also already meet the new Basel III capital standards for a well-capitalized bank. 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, was flat for the year driven by the large volume of mortgage loans held for sale in the first six months of 2013 compared to the balances carried in 2014. These balances are driven by mortgage loan closings. Excluding the mortgage loans held for sale volatility, the net interest income from core banking operations increased 5.9% or $1.9 million. Our net interest margin for 2014 was 4.25%, up from 4.10% due to asset mix, loan and deposit pricing, mortgage loans held for sale pricing, fee income capture, and the additional income from loans previously on non-accrual status. Loan growth that occurred late in the year had minimal impact on net interest income even though it should contribute to net interest income on a going forward basis.

Non-interest income decreased $2.8 million in 2014 over the previous year driven by lower mortgage revenues, which was more than offset by a reduction of $3.6 million in commissions and incentives. Net overhead, or the difference between non-interest income and non-interest expenses, increased only $372 thousand or 1.7% due to increased spending for facilities, technology, technology risk management, compliance and marketing. Salaries and benefits were held flat for the year, a significant accomplishment with our increased benefits costs. Investment revenues related to Monarch Bank Private Wealth totaled $1.6 million for the year compared to $1.1 million the previous year, a noteworthy increase. The Company is recognized by Raymond James Financial Services as a top performing bank investment program, with $235 million in assets under management accumulated since the formation of Monarch Bank Private Wealth in the third quarter of 2012.

Mortgage revenue remains the number one driver of non-interest income. $446 million in mortgage loans were closed during the fourth quarter of 2014 (69% purchase) compared to $350 million in the fourth quarter of 2013 (80% purchase). Monarch closed $1.6 billion in mortgage loans during 2014 compared to $2.0 billion in 2012. While volumes year over year declined approximately 20%, revenues from mortgage lending declined only 5% due to a strong focus on loan product mix, secondary market pricing, and fee income.

“Our focus on the purchase market paid off in 2014 when we had the best year of purchase mortgage business in our history. We closed $1.3 billion in home purchase loans and $0.3 billion in refinances, and altogether closed over 6,000 loans during the year,” stated William T. Morrison, CEO of Monarch Mortgage. “The year 2015 is beginning with an attractive rate environment and a much stronger pipeline of activity, and we expect it to be a great year for our mortgage operations.”

Monarch Financial Holdings, Inc. is the one-bank holding company for Monarch Bank. Monarch Bank is a community bank with ten banking offices in Chesapeake, Virginia Beach, Norfolk, and Williamsburg, Virginia. Monarch Bank also has loan production offices in Newport News and Richmond, 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), 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,

2014

2014

2014

2014

2013

ASSETS:

Cash and due from banks

$ 14,503

$ 21,083

$ 19,661

$ 18,510

$ 18,971

Interest bearing bank balances

49,761

58,207

37,166

37,033

31,955

Federal funds sold

1,135

3,938

29,761

84,232

53,985

Investment securities, at fair value

23,725

25,137

23,773

23,197

48,822

Mortgage loans held for sale

147,690

138,590

156,584

92,839

99,718

Loans held for investment, net of unearned income

772,590

713,667

700,159

715,088

712,671

Less: allowance for loan losses

(8,949)

(8,977)

(9,070)

(9,213)

(9,061)

Net loans

763,641

704,690

691,089

705,875

703,610

Bank premises and equipment, net

30,247

30,368

31,407

29,902

28,882

Restricted equity securities, at cost

3,633

3,179

3,169

3,156

3,683

Bank owned life insurance

9,687

9,587

7,526

7,467

7,409

Goodwill

775

775

775

775

775

Intangible assets, net

15

60

104

Accrued interest receivable and other assets

21,940

23,688

22,973

19,673

18,786

Total assets

$ 1,066,737

$ 1,019,242

$ 1,023,899

$ 1,022,719

$ 1,016,700

LIABILITIES:

Demand deposits–non-interest bearing

$ 235,301

$ 252,286

$ 240,348

$ 221,357

$ 206,891

Demand deposits–interest bearing

66,682

53,093

51,563

55,949

55,528

Money market deposits

369,221

365,041

377,096

367,590

374,462

Savings deposits

20,003

25,211

24,539

24,327

22,137

Time deposits

228,207

189,142

197,747

224,947

234,100

Total deposits

919,414

884,773

891,293

894,170

893,118

FHLB borrowings

1,075

1,100

1,125

1,150

1,175

Federal funds

10,000

Trust preferred subordinated debt

10,000

10,000

10,000

10,000

10,000

Accrued interest payable and other liabilities

18,710

18,145

18,650

17,422

14,661

Total liabilities

959,199

914,018

921,068

922,742

918,954

STOCKHOLDERS’ EQUITY:

Common stock

51,864

51,735

51,624

51,584

51,432

Capital in excess of par value

8,336

7,966

7,675

7,357

7,069

Retained earnings

47,354

45,523

43,566

41,232

39,437

Accumulated other comprehensive loss

(102)

(135)

(159)

(314)

(419)

Total Monarch Financial Holdings, Inc. stockholders’ equity

107,452

105,089

102,706

99,859

97,519

Noncontrolling interest

86

135

125

118

227

Total equity

107,538

105,224

102,831

99,977

97,746

Total liabilities and stockholders’ equity

$ 1,066,737

$ 1,019,242

$ 1,023,899

$ 1,022,719

$ 1,016,700

Common shares outstanding at period end

10,652,475

10,646,873

10,624,668

10,619,444

10,502,323

Nonvested shares of common stock included in commons shares outstanding

279,750

299,910

299,910

302,710

215,960

Book value per common share at period end (1)

$ 10.10

$ 9.87

$ 9.67

$ 9.40

$ 9.29

Tangible book value per common share at period end (2)

$ 10.02

$ 9.80

$ 9.59

$ 9.33

$ 9.20

Closing market price

$ 13.75

$ 12.56

$ 11.72

$ 12.26

$ 12.31

Total risk based capital – Consolidated company

13.79%

14.16%

14.29%

14.27%

13.91%

Total risk based capital – Bank

13.81%

14.18%

14.31%

14.30%

13.95%

(1) Book value per common share is defined as stockholders’ equity divided by common shares outstanding.

(2) Tangible book value per common share is defined as stockholders’ equity less goodwill and other intangibles divided by commons shares outstanding

Consolidated Statements of Income

Monarch Financial Holdings, Inc. and Subsidiaries

Unaudited

Three Months Ended

Year Ended

December 31,

December 31,

2014

2013

2014

2013

INTEREST INCOME:

Interest on federal funds sold

$ 4,980

$ 42,283

$ 84,850

$ 115,963

Interest on other bank accounts

92,156

28,626

244,702

58,027

Dividends on equity securities

33,545

67,540

106,955

277,700

Interest on investment securities

100,957

60,311

359,604

230,496

Interest on mortgage loans held for sale

1,376,920

1,090,070

4,866,818

7,021,186

Interest and fees on loans held for investment

9,752,472

9,388,407

37,327,978

36,645,065

Total interest income

11,361,030

10,677,237

42,990,907

44,348,437

INTEREST EXPENSE:

Interest on deposits

722,537

905,970

3,185,965

3,936,203

Interest on trust preferred subordinated debt

46,337

122,850

416,233

491,910

Interest on other borrowings

16,615

15,002

58,966

358,345

Total interest expense

785,489

1,043,822

3,661,164

4,786,458

NET INTEREST INCOME

10,575,541

9,633,415

39,329,743

39,561,979

PROVISION FOR LOAN LOSSES

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

10,575,541

9,633,415

39,329,743

39,561,979

NON-INTEREST INCOME:

Mortgage banking income

16,210,774

13,276,836

62,440,013

65,672,402

Service charges and fees

489,974

502,373

2,058,262

1,941,926

Title income

216,895

124,774

669,785

789,253

Investment and insurance income

382,774

336,002

1,592,398

1,053,429

Other income

72,366

111,924

318,783

425,261

Total non-interest income

17,372,783

14,351,909

67,079,241

69,882,271

NON-INTEREST EXPENSE:

Salaries and employee benefits

8,798,996

8,772,157

34,134,998

34,112,834

Commissions and incentives

6,926,507

5,248,131

24,754,633

28,344,347

Occupancy and equipment

2,412,086

2,220,634

9,548,543

8,449,912

Loan expense

1,676,134

1,526,317

6,652,007

7,891,835

Marketing expense

990,383

807,717

3,111,535

2,873,259

Data processing

715,057

459,681

2,272,785

1,696,535

Telephone

296,396

314,984

1,226,389

1,184,894

Other expenses

1,789,789

1,212,731

6,778,966

6,357,202

Total non-interest expense

23,605,348

20,562,352

88,479,856

90,910,818

INCOME BEFORE TAXES

4,342,976

3,422,972

17,929,128

18,533,432

Income tax provision

(1,616,093)

(1,179,017)

(6,490,273)

(6,386,040)

NET INCOME

2,726,883

2,243,955

11,438,855

12,147,392

Less: Net income attributable to noncontrolling interest

(43,720)

(87,389)

(227,005)

(1,056,385)

NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC

$2,683,163

$2,156,566

$11,211,850

$11,091,007

NET INCOME PER COMMON SHARE:

Basic

$ 0.25

$ 0.21

$ 1.06

$ 1.09

Diluted

$ 0.25

$ 0.20

$ 1.05

$ 1.08

Weighted average basic shares outstanding

10,648,184

10,486,056

10,619,443

10,167,156

Weighted average diluted shares outstanding

10,689,219

10,535,313

10,658,600

10,299,471

Return on average assets

1.04%

0.86%

1.13%

1.07%

Return on average stockholders’ equity

10.03%

8.88%

10.95%

11.97%

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,

2014

2014

2014

2014

2013

EARNINGS

Interest income

$ 11,361

$ 10,639

$ 10,557

$ 10,434

$ 10,677

Interest expense

(786)

(928)

(977)

(971)

(1,044)

Net interest income

10,575

9,711

9,580

9,463

9,633

Provision for loan losses

Noninterest income – mortgage banking income

16,211

16,658

17,369

12,202

13,277

Noninterest income – other

1,162

1,241

1,130

1,106

1,075

Noninterest expense

(23,605)

(23,121)

(23,007)

(18,747)

(20,562)

Pre-tax net income

4,343

4,489

5,072

4,024

3,423

Minority interest in net income

(44)

(46)

(121)

(16)

(87)

Income taxes

(1,616)

(1,635)

(1,767)

(1,471)

(1,179)

Net income

$ 2,683

$ 2,808

$ 3,184

$ 2,537

$ 2,157

PER COMMON SHARE

Earnings per share – basic

$ 0.25

$ 0.26

$ 0.30

$ 0.24

$ 0.21

Earnings per share – diluted

0.25

0.26

0.30

0.24

0.20

Common stock – per share dividends

0.08

0.08

0.08

0.07

0.07

Average Basic Shares Outstanding

10,648,184

10,635,275

10,620,869

10,600,766

10,486,056

Average Diluted Shares Outstanding

10,689,219

10,670,507

10,660,217

10,641,782

10,535,313

ALLOWANCE FOR LOAN LOSSES

Beginning balance

$ 8,977

$ 9,070

$ 9,213

$ 9,061

$ 11,228

Provision for loan losses

Charge-offs

(174)

(181)

(184)

(12)

(2,252)

Recoveries

146

88

41

164

85

Net charge-offs

(28)

(93)

(143)

152

(2,167)

Ending balance

$ 8,949

$ 8,977

$ 9,070

$ 9,213

$ 9,061

COMPOSITION OF RISK ASSETS

Nonperforming loans:

90 days past due

$ 175

$ 243

$ 499

$ 759

$ 472

Nonaccrual loans

2,705

2,180

3,028

1,718

1,740

OREO

144

767

144

302

302

Nonperforming assets

3,024

3,190

3,671

2,779

2,514

ASSET QUALITY RATIOS

Nonperforming assets to total assets

0.28%

0.31%

0.36%

0.27%

0.25%

Nonperforming loans to total loans

0.37

0.34

0.50

0.35

0.31

Allowance for loan losses to total loans held for investment

1.16

1.26

1.30

1.29

1.27

Allowance for loan losses to nonperforming loans

310.73

370.49

257.16

371.94

409.63

Annualized net charge-offs to average loans held for investment

0.02

0.05

0.08

-0.09

1.25

FINANCIAL RATIOS

Return on average assets

1.04%

1.11%

1.29%

1.06%

0.86%

Return on average stockholders’ equity

10.03

10.72

12.63

10.46

8.88

Net interest margin (FTE)

4.42

4.18

4.18

4.25

4.13

Non-interest revenue/Total revenue

60.5

62.7

63.7

56.1

57.3

Efficiency – Consolidated

84.5

83.7

81.8

82.1

85.5

Efficiency – Bank only

61.2

61.7

63.9

59.9

60.4

Average equity to average assets

10.39

10.40

10.18

10.13

9.73

PERIOD END BALANCES (Amounts in thousands)

Total mortgage loans held for sale

$ 147,690

$ 138,590

$ 156,584

$ 92,839

$ 99,718

Total loans held for investment

772,590

713,667

700,159

715,088

712,671

Interest-earning assets

1,003,332

945,697

949,872

956,160

952,981

Assets

1,066,737

1,019,242

1,023,899

1,022,719

1,016,700

Total deposits

919,414

884,773

891,293

894,170

893,118

Other borrowings

21,075

11,100

11,125

11,150

11,175

Stockholders’ equity

107,451

105,089

102,706

99,859

97,519

AVERAGE BALANCES (Amounts in thousands)

Total mortgage loans held for sale

$ 131,471

$ 138,382

$ 116,851

$ 70,856

$ 104,104

Total loans held for investment

725,093

701,137

698,851

704,917

695,074

Interest-earning assets

958,904

930,420

927,552

910,929

935,059

Assets

1,021,591

999,358

993,003

970,815

990,734

Total deposits

883,478

867,980

867,217

848,969

869,113

Other borrowings

14,575

11,124

11,150

11,174

11,199

Stockholders’ equity

106,088

103,908

101,092

98,374

96,415

MORTGAGE PRODUCTION (Amounts in thousands)

Dollar volume of mortgage loans closed

$ 445,846

$ 440,784

$ 446,863

$ 271,233

$ 349,695

Percentage of refinance based on dollar volume

30.9%

16.0%

15.0%

19.1%

20.3%

Financials IndustryBanking & Budgetingmortgage loans
Contact:

Brad E. Schwartz - (757) 389-5111, www.monarchbank.com

Read more here:
Monarch Financial Reports Higher Income, Strong Loan Growth, and Declares Cash Dividend

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