Monarch Financial Holdings, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - Monarch Financial Holdings, Inc.	d476805d8k.htm

Exhibit 99.1

LOGO

MONARCH FINANCIAL REPORTS RECORD QUARTERLY

AND ANNUAL FINANCIAL PERFORMANCE

Chesapeake, VA - Monarch Financial Holdings, Inc. (Nasdaq: MNRK, 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)

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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.

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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.

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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.


Contact:		Brad E. Schwartz – (757) 389-5111, www.monarchbank.com
Date:		January 31, 2013

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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.



6 months		9 months			3 months			3 months			3 months			3 months
6/30/2012		9/30/2012			12/31/2012			9/30/2012			6/30/2012			3/31/2012

$	15,162	$	19,135		$	4,208		$	3,973		$	8,903		$	6,259
	8,446		13,159			8,279			4,713			4,898			3,548
	102,474		140,974			50,422			38,500			64,974			37,500
	97,321		149,991			50,294			52,670			51,090			46,231
	21,734,790		33,454,639			12,577,364			11,719,849			10,853,754			10,881,036

	21,958,193		33,777,898			12,690,567			11,819,705			10,983,619			10,974,574


	2,548,691		3,755,695			1,206,595			1,207,004			1,266,904			1,281,787
	246,275		369,697			125,215			123,422			123,425			122,850
	100,114		199,837			259,195			99,723			37,607			62,507

	2,895,080		4,325,229			1,591,005			1,430,149			1,427,936			1,467,144

	19,063,113		29,452,669			11,099,562			10,389,556			9,555,683			9,507,430
	3,415,079		4,313,677			517,456			898,598			1,484,400			1,930,679


	15,648,034		25,138,992			10,582,106			9,490,958			8,071,283			7,576,751


	36,736,289		62,387,895			23,825,701			25,651,606			20,152,078			16,584,211
	881,616		1,340,188			489,830			458,572			467,565			414,051
	702,036		1,152,987			564,205			450,951			304,290			397,746

	38,319,941		64,881,070			24,879,736			26,561,129			20,923,933			17,396,008


	13,724,438		21,669,084			8,199,075			7,944,646			7,093,920			6,630,518
	19,084,866		33,586,352			12,986,177			14,501,486			10,352,665			8,732,201
	3,314,179		5,141,293			1,948,464			1,827,114			1,715,098			1,599,081
	3,799,454		6,025,563			2,461,957			2,226,109			2,184,323			1,615,131
	1,003,817		1,636,813			775,861			632,996			593,526			410,291
	709,332		1,069,616			455,784			360,284			363,342			345,990
	3,751,503		6,068,856			2,230,718			2,317,353			2,202,905			1,548,598

	45,387,589		75,197,577			29,058,036			29,809,988			24,505,779			20,881,810


	8,580,386		14,822,485			6,403,806			6,242,099			4,489,437			4,090,949

	(2,977,835)		(5,089,042	)		(2,337,743	)		(2,111,207	)		(1,556,294	)		(1,421,541	)

	5,602,551		9,733,443			4,066,063			4,130,892			2,933,143			2,669,408

	(309,458)		(676,947	)		(297,690	)		(367,489	)		(156,156	)		(153,302	)


$	5,293,093	$	9,056,496		$	3,768,373		$	3,763,403		$	2,776,987		$	2,516,106


	(780,000)		(1,164,589	)		(237,943	)		(622,532	)		(390,000	)		(390,000	)


$	4,513,093	$	7,891,907		$	3,530,430		$	3,140,871		$	2,386,987		$	2,126,106


$	0.75	$	1.09		$	0.45		$	0.79		$	0.40		$	0.35
$	0.62	$	0.88		$	0.37		$	0.63		$	0.33		$	0.29

Financial Highlights

Monarch Financial Holdings, Inc. and Subsidiaries


(Dollars in thousands, except per share data)	Three Months Ended December 31,						Year Ended December 31,
(Dollars in thousands, except per share data)	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.

Monarch Financial Holdings, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE - February 1, 2013

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Monarch Financial Holdings, Inc. Reports