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

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8-K - FORM 8-K - Monarch Financial Holdings, Inc.	d524949d8k.htm

EXHIBIT 99.1

LOGO

MONARCH FINANCIAL REPORTS RECORD

FIRST QUARTER FINANCIAL PERFORMANCE

Chesapeake, VA, April 18, 2013 - 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 1^st 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 17th 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.

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“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.

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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”.

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

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Consolidated Balance Sheets

Monarch Financial Holdings, Inc. and Subsidiaries

(In thousands)

Unaudited


	March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 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.

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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.

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Financial Highlights

Monarch Financial Holdings, Inc. and Subsidiaries


(Dollars in thousands, except per share data)	For the Quarter Ended
	March 31, 2013			December 31, 2012			September 30, 2012			June 30, 2012			March 31, 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	%

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Monarch Financial Holdings, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 18, 2013

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Monarch Financial Holdings, Inc. Reports