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

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8-K - FORM 8-K - Monarch Financial Holdings, Inc.	d51604d8k.htm

Exhibit 99.1

LOGO

MONARCH FINANCIAL REPORTS RECORD 2^ND

QUARTER AND DECLARES CASH DIVIDEND

Chesapeake, VA, July 23, 2015 - Monarch Financial Holdings, Inc. (Nasdaq: MNRK), the bank holding company for Monarch Bank, reported record second quarter profit and continued strong financial performance. The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on August 31, 2015, to shareholders of record on August 7, 2015.

Second quarter 2015 highlights are:

•

2nd quarter net income of $3,423,829, up 7.5%

•

Return on Equity of 12.28%

•

Net Interest Margin remained strong at 4.28%

•

Diluted earnings per share of $0.32

•

Non-performing assets at 0.23% of total assets

•

$605 million in mortgage loans closed, 76% purchase money

Year to date 2015 highlights are:

•

Net income of $6,885,036, up 20.4%

•

Return on Equity of 12.62%

•

Diluted earnings per share of $0.64

“We are pleased to report a record second quarter, as well as record results for the first six months of the year. Driving these gains is our mortgage operation, which closed over $1.09 billion in loans during the first half of the year, another first half of the year record. These higher mortgage loan closings, minimal credit costs, and a strong net interest margin continued to drive our bottom line results.” stated Brad E. Schwartz, Chief Executive Officer. “From a shareholder perspective our earnings per share are up over 18% for the year, we recently increased our cash dividend payout by 12.5%, and we were ranked as the 18^th top performing community bank in the country. We are extremely pleased with our past performance, our national ranking, and our future opportunities for growing the Monarch franchise.”

Net income was $3,423,829 for the second quarter of 2015, a record second quarter for the company, up 7.5% from the same period one year ago. The quarterly annualized return on average equity (ROE) was 12.28%, and the quarterly return on average assets (ROA) was 1.22%. Quarterly diluted earnings per share increased to $0.32, compared to $0.30 for the same quarter in 2014.

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Net income was $6,885,036 for the first six months of 2015, up 20.4% from the previous year. The annualized return on average equity (ROE) was 12.62%, and the quarterly return on average assets (ROA) was 1.26%. Diluted earnings per share were $0.64, compared to $0.54 for the same period in 2014.

Total assets at June 30, 2015 were $1.17 billion, with both loans and deposits showing strong year over year growth. Year over year total loans held for investment grew $93 million or 13.3% and mortgage loans held for sale grew $37 million or 23.9%. For the second quarter total loans held for investment grew $6 million or 0.8% and mortgage loans held for sale grew $34 million or 21.3%. Together these two loan categories continue to drive earning asset growth. Funding continues to shift to a higher level of demand deposits, with 36% of our total deposit mix now in demand deposits. Demand deposit balances remain at record high levels. A shift to funding a portion of our seasonal mortgage pipeline with short-term fixed rate borrowings has allowed us to maintain our deposit pricing discipline to better manage our net interest margin.

“While I am thrilled with our year over year loan performance, the second quarter was a little more challenging as we had very strong loan production that was largely offset by principal payments and payoffs.” stated Neal Crawford, President of Monarch Bank. “Our cash management and retail deposit teams continue to drive deposit growth, with well over a third of our deposits now in demand deposits.”

Non-performing assets to total assets were 0.23%, which continues to remain significantly below that of our local, state, and national peer group. This is the lowest level of non-performing assets reported since 2008. Non-performing assets were $2.6 million which were down from the previous quarter and the same period in 2014. Non-performing assets were comprised of $2.3 million in non-accrual loans, $0 in loans more than 90 days past due, and $375 thousand in other assets. Net charge-offs for the year were $773 thousand, provision expense was $500 thousand, and the allowance for loan losses represents 1.09% of loans held for investment and 383% of non-performing loans.

The Board of Directors announced a quarterly common stock cash dividend of $0.09 per common share, payable on August 31, 2015, to shareholders of record on August 7, 2015. Average equity to average assets was 9.92%, and total risk-based capital to risk weighted assets at Monarch Bank equaled 13.52%, significantly higher than the level required to be rated “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.

Net interest income, our number one driver of profitability, increased 17.1% or $1.6 million during the second quarter of 2015 compared to the same quarter in 2014 driven by higher average balances of loans held for investment and mortgage loans held for sale. The net interest margin was 4.28% for the second quarter, which was up from 4.18% in the same quarter in 2014.

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Non-interest income increased 27.7% or $5.1 million from the previous year driven by increased revenues from mortgage loans sold and related title insurance fees. Investment and insurance revenue increased 19.5% compared to the previous year due to the continued growth of Monarch Bank Private Wealth. Mortgage revenue continues to be the number one driver of non-interest income. We closed $605 million in mortgage loans (76% purchase) during the second quarter of 2015 compared to $487 million (53% purchase) in the first quarter of 2015, a significant increase. We closed $1,092 million in mortgage loans (66% purchase) during the first half of 2015 compared to $718 million (83% purchase) in the first half of 2014. Total non-interest expense increased 26.7% or $6.1 million during the second quarter due to higher mortgage commissions, salaries and benefits expenses.

“We had a great quarter for mortgage originations and closings, and our operations are running more effectively than ever. Our realtor and builder focus, combined with helping many of our existing clients refinance into lower rates earlier in the year, was the key to driving our higher annual loan volume.” stated William T. Morrison, CEO of Monarch Mortgage.

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), Fitzgerald Financial, LLC (secondary mortgage origination), Advance 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.

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


	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
ASSETS:
Cash and due from banks	$	15,319		$	13,870		$	14,503		$	21,083		$	19,661
Interest bearing bank balances		84,225			73,237			49,761			58,207			37,166
Federal funds sold		2,377			63,311			1,135			3,938			29,761

Investment securities, at fair value		17,338			20,283			23,725			25,137			23,773

Mortgage loans held for sale		193,948			159,899			147,690			138,590			156,584

Loans held for investment, net of unearned income		792,962			787,003			772,590			713,667			700,159
Less: allowance for loan losses		(8,676	)		(8,644	)		(8,949	)		(8,977	)		(9,070	)

Net loans		784,286			778,359			763,641			704,690			691,089


Bank premises and equipment, net		30,117			30,050			30,247			30,368			31,407
Restricted equity securities, at cost		4,706			3,243			3,633			3,179			3,169
Bank owned life insurance		10,465			9,950			9,687			9,587			7,526
Goodwill		775			775			775			775			775
Intangible assets, net		—			—			—			—			15
Accrued interest receivable and other assets		27,119			25,403			21,940			23,688			22,973


Total assets	$	1,170,675		$	1,178,380		$	1,066,737		$	1,019,242		$	1,023,899


LIABILITIES:
Demand deposits—non-interest bearing	$	293,442		$	270,446		$	235,301		$	252,286		$	240,348
Demand deposits—interest bearing		54,580			58,725			66,682			53,093			51,563
Money market deposits		379,716			417,329			369,221			365,041			377,096
Savings deposits		19,431			19,519			20,003			25,211			24,539
Time deposits		231,854			271,121			228,207			189,142			197,747

Total deposits		979,023			1,037,140			919,414			884,773			891,293

FHLB borrowings		46,025			1,050			11,075			1,100			1,125
Trust preferred subordinated debt		10,000			10,000			10,000			10,000			10,000
Accrued interest payable and other liabilities		22,167			19,653			18,710			18,145			18,650

Total liabilities		1,057,215			1,067,843			959,199			914,018			921,068


STOCKHOLDERS’ EQUITY:
Common stock		52,182			51,950			51,864			51,735			51,624
Capital in excess of par value		8,846			8,555			8,336			7,966			7,675
Retained earnings		52,412			49,957			47,354			45,523			43,566
Accumulated other comprehensive loss		(65	)		(14	)		(102	)		(135	)		(159	)

Total Monarch Financial Holdings, Inc. stockholders’ equity		113,375			110,448			107,452			105,089			102,706
Noncontrolling interest		85			89			86			135			125

Total equity		113,460			110,537			107,538			105,224			102,831


Total liabilities and stockholders’ equity	$	1,170,675		$	1,178,380		$	1,066,737		$	1,019,242		$	1,023,899


Common shares outstanding at period end		10,777,965			10,736,947			10,652,475			10,646,873			10,624,668

Nonvested shares of common stock included in commons shares outstanding		341,450			346,950			279,750			299,910			299,910

Book value per common share at period end (1)	$	10.52		$	10.29		$	10.09		$	9.87		$	9.67
Tangible book value per common share at period end (2)	$	10.45		$	10.21		$	10.01		$	9.80		$	9.59
Closing market price	$	12.55		$	12.51		$	13.75		$	12.56		$	11.72

Total risk based capital - Consolidated company		13.62	%		13.57	%		13.79	%		14.16	%		14.29	%
Total risk based capital - Bank		13.52	%		13.38	%		13.81	%		14.18	%		14.31	%

(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

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Consolidated Statements of Income

Monarch Financial Holdings, Inc. and Subsidiaries

Unaudited


	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
INTEREST INCOME:
Interest and fees on loans held for investment	$	10,032,923		$	9,089,071		$	19,873,259		$	18,567,963
Interest on mortgage loans held for sale		1,746,435			1,274,498			3,053,472			2,047,230
Interest on investment securities		78,784			91,929			167,699			167,978
Interest on federal funds sold		7,207			24,179			15,460			64,557
Dividends on equity securities		41,713			22,410			80,713			52,410
Interest on other bank accounts		116,754			54,905			218,783			90,937

Total interest income		12,023,816			10,556,992			23,409,386			20,991,075

INTEREST EXPENSE:
Interest on deposits		738,767			839,303			1,406,827			1,673,716
Interest on trust preferred subordinated debt		47,867			123,359			94,282			245,696
Interest on other borrowings		23,467			14,224			46,073			28,586

Total interest expense		810,101			976,886			1,547,182			1,947,998

NET INTEREST INCOME		11,213,715			9,580,106			21,862,204			19,043,077
PROVISION FOR LOAN LOSSES		250,000			—			500,000			—


NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,963,715			9,580,106			21,362,204			19,043,077


NON-INTEREST INCOME:
Mortgage banking income		22,240,973			17,369,228			43,304,652			29,571,390
Service charges and fees		558,790			538,579			1,075,344			1,008,791
Title income		241,919			167,454			474,690			272,488
Investment and insurance income		400,542			335,887			744,668			781,359
Other income		184,040			87,725			293,073			173,496

Total non-interest income		23,626,264			18,498,873			45,892,427			31,807,524

NON-INTEREST EXPENSE:
Salaries and employee benefits		10,097,518			8,492,446			19,691,794			16,764,007
Commissions and incentives		10,805,166			6,770,022			20,250,304			10,780,986
Occupancy and equipment		2,389,884			2,395,088			4,678,392			4,671,791
Loan origination expense		1,930,961			2,060,570			4,389,624			3,423,711
Marketing expense		902,932			797,908			1,649,159			1,319,749
Data processing		599,568			476,806			1,229,318			956,084
Telephone		353,163			293,451			678,909			604,588
Other expenses		2,074,321			1,720,693			3,763,845			3,232,701

Total non-interest expense		29,153,513			23,006,984			56,331,345			41,753,617


INCOME BEFORE TAXES		5,436,466			5,071,995			10,923,286			9,096,984

Income tax provision		(1,961,763	)		(1,767,500	)		(3,955,103	)		(3,238,740	)

NET INCOME		3,474,703			3,304,495			6,968,183			5,858,244

Less: Net income attributable to noncontrolling interest		(50,874	)		(120,921	)		(83,147	)		(137,405	)

NET INCOME ATTRIBUTABLE TO MONARCH FINANCIAL HOLDINGS, INC.	$	3,423,829		$	3,183,574		$	6,885,036		$	5,720,839


NET INCOME PER COMMON SHARE:

Basic	$	0.32		$	0.30		$	0.64		$	0.54
Diluted	$	0.32		$	0.30		$	0.64		$	0.54

Weighted average basic shares outstanding		10,760,159			10,620,869			10,744,430			10,596,786
Weighted average diluted shares outstanding		10,771,660			10,660,217			10,766,776			10,636,968

Return on average assets		1.22	%		1.29	%		1.26	%		1.18	%
Return on average stockholders’ equity		12.28	%		12.63	%		12.62	%		11.57	%

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Financial Highlights

Monarch Financial Holdings, Inc. and Subsidiaries


(Dollars in thousands, except per share data)	For the Quarter Ended
(Dollars in thousands, except per share data)	June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
EARNINGS
Interest income	$	12,024		$	11,385		$	11,361		$	10,639		$	10,557
Interest expense		(810	)		(737	)		(786	)		(928	)		(977	)

Net interest income		11,214			10,648			10,575			9,711			9,580
Provision for loan losses		(250	)		(250	)		—			—			—
Noninterest income - mortgage banking income		22,241			21,064			16,211			16,658			17,369
Noninterest income - other		1,385			1,202			1,162			1,241			1,130
Noninterest expense		(29,154	)		(27,178	)		(23,605	)		(23,121	)		(23,007	)

Pre-tax net income		5,436			5,486			4,343			4,489			5,072
Minority interest in net income		(51	)		(32	)		(44	)		(46	)		(121	)
Income taxes		(1,961	)		(1,993	)		(1,616	)		(1,635	)		(1,767	)

Net income	$	3,424		$	3,461		$	2,683		$	2,808		$	3,184


PER COMMON SHARE
Earnings per share - basic	$	0.32		$	0.32		$	0.25		$	0.26		$	0.30
Earnings per share - diluted		0.32			0.32			0.25			0.26			0.30
Common stock - per share dividends		0.09			0.08			0.08			0.08			0.08
Average Basic Shares Outstanding		10,760,159			10,728,206			10,648,184			10,635,275			10,620,869
Average Diluted Shares Outstanding		10,771,660			10,761,396			10,689,219			10,670,507			10,660,217

YIELDS
Loans held for investment		5.21	%		5.21	%		5.34	%		5.16	%		5.22	%
Mortgage loans held for sale, net at fair value		3.88			3.90			4.16			4.14			4.37
Other earning assets		1.38			1.31			1.33			1.16			1.04
Total earning assets		4.59			4.62			4.75			4.58			4.61
Interest bearing checking		0.13			0.13			0.14			0.15			0.17
Money market and regular savings		0.36			0.30			0.31			0.36			0.39
Time deposits		0.61			0.61			0.81			0.88			0.88
Borrowings		1.04			1.33			1.71			4.92			4.95
Total interest-bearing liabilities		0.44			0.43			0.48			0.57			0.60
Interest rate spread		4.15			4.19			4.27			4.01			4.01
Net interest margin		4.28			4.32			4.42			4.18			4.18

FINANCIAL RATIOS
Return on average assets		1.22	%		1.31	%		1.04	%		1.11	%		1.29	%
Return on average stockholders’ equity		12.28			12.98			10.03			10.72			12.63
Non-interest revenue/Total revenue		66.3			66.2			60.5			62.7			63.7
Efficiency - Consolidated		83.7			82.6			84.5			83.7			81.8
Efficiency - Bank only		64.6			66.2			61.2			61.7			63.9
Average equity to average assets		9.92			10.10			10.39			10.40			10.18

ALLOWANCE FOR LOAN LOSSES
Beginning balance	$	8,644		$	8,949		$	8,977		$	9,070		$	9,213
Provision for loan losses		250			250			—			—			—
Charge-offs		(287	)		(598	)		(174	)		(181	)		(184	)
Recoveries		69			43			146			88			41

Net charge-offs		(218	)		(555	)		(28	)		(93	)		(143	)

Ending balance	$	8,676		$	8,644		$	8,949		$	8,977		$	9,070


COMPOSITION OF RISK ASSETS
Nonperforming loans:
90 days past due	$	—		$	175		$	175		$	243		$	499
Nonaccrual loans		2,266			4,325			2,705			2,180			3,028
OREO and reposessed property		375			100			144			767			144

Nonperforming assets	$	2,641		$	4,600		$	3,024		$	3,190		$	3,671


ASSET QUALITY RATIOS
Nonperforming assets to total assets		0.23	%		0.39	%		0.28	%		0.31	%		0.36	%
Nonperforming loans to total loans		0.29			0.57			0.37			0.34			0.50
Allowance for loan losses to total loans held for investment		1.09			1.10			1.16			1.26			1.30
Allowance for loan losses to nonperforming loans		382.88			192.09			310.73			370.49			257.16
Annualized net charge-offs to average loans held for investment		0.11			0.29			0.02			0.05			0.08

AVERAGE BALANCES (Amounts in thousands)
Total mortgage loans held for sale	$	180,485		$	136,084		$	131,471		$	138,382		$	116,851
Total loans held for investment		778,757			771,587			725,093			701,137			698,851
Interest-earning assets		1,062,119			1,009,389			958,904			930,420			927,552
Assets		1,126,749			1,070,581			1,021,591			999,358			993,003
Total deposits		969,144			925,984			883,478			867,980			867,217
Other borrowings		27,437			21,049			14,575			11,124			11,150
Stockholders’ equity		111,824			108,174			106,088			103,908			101,092

MORTGAGE PRODUCTION (Amounts in thousands)
Dollar volume of mortgage loans closed	$	605,401		$	487,423		$	445,846		$	440,784		$	446,863
Percentage of refinance based on dollar volume		23.9	%		47.0	%		30.9	%		16.0	%		15.0	%

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Monarch Financial Holdings, Inc. - FORM 8-K - EX-99.1 - July 23, 2015

Attached files

Monarch Financial Holdings, Inc. Reports