Monarch Financial Reports Record First Quarter Performance

News provided by

Monarch Financial Holdings, Inc.

Apr 28, 2011, 08:08 ET

CHESAPEAKE, Va., April 28, 2011 /PRNewswire/ -- Monarch Financial Holdings, Inc. (Nasdaq: MNRK, MNRKP), the bank holding company for Monarch Bank, reported record first quarter profitability, along with annual loan, deposit and asset growth.  First quarter 2011 highlights are:

  • Net income of $1,373,257, up 22.6% from 2010
  • Diluted earnings per share of $0.16, up from $0.13 one year prior
  • Improved deposit mix with growth in checking and money market accounts
  • Closed $295 million in mortgage loans
  • Non-performing assets of 1.26% remain low and below our peers

Net income for the first quarter of 2011 was $1,373,257, compared to $1,119,817 for the same period in 2010.  The annualized return on average equity (ROE) was 7.74%, and the annualized return on average assets (ROA) was 0.71%.  Diluted earnings per share were $0.16, compared to $0.13 the previous year, a 23.1% increase.  

"The first quarter of 2011 was another period of record quarterly earnings performance.  We had great success in growing core deposits, maintaining our asset quality, and improving our mortgage banking revenue.  Year over year we improved our profitability, shareholder return, and loan and deposit mix, all while maintaining a strong capital position," stated Brad Schwartz, Chief Executive Officer.

Total assets at March 31, 2011 were $801.3 million, up $96.6 million or 13.7% from one year prior.  Total loans held for investment increased $9.7 million to $566 million.  Mortgage loans held for sale increased $12.6 million to $95 million, up 15% from 2010.  Deposits increased $90 million to $670 million, up 15.7% from 2010.  Deposit growth occurred primarily in money market and checking accounts offsetting a planned decline in certificates of deposit.  

"Our focus for 2011 is to grow our loan portfolio while improving the core deposit mix.  Our five dedicated cash management experts have been successful at delivering a business deposit platform that is on par with the larger banks in our markets.  With the continued pullback in lending by banks both large and small, we have been successful at building new client relationships that should result in increasing loan and deposit growth during the year," stated Neal Crawford, President of Monarch Bank.

The company continues to experience strong asset quality.  Non-performing assets represented 1.26% of total assets on March 31, 2011, down from 1.30% on December 31, 2010 but up slightly from a two year low of 1.05% reported one year prior.  The allowance for loan losses now represents 1.68% of total loans held for investment, compared to 1.55% one year earlier.  Total risk-based capital to risk-weighted assets, a measurement used by regulators to determine if a banking company is well capitalized, equaled 13.56%, significantly higher than the 10% required to be "Well Capitalized", the highest rating of capital strength by bank regulatory standards.  

Net interest income increased 19.7% or $1.2 million in 2011 compared to 2010 due to a combination of improved asset yields, earning asset growth, and declines in funding costs.  The net interest margin improved to 4.23% for 2011 compared to 4.13% in 2010.  Non-interest income in 2011 grew 17.1% compared to 2010, primarily driven by increased production at Monarch Mortgage.  Non-interest income represented 50% of total revenues in 2011, compared to 49% in 2010.  Monarch Mortgage and our related mortgage operations closed $295 million in mortgage loans, up from $230 million in 2010.  Monarch Mortgage is a retail mortgage lender.  Non-interest expense grew 21%, with the majority of the increase related to both banking growth and increased production at Monarch Mortgage.  

Monarch Financial Holdings, Inc. is the one-bank holding company for Monarch Bank.  Monarch Bank is a community bank with nine banking offices in Chesapeake, Virginia Beach, and Norfolk, Virginia.  OBX Bank, a division of Monarch Bank, operates offices in Kitty Hawk and Nags Head, North Carolina.  Services are also provided through over fifty ATMs located in the South Hampton Roads area and the Outer Banks of North Carolina, and "Monarch Online" consumer and business internet banking (monarchbank.com).  Monarch Mortgage and our affiliated mortgage companies have over twenty offices with locations in Virginia, North Carolina, Maryland, and South Carolina.  Our subsidiaries/ divisions include Monarch Bank, OBX Bank, Monarch 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 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 convertible 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.

www.monarchbank.com

Consolidated Balance Sheets

Monarch Financial Holdings, Inc. and Subsidiaries

(In thousands)

Unaudited



March 31

2011

2010

ASSETS:


 Cash and due from banks    

$   14,650

$   15,803

 Interest bearing bank balances    

1,088

4,562

 Federal funds sold      

35,398

7,040




 Investment securities        

43,542

8,413




 Loans held for sale      

95,306

82,664




 Loans held for investment, net of unearned income

566,456

556,784

 Less: allowance for loan losses    

(9,503)

(8,650)

     Net loans        

556,953

548,134




 Bank premises and equipment    

22,561

9,198

 Restricted equity securities      

8,859

7,020

 Bank owned life insurance      

7,403

7,120

 Goodwill  

775

775

 Intangible assets        

595

774

 Accrued interest receivable and other assets

14,178

13,175




     Total assets        

$ 801,308

$ 704,678




LIABILITIES:


  Demand deposits--non-interest bearing  

$ 103,434

$   93,571

  Demand deposits--interest bearing    

33,369

19,980

  Money market deposits      

298,134

169,476

  Savings deposits        

19,772

23,711

  Time deposits        

215,118

272,366

     Total deposits    

669,827

579,104




  FHLB borrowings  

41,450

42,088

  Trust preferred subordinated debt    

10,000

10,000

  Accrued interest payable and other liabilities

7,177

5,031

     Total liabilities      

728,454

636,223




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, issued and outstanding

4,000

4,000

  Common stock, $5 par, 20,000,000 shares authorized; issued -


     5,965,339 shares outstanding at March 31, 2011 and


     5,876,534 shares outstanding at March 31, 2010        

29,827

29,383

  Capital in excess of par value

22,251

22,166

  Retained earnings      

16,908

13,090

  Accumulated other comprehensive loss

(286)

(300)

     Total Monarch Financial Holdings, Inc. stockholders' equity

72,700

68,339

 Noncontrolling interest      

154

116

     Total equity        

72,854

68,455




     Total liabilities and stockholders' equity  

$ 801,308

$ 704,678

Consolidated Statements of Income

Monarch Financial Holdings, Inc. and Subsidiaries

Unaudited

Three Months Ended

March 31

2011

2010

INTEREST INCOME:


  Interest on federal funds sold        

$      27,041

$        8,377

  Interest on other bank accounts      

1,075

376

  Dividends on restricted securities      

32,515

18,165

  Interest & dividends on investment securities      

40,551

54,546

  Interest and fees on loans  

9,443,210

8,470,927

         Total interest income  

9,544,392

8,552,391

INTEREST EXPENSE:


  Interest on deposits    

1,757,675

1,861,365

  Interest on trust preferred subordinated debt    

121,500

121,500

  Interest on other borrowings

22,985

182,698

         Total interest expense  

1,902,160

2,165,563

NET INTEREST INCOME  

7,642,232

6,386,828

PROVISION FOR LOAN LOSSES        

1,001,454

1,327,870




NET INTEREST INCOME AFTER PROVISION


  FOR LOAN LOSSES    

6,640,778

5,058,958




NON-INTEREST INCOME:


  Service charges on deposit accounts      

386,320

394,331

  Mortgage banking income  

9,004,237

7,675,152

  Investment and insurance commissions      

86,400

74,320

  Other income    

217,549

133,777

         Total non-interest income        

9,694,506

8,277,580

NON-INTEREST EXPENSE:


  Salaries and employee benefits        

5,703,657

4,898,966

  Mortgage commissions  

3,546,847

3,025,580

  Occupancy and equipment  

1,387,033

1,068,425

  Loan expense    

1,355,423

1,001,184

  Data processing    

305,833

195,536

  Other expenses    

1,826,962

1,444,065

         Total non-interest expense        

14,125,755

11,633,756




INCOME  BEFORE TAXES  

2,209,529

1,702,782

  Income tax provision  

(699,474)

(569,700)

NET INCOME    

1,510,055

1,133,082




  Less: Net income attributable to noncontrolling interest    

(136,798)

(13,265)

NET INCOME ATTRIBUTABLE TO MONARCH      


  FINANCIAL HOLDINGS, INC  

$ 1,373,257

$ 1,119,817




Preferred stock dividend and accretion of preferred stock discount

(390,000)

(390,000)

NET INCOME AVAILABLE TO COMMON      




  STOCKHOLDERS    

$    983,257

$    729,817

NET INCOME  PER COMMON SHARE:  


 Basic      

$          0.17

$          0.13

 Diluted      

$          0.16

$          0.13

Financial Highlights

Monarch Financial Holdings, Inc. and Subsidiaries









(Dollars in thousands,






except per share data)

Three Months Ended March 31


2011

2010

Change

EARNINGS






Interest income

$     9,544

$      8,552

11.6%

Interest expense

1,902

2,166

(12.2)

Net interest income

7,642

6,386

19.7

Provision for loan losses

1,001

1,328

(24.6)

Noninterest income

9,694

8,278

17.1

Noninterest expense

14,126

11,634

21.4

Pre-tax net income

2,209

1,702

29.8

Minority interest in net income

137

13

953.8

Income taxes

699

569

22.8

Net income

1,373

1,120

22.6








PER COMMON SHARE








Earnings per share - basic

$       0.17

$        0.13

30.8%

Earnings per share - diluted

0.16

0.13

23.1

Book value

8.82

8.23

7.2

Tangible book value

8.59

7.96

7.9

Closing market price (adjusted)

8.39

7.79

7.7

Average Basic Shares Outstanding

5,754,299

5,700,238

0.9

Average Diluted Shares Outstanding

8,359,255

5,753,067

45.3








FINANCIAL RATIOS






Return on average assets

0.71%

0.67%

6.0%

Return on average stockholders' equity

7.74

6.68

15.9

Net interest margin (FTE)

4.23

4.13

2.4

Non-interest revenue/Total revenue

50.4

49.2

2.4

Efficiency - Consolidated

81.2

79.0

2.8

Efficiency - Bank only

57.4

54.1

6.1

Average equity to average assets

9.13

10.05

(9.2)

Total risk based capital - Consolidated

13.56

14.07

(3.6)

Total risk based capital - Bank only

12.97

12.06

7.5








PERIOD END BALANCES






Total loans held for sale

$   95,306

$    82,664

15.3%

Total loans held for investment

566,456

556,784

1.7

Interest-earning assets

758,052

666,906

13.7

Assets

801,308

704,678

13.7

Total deposits

669,827

579,104

15.7

Other borrowings

51,450

52,088

(1.2)

Stockholders' equity

72,854

68,455

6.4








AVERAGE BALANCES






Total loans held for investment

$ 562,212

$  544,628

3.2%

Interest-earning assets

743,155

637,447

16.6

Assets

787,752

676,455

16.5

Total deposits

688,967

548,685

25.6

Other borrowings

13,773

51,471

(73.2)

Stockholders' equity

71,929

67,978

5.8








ALLOWANCE FOR LOAN LOSSES






Beginning balance

$     9,038

$      9,300

(2.8) %

Provision for loan losses

1,001

1,328

(24.6)

Charge-offs

597

2,042

(70.8)

Recoveries

61

64

(4.7)

Ending balance

9,503

8,650

9.9

Net charge-off loans to average loans

0.10

0.36

(73.7)








ASSET QUALITY RATIOS






Nonperforming assets to total assets

1.26%

1.05%

21.0

bp

Allowance for loan losses to total loans held for investment

1.68

1.55

12.4

bp

Allowance for loan losses to nonperforming loans

119.97

131.16

(8.5) %








COMPOSITION OF RISK ASSETS






Nonperforming loans:






   90 days past due

$        430

$              -

100.0%

   Nonaccrual & Restructured debt

7,491

6,595

13.6

OREO

2,176

837

160.0

Nonperforming assets

10,097

7,432

35.9%









bp - Change is measured as difference in basis points.





SOURCE Monarch Financial Holdings, Inc.

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