Monarch Financial Reports Record Profits and Continued Growth

Jan 26, 2010, 11:55 ET from Monarch Financial Holdings, Inc.

CHESAPEAKE, Va., Jan. 26 /PRNewswire-FirstCall/ -- Monarch Financial Holdings , Inc. (Nasdaq: MNRK), the bank holding company for Monarch Bank, reported record annual and fourth quarter profitability, along with continued loan, deposit and asset growth.  Annual and fourth quarter 2009 highlights are:

  • Record annual net income of $4,855,672, up 329% from 2008
  • 2009 Earnings per share $0.66, up from $0.21 one year prior
  • Record 4th quarter net income of $1,223,027
  • Addition of $20 million in new capital, repayment of U.S. Treasury TARP Capital
  • Annual asset growth of $92 million, up 15.4%
  • Closed over $1.1 billion in mortgage loans in 2009
  • Non-performing assets 1.32% to total assets, remain significantly below peer

Net income for 2009 was $4,855,672 compared to $1,132,883 for the previous year.  The annualized return on average equity (ROE) was 7.55%, and the annualized return on average assets (ROA) was 0.75%.  Year-to-date 2009 diluted earnings per share were $0.66, compared to $0.21 the previous year.  The cost of repaying the U.S. Treasury preferred shares related to warrants issued reduced earnings per common share in the fourth quarter and year-to-date by $0.03 per share.  For the fourth quarter of 2009, net income was $1,223,027, a major increase compared to the loss of ($1,534,678) for the same period in 2008.  The quarterly annualized return on average equity (ROE) was 7.15 %, and the annualized return on average assets (ROA) was 0.73%.  Quarterly diluted earnings per share were $0.13, an improvement over the fourth quarter of 2008 when the basic and diluted loss per share was ($0.28).  

"We accomplished so much in a year that challenged all banks.  We reached record profitability, fully repaid the U.S. Treasury preferred stock investment, and oversubscribed and raised $20 million in new capital.  Monarch Mortgage had a record year for applications and closed mortgage loans, and was a major contributor to our performance.  We produced these record results despite historically higher credit costs and approximately one million dollars in additional FDIC deposit insurance expense," stated Brad Schwartz, Chief Executive Officer of Monarch Bank.  

Total assets at December 31, 2009 were $689 million, up $92 million or 15.4% from $597 million one year prior.  Total loans held for investment increased $33 million to $538 million, up 6.5% from 2008.  Mortgage loans held for sale increased $25 million to $79 million, up 45.3% from 2008.  Deposits increased $44 million to $540 million, up 8.9% from 2008.  Borrowings also grew in 2009, primarily to fund growth in our mortgage pipeline.  "Our growth and overall performance further differentiates us from our competitors, and positions us for growth opportunities in 2010 and beyond," stated Neal Crawford, President of Monarch Bank.

The company continues to experience better asset quality performance than its local and national peer group.  Non-performing assets represented 1.32% of total assets at year end 2009, down from 1.35% on December 31, 2008.  There was one $203,000 loan 90 days or more past due and still accruing, $6.8 million in non-accrual loans, and $2.1 million in other real estate owned.  The Company was aggressive in recognizing losses and disposing of non-performing assets throughout the year.  The allowance for loan losses represents 1.73% of total loans held for investment, compared to 1.59% one year earlier.  

Monarch repaid in full $14.7 million in preferred stock issued under the U.S. Treasury's CPP/TARP program in late December 2009.  The company also issued $20 Million in new convertible preferred stock in December 2009.  Equity to assets was 9.86% as of December 31, 2009, compared to 10.03% one year prior.  Total risk-based capital to risk weighted assets equaled 14.21%, significantly higher than what is required to be meet "Well Capitalized" standards, the highest rating of capital strength by bank regulatory standards.  

Net interest income increased 36.8% or $5.9 million in 2009 compared to 2008 due to a combination of improved asset yields, earning asset growth, and declines in funding costs.  The net interest margin improved to 3.64% for 2009 compared to 3.11% in 2008, with the net interest margin improving to 3.99% for the fourth quarter of 2009 compared to 2.83% for the same period in 2008.  

Non-interest income grew 80% from the same period in 2008, fueled by increased production at Monarch Mortgage and growth in banking fee income.  Non-interest income represented 52% of total revenues in 2009, compared to 39% in 2008.  Monarch Mortgage closed $1.19 Billion in mortgage loans in 2009, up from $577 million in 2008.  Monarch Mortgage is focused on the retail A-paper mortgage market and does not participate in the sub-prime or wholesale mortgage markets.  Non-interest expense grew 55%, with the majority of the increase related to the expansion and increased production of Monarch Mortgage and a 333% or close to a one million dollar increase in FDIC insurance expense.  

Monarch Financial Holdings, Inc. is the one-bank holding company for Monarch Bank.  Monarch Bank is a community bank with eight 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 twenty-three 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), Home Mortgage Solutions, 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".

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


2009

2008

ASSETS:



 Cash and due from banks

$             17,130 

$               8,418 

 Interest bearing bank balances

2,541 

112 

 Federal funds sold

14,680 

66 




 Investment securities:



    Securities available for sale

7,190 

5,847 

    Securities held to maturity

500 

       Total investment securities

7,190 

6,347 




 Mortgage loans held for sale

78,998 

54,369 




 Loans

537,700 

504,712 

 Less: allowance for loan losses

(9,300)

(8,046)

     Net loans

528,400 

496,666 




 Bank premises and equipment

8,973 

8,386 

 Restricted equity securities

7,020 

3,575 

 Bank owned life insurance

7,050 

6,788 

 Goodwill

775 

775 

 Intangible assets

818 

997 

 Accrued interest receivable and other assets

15,764 

10,699 




     Total assets

$           689,339 

$           597,198 




LIABILITIES:



  Demand deposits--non-interest bearing

$             76,169 

$             78,894 

  Demand deposits--interest bearing

19,671 

15,363 

  Money market deposits

157,309 

129,287 

  Savings deposits

22,812 

20,444 

  Time deposits

264,078 

252,098 

     Total deposits

540,039 

496,086 




  FHLB borrowings

66,159 

27,675 

  Federal funds purchased

385 

  Trust preferred subordinated debt

10,000 

10,000 

  Accrued interest payable and other liabilities

5,164 

3,164 

     Total liabilities

621,362 

537,310 




STOCKHOLDERS' EQUITY:



  Preferred stock, $5 par value, 1,185,300 shares authorized,



     none issued

  Noncumulative perpetual preferred stock, series B,

   $25 par value,



     800,000 issued and outstanding

20,000 

  Cumulative perpetual preferred stock, series A,

   $1,000 par value,



     14,700 issued, 0 outstanding at December 31, 2009

14,700 

     14,700 issued and outstanding  December 31, 2008



  Unearned discount on Series A cumulative perpetual

preferred stock

(219)

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



     5,865,534 shares outstanding at December 31, 2009 and



     5,735,007 shares outstanding at December 31, 2008

29,328 

28,675 

  Capital in excess of par value

6,345 

8,066 

  Retained earnings

12,360 

8,528 

  Accumulated other comprehensive income

(163)

27 

     Total Monarch Financial Holdings, Inc. stockholders' equity

67,870 

59,777 

 Noncontrolling interest

107 

111 

     Total equity

67,977 

59,888 




     Total liabilities and stockholders' equity

$           689,339 

$           597,198 




Consolidated Statements of Income

Monarch Financial Holdings, Inc. and Subsidiaries

Unaudited


Three Months Ended

Year Ended


December 31

December 31


2009

2008

2009

2008

INTEREST INCOME:





  Interest on federal funds sold

$               8,707 

$               6,374 

$             18,694 

$             23,818 

  Interest on other bank accounts

264 

493 

2,166 

65,533 

  Dividends on restricted securities

20,753 

27,480 

101,306 

189,686 

  Interest and dividends on investment securities

53,351 

115,898 

234,890 

483,547 

  Interest and fees on loans

8,388,129 

7,282,011 

32,160,603 

30,104,748 

         Total interest income

8,471,204 

7,432,256 

32,517,659 

30,867,332 

INTEREST EXPENSE:





  Interest on deposits

1,838,039 

3,201,624 

8,987,757 

12,673,382 

  Interest on trust preferred subordinated debt

122,850 

135,537 

328,066 

520,326 

  Interest on other borrowings

240,337 

249,824 

1,105,335 

1,522,275 

         Total interest expense

2,201,226 

3,586,985 

10,421,158 

14,715,983 

NET INTEREST INCOME

6,269,978 

3,845,271 

22,096,501 

16,151,349 

PROVISION FOR LOAN LOSSES

1,098,811 

3,769,463 

5,183,747 

5,014,076 






NET INTEREST INCOME AFTER PROVISION





  FOR LOAN LOSSES

5,171,167 

75,808 

16,912,754 

11,137,273 






NON-INTEREST INCOME:





  Service charges on deposit accounts

448,882 

348,712 

1,501,690 

1,370,229 

  Mortgage banking income

8,574,896 

4,475,397 

32,476,932 

16,471,341 

  Investment and insurance commissions

71,989 

286,513 

749,422 

1,277,608 

  Security gains, net

(67,229)

(56,428)

  Other income

12,198 

109,814 

906,213 

741,435 

         Total non-interest income

9,107,965 

5,153,207 

35,634,257 

19,804,185 

NON-INTEREST EXPENSE:





  Salaries and employee benefits

8,477,889 

4,785,974 

30,832,738 

19,008,912 

  Occupancy and equipment

1,077,931 

857,084 

3,871,050 

3,401,452 

  Loan expense

1,258,240 

611,340 

3,798,963 

1,922,651 

  Data processing

181,100 

179,817 

781,681 

669,135 

  FDIC insurance

204,318 

86,809 

1,290,073 

298,019 

  Other expenses

1,201,534 

1,042,876 

4,459,839 

3,722,676 

         Total non-interest expense

12,401,012 

7,563,900 

45,034,344 

29,022,845 






INCOME  BEFORE TAXES

1,878,120 

(2,334,885)

7,512,667 

1,918,613 

  Income tax provision

619,200 

(823,000)

2,452,970 

504,500 

NET INCOME

1,258,920 

(1,511,885)

5,059,697 

1,414,113 






  Less: Net income attributable to noncontrolling

   interest

(35,893)

(22,793)

(204,025)

(281,230)






NET INCOME ATTRIBUTABLE TO MONARCH





  FINANCIAL HOLDINGS, INC

$        1,223,027 

$      (1,534,678)

$        4,855,672 

$        1,132,883 






Preferred stock dividend and accretion of preferred





  stock discount

476,156 

1,062,963 

NET INCOME AVAILABLE TO COMMON

STOCKHOLDERS

$           746,871 

$      (1,534,678)

$        3,792,709 

$        1,132,883 

NET INCOME  PER COMMON SHARE:  





 Basic

$                 0.13 

$               (0.28)

$                 0.67 

$                 0.21 

 Diluted

$                 0.13 

$               (0.28)

$                 0.66 

$                 0.21 




Financial Highlights

Monarch Financial Holdings, Inc. and Subsidiaries


(Dollars in thousands, 





except per share data)

Three Months Ended December 31


Year Ended December 31,



2009


2008


Change



2009


2008


Change


EARNINGS















Interest income

$        8,471   


$        7,432   


14.0   

%


$      32,518   


$      30,867   


5.3   

%


Interest expense

2,201   


3,587   


(38.6)  



10,421   


14,716   


(29.2)  



Net interest income

6,270   


3,845   


63.1   



22,097   


16,151   


36.8   



Provision for loan losses

1,099   


3,769   


(70.8)  



5,184   


5,014   


3.4   



Noninterest income

9,108   


5,153   


76.8   



35,634   


19,804   


79.9   



Noninterest expense

12,401   


7,563   


64.0   



45,034   


29,022   


55.2   



Pre-tax net income (loss)

1,878   


(2,334)  


180.5   



7,513   


1,919   


291.5   



Minority interest in net income

36   


23   


56.5   



204   


281   


(27.4)  



Income taxes (benefit)

619   


(823)  


175.2   



2,453   


505   


385.7   



Net income

1,223   


(1,534)  


179.7   



4,856   


1,133   


328.6   

















PER COMMON SHARE















Earnings per share - basic

$          0.13   


$         (0.28)  


146.4   

%


$          0.67   


$          0.21   


219.0   

%


Earnings per share - diluted

0.13   


(0.28)  


146.4   



0.66   


0.21   


214.3   



Book value








8.18   


7.92   


3.3   



Tangible book value








7.91   


7.61   


3.9   



Closing market price (adjusted)








6.10   


6.75   


(9.6)  

















FINANCIAL RATIOS















Return on average assets

0.72   

%

(0.10)  

%

820.0   

%


0.75   

%

0.20   

%

275.0   

%


Return on average stockholders' equity

7.08   


(12.53)  


156.5   



7.55   


2.66   


183.8   



Net interest margin (FTE)

3.99   


2.83   


41.0   



3.64   


3.11   


17.0   



Non-interest revenue/Total revenue

51.8   


40.9   


26.7   



52.3   


39.1   


33.8   



Efficiency - Consolidated

80.3   


83.6   


(3.9)  



77.7   


80.2   


(3.1)  



Efficiency - Bank only

64.8   


75.5   


(14.2)  



58.2   


71.7   


(18.8)  



Average equity to average assets

10.20   


8.33   


22.4   



9.90   


7.67   


29.1   



Total risk based capital - Consolidated








14.21   


14.79   


(3.9)  



Total risk based capital - Bank only








10.82   


11.87   


(8.8)  

















PERIOD END BALANCES















Total loans held for sale








$      78,998   


$      54,369   


45.3   

%


Total loans held for investment








537,700   


504,712   


6.5   



Interest-earning assets








647,829   


568,463   


14.0   



Assets








689,339   


597,198   


15.4   



Total deposits








540,039   


496,086   


8.9   



Other borrowings








77,159   


38,060   


102.7   



Stockholders' equity








67,977   


59,888   


13.5   

















AVERAGE BALANCES















Total loans held for investment

$    525,587   


$    502,294   


4.6   

%


$    515,903   


$    477,016   


8.2   

%


Interest-earning assets

633,854   


552,934   


14.6   



618,431   


530,420   


16.6   



Assets

672,620   


584,480   


15.1   



649,356   


555,212   


17.0   



Total deposits

532,644   


492,195   


8.2   



513,386   


455,670   


12.7   



Other borrowings

48,186   


29,093   


65.6   



54,214   


43,556   


24.5   



Stockholders' equity

68,575   


48,713   


40.8   



64,300   


42,573   


51.0   

















ALLOWANCE FOR LOAN LOSSES















Beginning balance

$        9,550   


$        4,991   


91.3   

%


$        8,046   


$        3,976   


102.4   

%


Provision for loan losses

1,099   


3,769   


(70.8)  



5,184   


5,014   


3.4   



Charge-offs

1,359   


738   


84.1   



4,022   


1,033   


289.4   



Recoveries

10   


24   


(58.3)  



92   


89   


3.4   



Ending balance

9,300   


8,046   


15.6   



9,300   


8,046   


15.6   



Net charge-off loans to average loans

0.26   


0.14   


80.6   



0.76   


0.20   


284.9   

















ASSET QUALITY RATIOS















Nonperforming assets to total assets








1.32   

%

1.35   

%

(3.0)  

bp


Allowance for loan losses to total loans








1.73   


1.59   


13.5   

bp


Allowance for loan losses to

nonperforming loans








132.59   


107.19   


23.7   

%
















COMPOSITION OF RISK ASSETS















Nonperforming loans:















   90 days past due








$           203   


$                -   


100.0   

%


   Nonaccrual








6,811   


7,506   


(9.3)  



OREO








2,116   


533   


297.0   



Nonperforming assets








9,130   


8,039   


13.6   

%
















 bp - Change is measured as difference in basis points.  


SOURCE Monarch Financial Holdings, Inc.



RELATED LINKS

http://www.monarchbank.com