Attached files
| file | filename |
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| 8-K - FORM 8-K - Monarch Financial Holdings, Inc. | d8k.htm |
 Investor Presentation
As of December 31, 2010
March 22, 2011
Exhibit 99.1 |
 Page 2
Forward-Looking Statements
Certain
information
contained
in
this
discussion
may
include
“forward-looking
statements”
within
the
meaning
of
Section
27A
of
the
Securities
Act
of
1933,
as
amended,
and
Section
21E
of
the
Securities
Exchange
Act
of
1934,
as
amended.
These
forward-looking
statements
relate
to
the
Company’s
future
operations
and
are
generally
identified
by
phrases
such
as
“the
Company
expects,”
“the
Company
believes”
or
words
of
similar
import.
Although
the
Company
believes
that
its
expectations
with
respect
to
the
forward-looking
statements
are
based
upon
reliable
assumptions
within
the
bounds
of
its
knowledge
of
its
business
and
operations,
there
can
be
no
assurance
that
actual
results,
performance
or
achievements
of
the
Company
will
not
differ
materially
from
any
future
results,
performance
or
achievements
expressed
or
implied
by
such
forward-looking
statements.
For
details
on
factors
that
could
affect
expectations,
see
the
Company’s
most
recently
issued
Annual
Report
on
Form
10-K,
as
filed
with
the
Securities
and
Exchange
Commission. |
 Page 3
Brad E. Schwartz
Chief Executive Officer, Monarch Financial Holdings, Inc. &
Monarch Bank E. Neal Crawford, Jr.
President, Monarch Bank
Andrew N. Lock
Executive Vice President and Chief Risk Officer, Monarch Bank
Introduction |
 Page 4
Corporate Profile
Monarch Financial Holdings is a rapidly
growing financial services company
headquartered in Chesapeake, Virginia
–
$826 million in assets
–
$550 million in loans held for investment
–
$175 million in loans held for sale
–
$706 million in deposits
Monarch Bank was founded in 1998, profitable
in
15
th
month
of
operation,
and
now
has
9
offices in South Hampton Roads
OBX Bank, a division of Monarch Bank,
opened in May 2007 to serve the local needs of
the Outer Banks with two offices
Monarch Mortgage drives significant non-
interest income through retail residential
mortgage origination
–
$1.6 Billion in prime residential
mortgage originations in 2010
51% JV Ownership
75% JV Ownership
51% JV Ownership |
 Page 5
Monarch Franchise
OBX Bank Offices:
Kitty Hawk, NC
Nags Head, NC
Monarch Investments:
Chesapeake, VA
Monarch Bank Offices:
Chesapeake, VA (2)
Norfolk, VA (2)
Virginia Beach, VA (5)
Monarch Mortgage Offices:
Chesapeake, VA
Norfolk, VA
Virginia Beach, VA (2)
Richmond, VA (2)
Fredericksburg, VA
Fairfax, VA
Bowie, MD
Crofton, MD
Gaithersburg, MD
Greenbelt, MD
Rockville, MD (2)
Towson, MD
Waldorf, MD
Charlotte, NC (2)
Kitty Hawk, NC
Wilmington, NC (2)
Greenwood, SC |
 Page 6
Experienced Management Team
Our
senior
management
team
consists
of
17
officers
who
have
over
463
years
of
combined
experience and over 27 years experience on average in the financial
services industry –
16 % insider ownership
–
Management transition took place in 2009/2010
* Serves as a director on the holding company board
Years
Name
Position
Experience
Brad E. Schwartz *
Chief Executive Officer, MFHI & Monarch Bank
27
E. Neal Crawford *
President, Monarch Bank
26
William F. Rountree, Jr. *
President MFHI
44
James K. Ferber
President
Real Estate Finance Group
29
Barry A. Mathias
Chesapeake
Market President 40
David W. McGlaughon
Outer
Banks Market President
31
Donald F. Price
Norfolk
Market President
34
W. Craig Reilly
Virginia
Beach Market President
13
Jeremy R. Starkey
Senior Vice President Commercial Real Estate Group
20
E. Ted Yoder
President, Monarch Mortgage
18
William T. Morrison
Executive Vice President & Chief Operating Officer, Monarch
Mortgage 25
Mary A. Anderson
Senior Vice President -
Human Resources
25
Denys Diaz
Executive Vice President & Chief Information Officer
(4/4/2011) 20
Lynette P. Harris
Executive Vice President & Chief Financial Officer
30
Barbara N. Lane
Executive Vice President –
Facilities
41
Andrew N. Lock
Executive Vice President & Chief Risk Officer
19
Nancy B. Porter
Senior Vice President -
Sales and Marketing
21 |
 Page 7
Monarch Mortgage
Monarch Mortgage, headquartered in Virginia Beach, was founded in May
2007 as a result of restructuring our existing mortgage
operations –
Originates permanent residential mortgage loans primarily sold,
servicing released, into the secondary market
–
Focus on quality loans, offering only products with a proven liquid
market and multiple reliable buyers
Significant risk management and bank oversight
Experienced and proven management team
–
Compensation tied to bottom line
Monarch Mortgage operates 24 locations
–
4 in core banking markets
–
20 in mortgage only markets
Significant origination capabilities:
–
$1.6 Billion closed in 2010, up from $1.2 Billion in 2009
–
Focus on purchase market
Mortgage Originations
$75
$200
$577
$1,630
$1,186
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
$1,600.00
$1,800.00
2006
2007
2008
2009
2010e |
 Page 8
Capital Events
Publicly traded on Nasdaq Capital Market under MNRK, MNRKP
Formed Monarch Financial Holdings, Inc. as one bank holding company
in 2006 with 5,969,039 common shares now outstanding
Issued $14.7 Million in TARP Capital in December 2008 as an
abundance of caution during financial crisis
Issued $20 Million of Non-cumulative Convertible Preferred in
2009 •
800,000 shares at $25 per share
•
7.80% interest rate, can convert if common stock trades at
$10.40 Repaid TARP Capital in full in December 2009
Began
common stock dividends in 2010, $0.14 per share paid out
|
 January 4, 2011
Outside Recognition
Received
Bauer
top
5-STAR
rating
for
5
th
Quarter
in
a
row
Scott and Stringfellow “Buy”
recommendation
Recognized as “Rising 20”
top growth company in Hampton Roads
Recognized by Inside Business as one of the “Best Places to
Work” in
Hampton Roads in 2007 and 2009 |
 Page 10
Our
“Smart
Growth”
Business
Strategy
Continue to Grow
Banking
Franchises
Grow Core
Deposits
Maintain Risk
Management
Focus
Grow Non-
Interest Income
Lines of Business
Maintain
Financial
Discipline
Use Market Presidents and advisory boards for product and service
delivery in existing and potential expansion markets such as
the Peninsula, Williamsburg, and Richmond, the I-64
pathway. Organic and Acquisition growth
opportunities. Continue to conservatively underwrite loans
and aggressively manage problem loans. Maintain strong
risk management focus with mortgage origination
business. Private
Banking/Cash
Management
Group
focused
on
core
deposit
generation
and
service
of
business
deposits,
focused
on
checking
account
growth.
Focus
on
office
repositioning
and
franchise
growth.
Build and maintain sustainable revenue and net income sources
incremental to our spread income through significant
residential mortgage
origination and other non-interest income activities with
bottom line mentality. Look for acquisition
opportunities. Deliver high performance shareholder returns
through strict adherence to risk management and pricing
philosophy. |
 Page 11
Financial
Highlights
2010 -
2006
($ in millions)
2010
2009
2006
CAGR
Balance Sheet:
Total Assets
$825.6
$689.6
$407.7
19.3%
Loans, HFI
558.9
537.7
318.0
15.1%
Total Deposits
705.7
540.0
314.1
22.4%
Stockholders Equity
71.7
67.9
34.0
20.5%
Tangible Book Value per Share
$8.40
$7.90
$7.02
4.6%
Income Statement:
Net Interest Income
$30.5
$22.1
$14.2
20.9%
Non-Interest Income
53.5
35.6
3.6
96.1%
Pre-Tax Pre-Provision Income
18.4
12.7
6.0
32.5%
Net Income
5.9
4.9
3.6
13.2%
Diluted Earnings per Share
$0.75
$0.66
$0.72
1.0%
Return on Equity
8.59%
7.55%
11.38%
Performance:
Net Interest Margin
4.22%
3.64%
4.43%
NPAs & 90 PD / Total Assets
1.30%
1.40%
0.03%
Loan Loss Reserves / Loans, HFI
1.62%
1.73%
1.01%
Equity /Assets
8.67%
9.85%
8.34%
Banking Offices
11
10
6
Basic Shares Outstanding
5,715,532
5,661,284
4,759,448
Preferred Shares Outstanding
800,000
800,000
0 |
 $227
$331
$407
$502
$597
$690
$826
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
2004
2005
2006
2007
2008
2009
2010
Page 12
Strong
Balance
Sheet
Growth
–
Total
Assets |
 $179
$263
$321
$419
$505
$538
$559
$19
$54
$79
$186
$0
$100
$200
$300
$400
$500
$600
$700
$800
2004
2005
2006
2007
2008
2009
2010
Page 13
Strong
Balance
Sheet
Growth
–
Loans |
 Page 14
Significant controls in place to actively monitor and manage real
estate exposure –
Centralized real estate and construction underwriting and
monitoring –
Newly centralized Commercial Real Estate Group with CRE loan
brokerage capacity Mortgage loans held for sale provide
additional spread income and average 20 to 30 days on the
balance sheet Diversified Loan Portfolio |
 $171
$273
$314
$389
$498
$540
$706
$0
$100
$200
$300
$400
$500
$600
$700
$800
2004
2005
2006
2007
2008
2009
2010
Page 15
Strong
Balance
Sheet
Growth
-
Deposits |
 Page 16
Grow Core Deposits
Core deposit generation is vital to funding our loan growth and
preserving our net interest margin
–
Built a Cash Management Team to rival larger competitors
–
Goal sell and service large DDA relationships
28% DDA growth in 2010
We utilize FHLB and brokered deposits for mortgage funding
|
 Branch
Deposits
2010
Count
in Market
Market Share (%)
Avg. Per
Rank
Institution
(#)
($M)
2010
2006
Branch
1
Wells Fargo & Company (CA)
54
$ 4,069
20.10%
21.38%
$ 75,361
2
SunTrust Banks, Inc. (GA)
42
$ 3,164
15.63%
14.29%
$ 75,338
3
TowneBank (VA)
19
$ 2,824
13.95%
9.28%
$ 148,672
4
BB&T Corporation (NC)
55
$ 2,483
12.27%
14.60%
$ 45,161
5
Bank of America Corporation (NC)
46
$ 2,080
10.28%
14.38%
$ 45,234
6
Commonwealth Bankshares, Inc. (VA)
19
$ 1,018
5.03%
2.73%
$ 53,615
7
Hampton Roads Bankshares, Inc. (VA)
29
$
794 3.92%
1.90%
$ 27,384
8
Old Point Financial Corporation (VA)
23
$
687 3.40%
3.19%
$ 29,888
9
Monarch Financial Holdings, Inc. (VA)
10
$
590 2.92%
1.82%
59,092
10
Farmers Bank
5
$
363 1.80%
1.34%
$ 72,719
Greater Hampton Roads MSA
383
$ 20,242
100.00%
100.00%
Page 17
Deposit
Market
Share
–
Greater
Hampton
Roads
Ranked
#9
with
$590,926
million
or
2.92%
deposit
market
share,
a
15%
increase
in
market
share year-over-year
–
Top five institutions had 72.23% of deposits in the market
–
CAGR 24% past five years |
 Page 18
2009 and 2010 were Record Years
First
Quarter
2009–
Record
1
st
Quarter
profits
Second
Quarter
2009
–
Record
2
nd
Quarter
profits
Third
Quarter
2009
–
Record
3
rd
Quarter
profits
Fourth
Quarter
2009
–
Record
4
th
Quarter
profits
2009 –
Record Annual profits
First
Quarter
2010
–
Record
1
st
Quarter
profits
Second
Quarter
2010
–
Record
2
nd
Quarter
profits
Third
Quarter
2010
–
Record
3
rd
Quarter
profits
Fourth
Quarter
2010
–
Record
4
th
Quarter
profits
2010 –
Record Annual profits |
 Page 19
Profitability Performance Trends
0.000
0.500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
2006
2007
2008
2009
2010
Margin
Net OH
PTPP
Log. (PTPP) |
 Page 20
Net Interest Income –
Peer Comparison
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Towne Bank
3.92
3.64
3.21
2.99
3.36
Bank of Hampton Roads
4.83
4.69
3.80
3.59
2.68
Bank of the Commonwealth
4.93
4.55
3.66
3.30
2.87
The Old Point National Bank of Phoebus
3.19
3.20
3.37
3.19
3.37
Heritage Bank
3.50
3.52
3.48
3.44
3.69
The Middleburg Bank
3.83
3.55
3.75
3.90
3.22
Village Bank
4.24
3.59
2.56
3.05
3.46
Composite Peer Group Average
4.09
3.87
3.36
3.37
3.33
National Peer Group Average
3.94
3.77
3.54
3.45
3.56
Monarch Bank
4.28
4.20
3.01
3.47
4.00
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Bank Only –
FFIEC Information |
 Page 21
Net
Overhead
–
Peer
Comparison
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Towne Bank
2.04
2.04
1.82
1.76
1.68
Bank of Hampton Roads
2.70
2.39
2.13
4.15
2.73
Bank of the Commonwealth
1.81
1.93
1.60
1.88
2.00
The Old Point National Bank of Phoebus
1.75
1.67
1.88
2.18
2.28
Heritage Bank
3.12
2.87
2.96
2.68
2.69
The Middleburg Bank
1.92
2.64
2.48
2.75
2.39
Village Bank
2.90
2.65
1.91
3.45
2.27
Composite Peer Group Average
2.34
2.36
2.06
2.54
2.20
National Peer Group Average
1.96
1.98
2.06
2.18
2.16
Monarch Bank
2.44
2.66
1.70
1.45
1.56
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
LOW IS BETTER
Bank only –
FFIEC Information |
 Page 22
Non-Interest Income Growth
Our strategy involves building and maintaining sustainable revenue
and net income sources in addition to traditional banking
spread income –
Monarch
Mortgage:
underwrites
permanent
prime
residential
mortgage
loans
to
be
sold
in the secondary market
–
Real
Estate
Security
Agency:
residential
and
commercial
title
and
settlement
–
Monarch
Capital:
provides
commercial
mortgage
brokerage
services
(in
mortgage
#’s)
* Operating Revenue defined as non-interest income plus
net-interest income Non-Interest Income
($ in 000s)
2006
2007
2008
2009
2010
Mortgage banking income
$2,061
$5,152
$18,080
$32,477
$50,506
Investment and insurance commissions
204
1,131
1,278
749
290
Service charges and fees
924
1,159
1,370
1,502
1,637
Title company income
48
61
230
309
599
Other
348
876
455
597
472
Total Non-Interest Income
$3,586
$8,379
$21,413
$35,634
$53,503
Non-Interest Income / Operating Revenue
20.1%
33.2%
55.1%
61.7%
63.7% |
 Page 23
Our Risk Management Focus Pays Off
The
credit
risk
within
the
company
is
overseen
by
Andy
Lock,
our
Chief
Risk
Officer
All loans are reviewed and loan relationships that exceed $1,500,000
are approved by either a management
loan
committee
or
a
board
of
directors’
loan
committee
All loans are risk rated with those ratings reviewed by an
independent third-party loan review service
In
4
th
quarter
of
2010
had
Federal
Reserve
Bank
examination,
which
validated
our
practices
Mortgage operations risks are managed daily through a senior
management team at Monarch Mortgage along with oversight from
Monarch Bank senior management –
Duties include authority and oversight of underwriting and
regulatory compliance –
All correspondents and products are approved by our Board of
Directors to ensure no inappropriate products with excessive
risk are sold –
William Morrison, Monarch Mortgage Chief Operating Officer,
previously served as a chief credit officer for a local
community bank Other than credit risk our banking risk
includes interest rate risk, which we manage through our
active Asset/Liability Management Committee
|
 Historically
Low
Non-performing
Assets |
 Aggressive Provision & Charge-off History
|
 Allowance to Loans HFI and NPA Ratio |
 Non-Performing Assets –
Compared to Peers |
 Our
Texas
Ratio
–
Compared
to
Peers
0.00
20.00
40.00
60.00
80.00
100.00
120.00
Towne Bank
0.75
1.11
1.24
11.72
18.69
Bank of Hampton Roads
2.26
3.45
7.22
89.48
92.46
Bank of the Commonwealth
2.15
4.85
38.17
61.40
113.02
The Old Point National Bank of Phoebus
1.76
2.08
9.90
15.40
36.49
Heritage Bank
0.72
0.63
0.81
0.88
0.72
The Middleburg Bank
0.02
8.04
20.33
15.79
36.44
Village Bank
9.20
12.41
35.61
70.92
56.64
Composite Peer Group Average
2.13
4.18
15.80
35.02
45.89
National Peer Group Average
5.14
9.36
19.69
30.52
30.05
Monarch Bank
0.21
0.86
13.10
14.58
12.64
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
The Texas Ratio is defined as non-current loans & debt securities plus
non-investment OREO divided by tangible equity plus loan loss reserves. |
 Page 29
Why Invest in Monarch?
High performing, diversified financial services company
Attractive franchise in one of the best demographic markets in the
country Strong, highly experienced senior management team and
bankers Conservative underwriting culture with better than
peer asset quality Significant non-interest income lines
of business Outperform peers through disciplined growth and
risk management Ready to take advantage of market dysfunction
through organic and acquisition growth
|
 Thank You
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