Monarch Financial Reports Solid Growth and Record 2nd Quarter Profitability

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Jul 21, 2011, 08:30 ET

CHESAPEAKE, Va., July 21, 2011 /PRNewswire/ -- Monarch Financial Holdings, Inc. (NASDAQ: MNRK, MNRKP), the bank holding company for Monarch Bank, reported the best second quarter profits in the company's history, along with strong loan and deposit growth, as well as improved asset quality. Second quarter 2011 highlights are:

Record 2nd quarter net income of $1,661,091, up 7% from 2010
Net income available to common shareholders up 9%
Annual asset growth of $41 million, total assets at $832 million
Annual loan growth of $34 million, up 6.1%
Annual deposit growth of $87 million, up 13.5%
Non-performing assets remain low at 1.16% of total assets
Closed $347 million in mortgage loans during the 2nd quarter

"I am pleased to report continued financial performance for Monarch and all our companies for the second quarter and for the year. I am most pleased with our loan growth, with over $35 million in new commercial loans originated during the second quarter. Many banks are still not lending and most are actually shrinking their loan portfolios. We are doing our part to get this economy going again, and we are adding a great number of strong and credit worthy clients," stated Brad E. Schwartz, Chief Executive Officer. "Mortgage production continues to be a major contributor to our bottom line. All major areas improved including our net interest margin, overall profitability, liquidity, core deposit growth, and of course our asset quality. We remain bullish on having another great year for our shareholders."

Net income was $1,661,091 for the second quarter of 2011, up 7% from the same period in 2010, which was the company's previous record second quarter with $1,552,908 in net income. The quarterly annualized return on average equity (ROE) was 9.12%, and the annualized return on average assets (ROA) was 0.87%. Quarterly earnings per share were $0.21, compared to $0.20 per share in the same quarter of 2010. For the first six months of 2011 net income was a record $3,034,348 compared to $2,672,725 for the same period in 2010, a 13.5% increase. The six month annualized return on average equity (ROE) was 8.44%, and the annualized return on average assets (ROA) was 0.79%. Year to date earnings per share were $0.38 compared to $0.33 for the same period in 2010.

Total assets at June 30, 2011 grew to $831.7 million, up $30.4 million for the quarter and up $41.3 million or 5.2% from the same period in 2010. Portfolio loans and investments grew and were offset slightly by lower balances of mortgage loans held for sale. Loans held for investment grew $22.3 million for the quarter and $34.0 million, or 6.1%, from the same period in 2010. Deposits increased $86.7 million since the second quarter of 2010, with growth focused on checking and money market accounts. Our deposit mix continues to improve as we position the Company for the eventual rise in interest rates.

"Our Monarch Bank and OBX Bank teams delivered the best quarter of the past year for commercial loan production and net loan growth. Not having to focus all of our time on problem loans has given us an edge in attracting and lending to new client relationships who in the past would have dealt with our larger bank competition. In addition, we have a seven-member dedicated team of cash management bankers who continue to improve our deposit mix and service levels for our business banking clients," stated Neal Crawford, President of Monarch Bank.

The Company continues to experience significantly better asset quality performance than its local, state, and national peer group. Non-performing assets equaled 1.16% of total assets, down from 1.26% reported as of March 31, 2011, but up from 1.03% one year prior. Non-performing assets were $9.6 million, comprised of $165,000 in loans 90 days or more past due and still accruing interest, $7.8 million in non-accrual loans and $1.6 million in other real estate owned. The Company was aggressive in recognizing losses and disposing of non-performing assets during the quarter. The allowance for loan losses represents 1.61% of total loans held for investment, up from 1.55% in the second quarter of 2010.

Average equity to average assets was 9.51% during the second quarter of 2011, up from 9.10% one year prior. Total risk-based capital to risk weighted assets equaled 13.23%, significantly higher than what is required to meet the highest rating of "Well Capitalized" by federal banking regulators. Monarch again was awarded the highest 5-Star "Superior" rating by Bauer Financial, an independent third-party bank ratings agency that rates banks on safety and soundness. During the second quarter of 2011 Monarch increased their semi-annual cash dividend to common shareholders to $0.08 per share.

Net interest income, our number one driver of profitability, increased 10.4% or $754,007 during the second quarter of 2011 compared to the same quarter in 2010 due to earning asset growth, changes in the mix of loans and deposits, as well as reduced funding costs. The net interest margin improved to 4.55% compared to 4.14% in 2010, and was up from 4.23% in the second quarter of 2011.

Mortgage revenue drove non-interest income slightly higher for the quarter compared to the previous year. Monarch Mortgage and their related mortgage companies closed $347 million in mortgage loans during the quarter, compared to $358 million during the same quarter of 2010. Year to date the mortgage group has closed over $642 million in mortgage loans compared to $592 million for the first six months of 2010. Non-interest expense grew 12.6%, with the majority of the increase related to increased expenses related to mortgage production, facilities expansion, salary and benefits, and loan expense.

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), 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 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.

Consolidated Balance Sheets
*Monarch Financial Holdings, Inc. and Subsidiaries*
(In thousands)
Unaudited

	June 30
	2011	2010
ASSETS:
Cash and due from banks.......................................................................................................	$ 17,890	$ 22,471
Interest bearing bank balances...............................................................................................	1,629	6,841
Federal funds sold..................................................................................................................	13,034	10,035

Investment securities..............................................................................................................	49,301	8,457

Loans held for sale.................................................................................................................	115,704	149,527

Loans held for investment, net of unearned income...............................................................	588,785	554,797
Less: allowance for loan losses.............................................................................................	(9,480)	(8,575)
Net loans.............................................................................................................................	579,305	546,222

Bank premises and equipment................................................................................................	22,833	16,302
Restricted equity securities.....................................................................................................	7,175	7,296
Bank owned life insurance.....................................................................................................	7,472	7,192
Goodwill..................................................................................................................................	775	775
Intangible assets.....................................................................................................................	551	729
Accrued interest receivable and other assets.......................................................................	16,010	14,526

Total assets.........................................................................................................................	$ 831,679	$ 790,373

LIABILITIES:
Demand deposits--non-interest bearing.................................................................................	$ 117,181	$ 104,503
Demand deposits--interest bearing........................................................................................	30,769	22,068
Money market deposits..........................................................................................................	307,466	214,541
Savings deposits....................................................................................................................	20,847	22,905
Time deposits.........................................................................................................................	253,902	279,471
Total deposits......................................................................................................................	730,165	643,488

FHLB borrowings...................................................................................................................	9,026	60,636
Trust preferred subordinated debt.........................................................................................	10,000	10,000
Accrued interest payable and other liabilities........................................................................	8,379	6,969
Total liabilities.......................................................................................................................	757,570	721,093

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 -
5,951,839 shares (includes nonvested shares of 3,500) at
June 30, 2011 and 5,875,534 shares outstanding at June 30, 2010...................................	29,742	29,378
Capital in excess of par value................................................................................................	22,374	22,249
Retained earnings..................................................................................................................	17,702	13,841
Accumulated other comprehensive loss................................................................................	(351)	(309)
Total Monarch Financial Holdings, Inc. stockholders' equity...............................................	73,467	69,159
Noncontrolling interest.............................................................................................................	642	121
Total equity..........................................................................................................................	74,109	69,280

Total liabilities and stockholders' equity...............................................................................	$ 831,679	$ 790,373

Consolidated Statements of Income
*Monarch Financial Holdings, Inc. and Subsidiaries*
Unaudited
	Three Months Ended		Six Months Ended
	June 30		June 30
	2011	2010	2011	2010
INTEREST INCOME:
Interest on federal funds sold..............................................................	$ 12,960	$ 15,906	$ 40,001	$ 24,283
Interest on other bank accounts..........................................................	29	1,513	1,104	1,889
Dividends on restricted securities........................................................	50,933	29,087	83,448	47,252
Interest & dividends on investment securities......................................	49,589	49,029	90,140	103,575
Interest and fees on loans...................................................................	9,600,504	9,416,922	19,043,714	17,887,849
Total interest income.....................................................................	9,714,015	9,512,457	19,258,407	18,064,848
INTEREST EXPENSE:
Interest on deposits..............................................................................	1,575,088	1,903,582	3,332,763	3,764,947
Interest on trust preferred subordinated debt......................................	124,200	124,200	245,700	245,700
Interest on other borrowings...............................................................	19,108	243,063	42,093	425,761
Total interest expense...................................................................	1,718,396	2,270,845	3,620,556	4,436,408
NET INTEREST INCOME............................................................................	7,995,619	7,241,612	15,637,851	13,628,440
PROVISION FOR LOAN LOSSES.............................................................	1,099,696	1,504,948	2,101,150	2,832,818

NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES.............................................................................	6,895,923	5,736,664	13,536,701	10,795,622

NON-INTEREST INCOME:
Service charges on deposit accounts.................................................	424,829	429,025	811,149	823,356
Mortgage banking income.....................................................................	11,205,023	11,024,864	20,209,260	18,700,016
Investment and insurance commissions..............................................	85,305	67,585	171,705	141,905
Other income........................................................................................	208,223	253,425	425,772	387,202
Total non-interest income..............................................................	11,923,380	11,774,899	21,617,886	20,052,479
NON-INTEREST EXPENSE:
Salaries and employee benefits...........................................................	5,615,748	5,283,733	11,014,592	8,972,728
Commissions and incentives................................................................	5,181,545	5,035,667	9,033,205	9,271,218
Occupancy and equipment..................................................................	1,385,880	1,300,842	2,772,913	2,369,267
Loan expense......................................................................................	1,595,597	1,475,466	2,951,020	2,476,650
Data processing ..................................................................................	278,015	222,533	583,848	418,069
Other expenses...................................................................................	2,005,091	1,855,196	3,832,053	3,299,261
Total non-interest expense...........................................................	16,061,876	15,173,437	30,187,631	26,807,193

INCOME BEFORE TAXES .......................................................................	2,757,427	2,338,126	4,966,956	4,040,908
Income tax provision............................................................................	(981,457)	(749,331)	(1,680,931)	(1,319,031)
NET INCOME............................................................................................	1,775,970	1,588,795	3,286,025	2,721,877

Less: Net income attributable to noncontrolling interest.......................	(114,879)	(35,887)	(251,677)	(49,152)
NET INCOME ATTRIBUTABLE TO MONARCH .........................................
FINANCIAL HOLDINGS, INC..................................................................	$ 1,661,091	$ 1,552,908	$ 3,034,348	$ 2,672,725

Preferred stock dividend and accretion of preferred.............................
stock discount......................................................................................	(390,000)	(390,000)	(780,000)	(780,000)
NET INCOME AVAILABLE TO COMMON .................................................
STOCKHOLDERS..................................................................................	$ 1,271,091	$ 1,162,908	$ 2,254,348	$ 1,892,725
NET INCOME PER COMMON SHARE:
Basic.....................................................................................................	$ 0.21	$ 0.20	$ 0.38	$ 0.33
Diluted....................................................................................................	$ 0.19	$ 0.20	$ 0.35	$ 0.33

Financial Highlights

Monarch Financial Holdings, Inc. and Subsidiaries

(Dollars in thousands, except per share data)

Three Months Ended June 30

Six Months Ended June 30

2011

2010

Change

2011

2010

Change

EARNINGS

Interest income

$ 9,714

$ 9,512

2.1

$ 19,258

$ 18,065

6.6

Interest expense

1,718

2,271

(24.4)

3,621

4,436

(18.4)

Net interest income

7,996

7,241

10.4

15,637

13,629

14.7

Provision for loan losses

1,100

1,505

(26.9)

2,101

2,833

(25.8)

Noninterest income

11,923

11,775

1.3

21,618

20,052

7.8

Noninterest expense

16,062

15,173

5.9

30,187

26,807

12.6

Pre-tax net income

2,757

2,338

17.9

4,967

4,041

22.9

Minority interest in net income

115

219.4

252

414.3

Income taxes

981

749

31.0

1,681

1,319

27.4

Net income

1,661

1,553

7.0

3,034

2,673

13.5

PER COMMON SHARE

Earnings per share - basic

$ 0.21

$ 0.20

5.0

$ 0.38

$ 0.33

15.2

Earnings per share - diluted

0.19

0.20

(5.0)

0.35

0.33

6.1

Book value

8.98

8.37

7.3

Tangible book value

8.76

8.11

8.0

Closing market price (adjusted)

7.90

7.92

(0.3)

Average Basic Shares Outstanding

5,967,652

5,704,974

4.6

5,967,038

5,702,619

4.6

Average Diluted Shares Outstanding

8,562,757

5,795,852

47.7

8,565,699

5,781,141

48.2

FINANCIAL RATIOS

Return on average assets

0.87

0.82

6.1

0.79

0.75

5.3

Return on average stockholders' equity

9.12

9.05

0.8

8.44

7.88

7.1

Net interest margin (FTE)

4.55

4.14

9.9

4.41

4.14

6.5

Non-interest revenue/Total revenue

55.1

55.3

(0.4)

52.9

52.6

0.6

Efficiency - Consolidated

80.4

79.6

1.0

80.8

79.3

1.9

Efficiency - Bank only

58.0

56.3

3.0

57.7

55.3

4.3

Average equity to average assets

9.51

9.10

4.5

9.31

9.54

(2.4)

Total risk based capital - Consolidated

13.23

13.37

(1.0)

Total risk based capital - Bank only

12.72

12.10

5.1

PERIOD END BALANCES

Total loans held for sale

$ 115,704

$ 149,527

(22.6)

Total loans held for investment

588,785

554,797

6.1

Interest-earning assets

775,217

738,249

5.0

Assets

831,679

790,373

5.2

Total deposits

730,165

643,488

13.5

Other borrowings

19,026

70,636

(73.1)

Stockholders' equity

73,467

69,159

6.2

AVERAGE BALANCES

Total loans held for investment

$ 570,547

$ 556,603

2.5

$ 566,406

$ 550,584

2.9

Interest-earning assets

714,370

711,843

0.4

725,100

674,851

7.4

Assets

768,170

755,927

1.6

778,206

716,731

8.6

Total deposits

669,385

599,399

11.7

679,122

575,459

18.0

Other borrowings

12,733

74,846

(83.0)

13,250

63,223

(79.0)

Stockholders' equity

73,039

68,824

6.1

72,488

68,403

6.0

ALLOWANCE FOR LOAN LOSSES

Beginning balance

$ 9,503

$ 8,650

9.9

$ 9,038

$ 9,300

(2.8)

Provision for loan losses

1,100

1,505

(26.9)

2,101

2,833

(25.8)

Charge-offs

1,537

1,706

(9.9)

2,134

3,748

(43.1)

Recoveries

414

126

228.6

475

190

150.0

Ending balance

9,480

8,575

10.6

9,480

8,575

10.6

Net charge-off loans to average loans

0.20

0.28

(30.7)

0.29

0.65

(54.7)

ASSET QUALITY RATIOS

Nonperforming assets to total assets

1.16

1.03

13.0

Allowance for loan losses to total loans held for investment

1.61

1.55

6.5

Allowance for loan losses to nonperforming loans

118.41

126.91

(6.7)

COMPOSITION OF RISK ASSETS

Nonperforming loans:

90 days past due

$ 165

$ 870

100.0

Nonaccrual & Restructured debt

7,841

5,887

33.2

OREO

1,625

1,417

14.7

Nonperforming assets

9,631

8,174

17.8

bp - Change is measured as difference in basis points.

SOURCE Monarch Financial Holdings, Inc.

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