Monarch Financial Reports Strong First Quarter Results

CHESAPEAKE, Va., April 22 /PRNewswire-FirstCall/ -- Monarch Financial Holdings, Inc. (Nasdaq: MNRK), the bank holding company for Monarch Bank, reported record first quarter profitability, improved asset quality, along with continued loan, deposit and asset growth.  First quarter 2010 highlights are:

• Record first quarter net income of $1,119,817, up 5.7% from 2009
• Non-performing assets decline to 1.05% of total assets
• Assets exceed $700 million for first time, now at $704.7 million
• Deposit growth of $39.1 million, with 76% in checking and money markets
• Loan growth of $19.1 million
• Pre-tax pre-provision earnings up 27.9% from previous year
• Net Interest margin expansion to 4.13%, up from 3.20% one year prior

Net income for 2010 was $1,119,817 compared to $1,060,271 for the previous year.  The annualized return on average equity (ROE) was 6.68%, and the annualized return on average assets (ROA) was 0.67%.  Diluted earnings per share were $0.13, compared to $0.16 the previous year and were down due to dividend expense related to the issuance of new capital in late 2009.  

"We are extremely pleased with our performance, and are excited about our many growth initiatives going forward.  On top of our fifth record quarterly profit and continued net interest margin expansion, asset quality improved and remains significantly better than our peers.  Monarch Mortgage also continues to contribute to our earnings performance," stated Brad Schwartz, Chief Executive Officer of Monarch Bank.  

Total assets at March 31, 2010 were $705 million, up $71 million or 11.1% from $634 million one year prior.  Total loans held for investment increased $50 million to $557 million, up 9.8% from 2009.  Deposits increased $57 million to $579 million, up 11.0% from 2009.  Borrowings used primarily to fund our mortgage pipeline increased $6 million in 2010, up 11.9% from one year prior.  "Our focus on 'smart growth' delivered a great quarter for deposits and loans, with the majority of deposit growth in demand deposits and money market accounts.  During the quarter we added several talented bankers to our sales team to drive future growth," 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 declined to 1.05% of total assets, compared to 1.61% one year prior and 1.40% at year end 2009.  Non-performing assets declined 27.4% from one year prior and totaled $7.4 million, comprised of $6.6 million in non-accrual loans and $837 thousand 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 1.55% of total loans held for investment, with the allowance now representing 116% of non-performing loans.

Equity to assets was 9.71% as of March 31, 2010, compared to 9.61% one year prior.  Total risk-based capital to risk weighted assets equaled 13.90%, significantly higher than what is required to meet "Well Capitalized" standards, the highest rating of capital strength by bank regulatory standards.  In December 2009 Monarch fully repaid $14.7 million in the U.S. Treasury's CPP/TARP program and issued $20 million in new convertible preferred stock.  

Net interest income increased 39.2% or $1.8 million during the first quarter of 2010 compared to the same quarter in 2009 due to a combination of improved asset yields, earning asset growth, and declines in funding costs.  The net interest margin improved to 4.13% compared to 3.20% in 2009, and was up from 3.99% in the fourth quarter of 2009.  We have been able to improve our margin while limiting long-term fixed rate loans and extending the maturities on fixed-term deposits.  

Non-interest income grew 5.6% from the same period in 2009, fueled by increased mortgage margins and growth in banking fee income.  Monarch Mortgage closed $234 million in mortgage loans during the quarter.  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 15.6%, with the majority of the increase related growth in salary and benefits and mortgage loan 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), 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.

SOURCE Monarch Financial Holdings, Inc.