Monarch Financial Reports Record 3rd Quarter Profitability and Continued Asset Growth

CHESAPEAKE, Va., Oct. 27 /PRNewswire-FirstCall/ -- Monarch Financial Holdings, Inc. (Nasdaq: MNRK), the bank holding company for Monarch Bank, reported the best third quarter profits in the company's history, along with strong mortgage growth and good asset quality.  Third quarter 2010 highlights are:

• Record 3rd quarter net income of $1,511,726, up 31.1% from 2009
• Net Interest margin expansion to 4.36%, up from 3.62% one year prior
• Assets growth of $86 million, total assets reach $876 million
• Deposit growth of $32 million
• Non-performing assets at 1.23% of total assets
• Closed $504 million in mortgage loans

Net income was $1,511,726 for the third quarter of 2010, up 31.1% from the same period in 2009, which was the company's previous record quarter with $1,152,782 in net income.  The quarterly annualized return on average equity (ROE) was 8.65%, and the annualized return on average assets (ROA) was 0.74%.  Quarterly diluted earnings per share were $0.19, compared to $0.17 per share in the third quarter of 2009.  For the first nine months of 2010 net income was a record $4,184,451 compared to $3,632,645 for the same period in 2009, a 15.2% increase.  The nine month annualized return on average equity (ROE) was 8.14%, and the annualized return on average assets (ROA) was 0.75%.  

"It is exciting to announce the seventh consecutive quarter for record profits at Monarch, especially with credit costs weighing so heavily on our true earnings potential.  The economy remained sluggish and we continued to aggressively charge off poorly performing loans while building our loan loss reserves this quarter, growing our reserves by $1.7 million.  Reduced funding costs coupled with a record quarter for Monarch Mortgage closings and profitability was critical to our success.  Asset quality remains extremely favorable compared to other local and regional banks.  It was again an excellent quarter for growth in earnings, net interest margin expansion, mortgage production, and deposit growth," stated Brad E. Schwartz, Chief Executive Officer.  

Total assets at September 30, 2010 grew to $876.2 million, up $85.8 million for the quarter and up $224.4 million or 34.4% from the same period in 2009.  Record low interest rates, growth in our mortgage production capacity and the volume of refinanced mortgage loans were the primary drivers of our asset growth during the past two quarters.  We anticipate total assets to decline in the fourth quarter as mortgage production typically slows at the end of the year.  Total mortgage loans held for sale increased $88.3 million since the second quarter of 2010, and are up $166.6 million since the third quarter of 2009.  Loans held for investment grew $39.0 million, up 7.5% from the same period in 2009.  Deposits increased $31.5 million since the second quarter of 2010, and have grown 25.0% or $134.9 million from the same period in 2009.  To support this strong asset growth our dedicated mortgage line of credit with the Federal Home Loan Bank of Atlanta grew to $111.3 million, while only $1.5 million was outstanding on the Bank's lines of credit with the FHLB and other banks.  

"Our Monarch and OBX Bank teams delivered another fine quarter for deposit and loan production.  While loans held for investment show limited net dollar growth over the previous quarter, loan demand and production remained strong and more than offset loan payments and pay downs.  We see great opportunity to handle the banking needs of the many business clients who are disenchanted with the larger bank's pullback in our markets," 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 1.23% of total assets, up from 1.03% at the end of the second quarter but down from 1.34% one year prior.  Non-performing assets were $10.8 million, comprised of $1.0 million in loans 90 days or more past due and still accruing interest, $7.5 million in non-accrual loans and $2.3 million in other real estate owned.  The Company was aggressive in recognizing losses and disposing of non-performing assets during the quarter, with net charge-offs of $1.3 million and $3.0 million expensed to further build the allowance for loan losses.  The allowance for loan losses represents 1.83% of total loans held for investment, up from 1.55% in the second quarter of 2010.  

Average equity to average assets was 8.56% during the third quarter of 2010, compared to 10.18% one year prior.  Total risk-based capital to risk weighted assets equaled 12.55%, significantly higher than what is required to meet the highest rating of "Well Capitalized" by federal banking regulators.  In September 2010 Monarch was once again awarded the 5-Star "Superior" rating by Bauer Financial, an independent third-party bank ratings agency that rates banks on safety and soundness.  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 49.6% or $2.7 million during the third quarter of 2010 compared to the same quarter in 2009 due to earning asset growth and reduced funding costs.  The net interest margin improved to 4.36% compared to 3.62% in 2009, and was up from 4.14% in the second quarter of 2010.  

Non-interest income grew 94.6% from the same period in 2009, fueled by record quarterly mortgage production and margins.  Monarch Mortgage and their related mortgage companies closed $504 million in mortgage loans during the quarter, compared to $265 million during the same quarter of 2009.  Year to date the mortgage group originated over $1.7 billion in new loan applications and closed over $1.0 billion in mortgage loans.  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 76.9%, with the majority of the increase related to mortgage production-based variable expenses including mortgage commissions, 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 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

SOURCE Monarch Bank