Monarch Bank 2004 Annual Report

Letter From The PresidentDear Valued Shareholder:Monarch Bank continues to showstrong growth and improvedprofits and is well on its way tobuilding a strong franchise inSouth Hampton Roads, Virginia.The Bank now has two officeseach in Chesapeake, Norfolk, andVirginia Beach, which are thelargest and fastest-growing citiesin the region. We are quicklyaccomplishing our strategic goalsof building the best located andaccessible franchise in the region.With the success of our NorfolkRegion, with over $55 million inloans and deposits in less than ayear, we have embraced theregional market manager conceptwhich gives the responsibility toour market presidents to lead andcultivate each of our three existingmarkets. As a result of our successwith this concept, we are nowimplementing this in the othertwo regions and have alreadynamed a new market presidentfor Chesapeake. We continue tohire experienced, local, provenbankers and are very proud ofwhat we believe to be the bestteam of bankers in our markets.In addition to building ourfranchise through the opening ofnew offices, both free-standingand store-fronts, we have createda huge network of ATMs fromthe Virginia Beach Oceanfrontinto the cities of Hampton Roadsand onward to the Outer Banksof North Carolina, from Corollato Hatteras, and we now have41 ATMs for our customers’convenience and use. We intendto continue to aggressively growthis important distribution systemfor our customers’ use.Monarch again reported stronggrowth in loans, deposits, earningsand capital for the year endingDecember 31, 2004. Our netincome was $757,054 compared to$540,762 the previous year, a 40%increase and another record year.Pre-tax net income increased by60% when compared to theprevious year.The Bank picked up strongmomentum with each quarter,getting progressively better,culminated by the best quarter onrecord in our short history. For thefourth quarter of 2004, net incomerose $123,000 compared to thesame period in 2003. Our totalassets were $227 million as of thesame date, up almost $43 millionor 23% from $184 million one yearprior. Total loans increased to $179million, up almost $45 million or33% while deposits totaled $171million, up over $28 million or20% in 2003 levels. Asset qualityremains extremely strong as ourcharge-offs have been negligibleand Monarch had no nonperformingloans or assets atyear-end.As we grow and mature, we areputting increased emphasis onincreasing our income from noninterestsources. In 2004, noninterestincome more thandoubled from the previous yearand increased by $1,220,000. Thistremendous growth was fueledby increased production andefficiency from Monarch HomeFunding, the bank’s secondarymortgage origination subsidiary.We had nice increases in depositservice charges related to a newdeposit overdraft (privilege)service. In addition, we startedMonarch Capital, which is acommercial mortgage brokerageoperation that can furnish ourclients with very large permanentloans with extended terms and ona non-recourse basis. MonarchInvestments, our new investmentsubsidiary, continues to progressand show monthly improvement.Our investments in BankersInsurance and Bankers Title,formed with other Virginiacommunity banks, have alreadycontributed to our 2004 earningsand show growth potential in 2005.As we look forward into 2005 andbeyond, our prospects are verypromising. We have positionedthe Bank to take full advantage ofthe current rising interest rateenvironment and have introduceda new asset/liability managementsystem which will let us maximizeour performance under changingeconomic conditions. We arestructured for continued stronggrowth, increased profits and forbuilding a strong franchise.Monarch Bank is personifyingour mission statement of buildinglasting relationships throughexceptional service. If you arenot currently banking withMonarch, I encourage you togive us that opportunity. If youare, I want to thank you for lettingus serve you and ask that yourecommend Monarch to yourfriends, neighbors, and businessassociates.Very truly yours,William F. Rountree, Jr.President & CEO