MOUNT AIRY, N.C., Feb. 22, 2018 (GLOBE NEWSWIRE) — Surrey Bancorp (the “Company”) (Pink Sheets:SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the fourth quarter of 2017 and the full year.

For the quarter ended December 31, 2017, net income totaled $315,321 or $0.08 per fully diluted share, compared with $895,499 or $0.21 per fully diluted common share earned during the fourth quarter of 2016. The decrease in quarterly earnings results from an increase in the provision for income taxes as a result of a reduction in the value of net deferred tax assets of approximately $628,000. The reduction was necessitated by the enactment of the Tax Cuts and Jobs Act during the quarter.  

Net interest income increased by 2.5 percent from $2,866,692 in the fourth quarter of 2016 to $2,938,607 for the same period in 2017. This increase is due to an increase in interest rates and the resulting increase in interest income from interest bearing balances deposited at other banks. Overall the net interest margin decreased from 4.54 in the fourth quarter of 2016 to 4.40 percent for the same period in 2017 due to a change in the earning asset mix. Asset yields decreased from 4.90 percent in 2016 to 4.73 percent in 2017. Loan yields fell from 5.75 percent in the fourth quarter of 2016 to 5.52 percent during same quarter in 2017. This decrease was offset by loan growth as average loans outstanding increased 3.4 percent from $211,972,499 in 2016 to $219,285,285 in 2017. Yields on interest bearing bank balances increased from 0.47 percent in the fourth quarter of 2016 to 1.16 percent in 2017. Average interest bearing bank balances increased from $35,219,483 in the fourth quarter of 2016 to $42,148,188 in 2017, going from 13.7 percent of interest earning assets in 2016 to 15.7 percent in 2017. Although average loans outstanding increased from the fourth quarter of 2016 to 2017, the higher yielding loans made up a smaller percentage of total average earning assets in the fourth quarter of 2017 compared to the fourth quarter of 2016. Average loans as a percentage of earning assets decreased from 83.4 percent in the fourth quarter of 2016 to 81.5 percent of earning assets in 2017. The cost of funds decreased slightly from 0.40 percent in the fourth quarter of 2016 to 0.37 percent in the fourth quarter of 2017 as certificates of deposit made up a lower percentage of average deposits. The provision for loan losses decreased from $64,752 in the fourth quarter of 2016 to $48,679 in 2017. Noninterest income increased from $742,463 in the fourth quarter of 2016 to $822,353 in 2017. This increase was attributable to increases in deposit service fees and other service charges. Noninterest expenses increased from $2,092,025 in the fourth quarter of 2016 to $2,300,711 in the fourth quarter of 2017. This increase is attributable to expenses associated with equipment purchases.

For the year ended December 31, 2017, the Company reported net income of $3,026,907, or $0.73 per fully diluted common share. This represents a 15.9 percent decrease in profitability from year-end 2016, when the Company reported earnings of $3,596,628, or $0.86 per fully diluted common share. This decrease was attributable to the aforementioned revaluation of net deferred tax assets due to the new tax law enacted in December 2017. Net interest income increased 1.6 percent from $11,018,850 for the year ended 2016 to $11,198,022 at year-end 2017. This increase was due to increases in the Federal funds rate. Noninterest income decreased 5.5 percent to $2,686,128 in 2017, compared to $2,843,811 reported for the year ended December 31, 2016. This decrease was due to life insurance proceeds in excess of the cash surrender value of $315,754 recorded in 2016. The provision for loan losses decreased from $401,403 in 2016 to a provision recapture of $44,866 in 2017. The net recapture is due to charge off recoveries in 2017 and improved economic conditions which lowered environmental factors used in calculating the loan loss reserve. Noninterest expenses increased 4.4 percent, from $8,002,821 in 2016, to $8,351,960 in 2017. The majority of the increase results from cost associated with cybersecurity, equipment purchases, professional fees and fees associated with government guaranteed lending.   

Loan loss reserves were $3,848,006 or 1.72 percent of total loans as of December 31, 2017. Non-performing assets were 0.16 percent of total assets at December 31, 2017, compared to 0.54 percent on that date in 2016. At December 31, 2017, the allowance for loan loss reserves equals 147.9 percent of impaired and non-performing assets, net of government guarantees compared to 105.4 percent at the end of 2016.

Total assets were $300,509,941 as of December 31, 2017, an increase of 8.4 percent from $277,102,385 reported as of December 31, 2016. Total deposits were $253,655,262 at year-end 2017, an increase of 10.2 percent from the $230,261,545 reported at the end of year of 2016. Net loans increased 5.6 percent to $220,395,992 at December 31, 2017, compared to $208,690,443 as of December 31, 2016.

About Surrey Bancorp

Surrey Bancorp is the bank holding company for Surrey Bank & Trust (the “Bank”) and is located at 145 North Renfro Street, Mount Airy, North Carolina. The Bank operates full service branch offices at 145 North Renfro Street, 1280 West Pine Street and 2050 Rockford Street in Mount Airy. Full-service branch offices are also located at 653 South Key Street in Pilot Mountain, 393 CC Camp Road in Elkin and 1096 Main Street in North Wilkesboro, North Carolina and 940 Woodland Drive in Stuart, Virginia. 

Surrey Bank & Trust is engaged in the sale of insurance and provides full-service brokerage and investment services through its wholly owned subsidiary Surrey Investment Services, Inc. The insurance division, dba SB&T Insurance, is located at 199 North Renfro Street in Mount Airy. The brokerage division which operates through an association with LPL Financial, is located at 145 North Renfro Street in Mount Airy.

Surrey Bank & Trust can be found online at www.surreybank.com.

Non-GAAP Financial Measures

This report refers to the overhead efficiency ratio, which is computed by dividing non-interest expense by the sum of net interest income and non-interest income. This is a non-GAAP financial measure that we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible, because other companies may calculate the efficiency ratio differently. Such information is not in accordance with generally accepted accounting principles in the United States (GAAP) and should not be construed as such. Management believes such financial information is meaningful to the reader in understanding operating performance, but cautions that such information not be viewed as a substitute for GAAP. Surrey Bancorp, in referring to its net income, is referring to income under GAAP.

Forward Looking Statements
Information in this press release contains “forward-looking statements.” These statements reflect management’s current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. As such, actual results and outcomes may materially differ from what may be expressed or forecast in such forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit levels, loan demand and asset quality, including real estate and other collateral values; changes in banking regulations and accounting principles, policies or guidelines; and the impact of competition from traditional or new sources. These and other factors that may emerge could cause decisions and actual results to differ materially from current expectations. Surrey Bancorp takes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this press release.

 
SURREY BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
                 
    December 31,
2017
    December 31,
2016
 
    (unaudited)        
Total assets   $ 300,510     $ 277,102  
Total loans     224,244       212,378  
Investments     55,816       46,680  
Deposits     253,655       230,262  
Borrowed funds           1,750  
Stockholders’ equity     42,046       40,537  
Non-performing assets to total assets     0.16 %     0.54 %
Loans past due more than 90 days to total loans     0.04 %     0.00 %
Allowance for loan losses to total loans     1.72 %     1.74 %
Tangible book value per common share   $ 10.38     $ 9.87  
                 

 
SURREY BANCORP
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
             
    For the Three Months
Ended December 31,
    For the Twelve Months
Ended December 31,
 
    2017     2016     2017       2016  
Interest income   $ 3,162     $ 3,096     $ 12,096       $ 11,924  
Interest expense     223       229       898         905  
Net interest income     2,939       2,867       11,198         11,019  
Provision for loan losses     49         65       (45 )         402  
Net interest income after provision for loan losses     2,890       2,802       11,243         10,617  
Noninterest income     822       742       2,686         2,844  
Noninterest expense     2,301       2,092       8,352         8,003  
Net income before taxes     1,411        1,452       5,577         5,458  
Provision for income taxes     1,096       557       2,550         1,862  
Net income     315       895       3,027         3,596  
Preferred stock dividend declared     46        46       183         183  
Net income available to common shareholders   $ 269     $ 849     $ 2,844       $ 3,413  
Basic net income per share   $ 0.08     $ 0.24     $ 0.80       $ 0.96  
Diluted net income per share   $ 0.08     $ 0.21     $ 0.73       $ 0.86  
Return on average total assets (1)     0.43 %     1.30 %     1.07   %     1.37 %
Return on average total equity (1)     2.92 %     8.63 %     7.15   %     8.91 %
Yield on average interest earning assets     4.73 %     4.90 %     4.62   %     4.91 %
Cost of funds     0.37 %     0.40 %     0.38   %     0.41 %
Net yield on average interest earning assets     4.40 %     4.54 %     4.28   %     4.54 %
Overhead efficiency ratio     55.62 %     57.96 %     60.15   %     57.73 %
Net charge-offs/average loans     0.00 %     0.08 %     -0.10    %     0.16 %
                                   

   (1) Annualized for all periods presented.

For additional information, please contact
Ted Ashby, CEO, or Mark Towe, CFO             
(336) 783-3900