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Surrey Bancorp Reports Third Quarter Net Income of $801,381

MOUNT AIRY, N.C., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Surrey Bancorp (the “Company”), (Pink Sheets:SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the third quarter of 2017.

For the quarter ended September 30, 2017, net income totaled $801,381 or $0.19 per fully diluted share, compared to $785,354 or $0.19 per fully diluted common share earned during the third quarter of 2016.

Net income for the three months ended September 30, 2017, is approximately 2.0 percent higher than for the same period in 2016. The increase in earnings results from an increase in net interest income. Net interest income increased from $2,711,787 in the third quarter of 2016 to $2,837,450 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 4.50 in the third quarter of 2016 to 4.34 percent for the same period in 2017 due to a change in the earning asset mix. Asset yields decreased from 4.86 percent in 2016 to 4.69 percent in 2017. Loan yields fell slightly from 5.46 percent in the third quarter of 2016 to 5.42 percent during same quarter in 2017. This decrease was offset by loan growth as average loans outstanding increased 1.5 percent from $211,979,825 in 2016 to $215,122,300 in 2017. Yields on interest bearing bank balances increased from 0.52 percent in the third quarter of 2016 to 1.34 percent in 2017. Average interest bearing bank balances increased from $23,886,991 in the third quarter of 2016 to $40,556,996 in 2017, going from 9.9 percent of interest earning assets in 2016 to 15.5 percent in 2017. Although average loans outstanding increased from the third quarter of 2016 to 2017, the higher yielding loans made up a smaller percentage of total average earning assets in the third quarter of 2017 compared to the third quarter of 2016. Average loans as a percentage of earning assets decreased from 87.4 percent in the third quarter of 2016 to 82.0 percent of earning assets in 2017. The cost of funds decreased slightly from 0.40 percent in the third quarter of 2016 to 0.38 percent in the third quarter of 2017 as certificates of deposit made up a lower percentage of average deposits. Average interest bearing deposits increased 9.6 percent from the third quarter of 2016 from $154,438,353 to $169,297,720 in 2017. This growth lead to a 10.5 percent increase in interest expense on deposits for the quarter ended September 30, 2017. The provision for loan losses increased from $123,910 in the third quarter of 2016 to $229,116 in 2017, a $105,206 increase. The provision increase is due to loan growth.

Noninterest income increased from $623,870 in the third quarter of 2016 to $638,552 in 2017. The increase primarily results from an increase in service charges on deposit accounts and insurance commissions. Noninterest expenses increased 1.0 percent from $1,998,910 in the third quarter of 2016, to $2,019,205 in 2017. This increase was primarily due to an increase in salaries and employee benefits.

Loan loss reserves were $3,795,649 or 1.72 percent of total loans as of September 30, 2017. Non-performing assets were 0.22 percent of total assets at September 30, 2017, compared to 0.63 percent on that date in 2016. At September 30, 2017, the allowance for loan loss reserves equals 356 percent of impaired and non-performing assets, net of government guarantees.

Total assets were $292,006,764 as of September 30, 2017, an increase of 8.9 percent from $268,079,225 reported as of September 30, 2016. Total deposits were $243,724,920 at quarter-end 2017, a 10.2 percent increase from the $221,063,810 reported at the end of the third quarter of 2016. Net loans increased to $216,867,767, or 2.8 percent, compared to $211,051,726, at September 30, 2016.

Net income for the nine months ended September 30, 2017, was $2,711,586 or $0.65 per diluted share, compared to $2,701,129 or $0.65 per diluted share, for the same period in 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, Elkin, North Carolina, and 940 Woodland Drive in Stuart, Virginia. The Bank has a Loan Production Office at 717 Main Street in North Wilkesboro, North Carolina. Construction of a full service branch in North Wilkesboro began the third quarter of 2017 and is expected to be completed in the fourth quarter of 2017.

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.

CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)

September 30,
2017
December 31,
2016
September 30,
2016
(unaudited) (unaudited)
Total assets $292,007 $277,102 $268,079
Total loans 220,663 212,378 214,850
Investments 49,452 46,680 32,683
Deposits 243,725 230,262 221,064
Borrowed funds - 1,750 1,750
Stockholders’ equity 43,151 40,537 41,009
Non-performing assets to total assets 0.22% 0.54% 0.63%
Loans past due more than 90 days to total loans 0.00% 0.00% 0.21%
Allowance for loan losses to total loans 1.72% 1.74% 1.77%
Book value per common share $11.12 $10.38 $10.51


CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)

For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2017 2016 2017 2016
Interest income $ 3,063 $ 2,931 $ 8,934 $ 8,828
Interest expense 226 219 675 676
Net interest income 2,837 2,712 8,259 8,152
Provision for loan losses 229 124 (93) 337
Net interest income after provision for loan losses 2,608 2,588 8,352 7,815
Noninterest income 638 624 1,864 2,101
Noninterest expense 2,019 1,999 6,051 5,910
Net income before taxes 1,227 1,213 4,165 4,006
Provision for income taxes 426 428 1,454 1,305
Net income 801 785 2,711 2,701
Preferred stock dividend declared 46 46 137 137
Net income available to common shareholders $755 $739 $2,574 $2,564
Basic net income per share $0.21 $0.21 $0.73 $0.72
Diluted net income per share $0.19 $0.19 $0.65 $0.65
Return on average total assets (1) 1.12% 1.20% 1.29% 1.39%
Return on average total equity (1) 7.47% 7.70% 8.59% 9.01%
Yield on average interest earning assets 4.69% 4.86% 4.60% 4.94%
Cost of funds 0.38% 0.40% 0.38% 0.42%
Net yield on average interest earning assets 4.34% 4.50% 4.25% 4.56%
Overhead efficiency ratio 58.09% 59.93% 59.78% 57.65%
Net charge-offs (recoveries)/average loans 0.01% 0.08%
%
(0.09)% 0.08%
(1) Annualized for all periods presented.

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

Source:Surrey Bancorp