Surrey Bancorp Reports Second Quarter Net Income of $962,480

MOUNT AIRY, N.C., July 25, 2017 (GLOBE NEWSWIRE) -- Surrey Bancorp (the "Company"), (Pink Sheets:SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the second quarter of 2017.

For the quarter ended June 30, 2017, net income totaled $962,480 or $0.23 per fully diluted share, compared to $1,138,821 or $0.27 per fully diluted common share earned during the second quarter of 2016. 

Net income for the three months ended June 30, 2017, is approximately 15.5 percent lower than for the same period in 2016. The decrease in earnings results from a decrease in noninterest income. Noninterest income decreased from $938,921 in the second quarter of 2016 to $603,236 in 2017. The decrease primarily results from the recording of $315,754 in tax exempt life insurance proceeds during the quarter ended June 30, 2016. Net interest income decreased from $2,744,970 in the second quarter of 2016 to $2,730,717 in 2017. This decrease is due to a tightening of the net interest margin and a change in the earning asset mix. The net interest margin decreased from 4.65 percent to 4.23 percent from 2016 to 2017. Asset yields decreased from 5.02 percent in 2016 to 4.58 percent in 2017. Loan yields fell from 5.60 percent in the second quarter of 2016 to 5.37 percent during the quarter ending in 2017. Although average loans outstanding increased 10.0 percent from the second quarter of 2016 to 2017, the higher yielding loans made up a smaller percentage of total average earning assets in the second quarter of 2017 compared to the second quarter of 2016. Average loans as a percentage of earning assets decreased from 88.3 percent in the second quarter of 2016 to 81.9 percent of earning assets in 2017. The cost of funds decreased slightly from 0.42 percent in the second quarter of 2016 to 0.39 percent in the second quarter of 2017 as certificates of deposit made up a lower percentage of average deposits.  The provision for loan losses decreased from a provision of $136,927 in the second quarter of 2016 to a provision recapture of $135,998 in 2017, a $272,925 decrease. The provision decrease is partially due to the recovery of loans charged off in prior periods and the effects of the recoveries on the historical loss calculations. Net charge off recoveries amounted to $94,715 in the second quarter of 2017 compared to net charge offs of $90,726 in the second quarter of 2016. 

Noninterest income excluding life insurance proceeds decreased 3.2 percent from the second quarter of 2016 to the second quarter of 2017. Reductions in mortgage loan fees accounted for most of the decrease.  Noninterest expenses increased 1.7 percent from $1,956,297 in the second quarter of 2016, to $1,988,871 in 2017. This increase was primarily due to an increase in professional fees that increased from $35,684 in the second quarter of 2016 to $99,468 in 2017. In 2016 professional fees were significantly reduced due to recoveries of legal fees associated with charged off loans.

Loan loss reserves were $3,584,914 or 1.68 percent of total loans as of June 30, 2017. Non-performing assets were 0.34 percent of total assets at June 30, 2017, compared to 0.67 percent on that date in 2016. At June 30, 2017, the allowance for loan loss reserves equals 128 percent of impaired and non-performing assets, net of government guarantees.    

Total assets were $283,821,022 as of June 30, 2017, an increase of 8.1 percent from $262,650,694 reported as of June 30, 2016. Total deposits were $236,363,048 at quarter-end 2017, a 9.1 percent increase from the $216,689,033 reported at the end of the second quarter of 2016. Net loans increased to $210,754,322, or 1.4 percent, compared to $207,918,096, at June 30, 2016.

Net income for the six months ended June 30, 2017, was $1,910,205 or $0.46 per diluted share, compared to $1,915,775 or $0.46 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 second 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.

(1) Annualized for all periods presented.

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