Market Overview

Surrey Bancorp Reports First Quarter Net Income of $1,063,275


MOUNT AIRY, N.C., April 24, 2018 (GLOBE NEWSWIRE) -- Surrey Bancorp (the "Company") (Pink Sheets:SRYB), the holding company for Surrey Bank & Trust (the "Bank"), today reported earnings for the first quarter of 2018.

For the quarter ended March 31, 2018, net income totaled $1,063,275 or $0.26 per fully diluted common share, compared with $947,725 or $0.23 per fully diluted common share earned during the first quarter of 2017. 

The increase in earnings results from a reduction in the provision for income taxes due to the rate reductions in the Tax Cuts and Jobs Act. Income tax expense decreased from $509,000, on an income before income taxes of $1,456,725 in 2017 to $312,400, on an income before income taxes of $1,375,675 in 2018. This is a reduction in the effective income tax rate from 34.9 percent to 22.7 percent.

Net interest income increased from $2,691,248 in the first quarter of 2017 to $3,157,691 in 2018 due to loan growth and an increase in the net interest margin. The net interest margin increased from 4.22 percent to 4.71 percent from 2017 to 2018 due to a combination of higher assets yields and a change in asset mix. Higher yielding loans made up 81.5 percent of average interest earning assets in the first quarter of 2017 as opposed to 83.7 percent in the first quarter of 2018.  Loan yields increased from 5.40 percent in 2017 to 5.70 percent in 2018 due to a general increase in interest rates and the realization of discounts on certain loans due to payoffs and the repurchase of a large loan previously sold. Discounts totaling $162,692 were recorded as additional interest income in the first quarter of 2018. The cost of funds decreased slightly from 0.39 percent in the first quarter of 2017 to 0.38 percent in the first quarter of 2018 as non-interest bearing deposits made up a higher percentage of average deposits. 

The provision for loan losses increased from a recapture of $186,663 in the first quarter of 2017 to a provision for loan losses of $50,006 in 2018. This increase is due to loan growth. Loans outstanding increased $6,941,719 in the first quarter of 2018 as opposed to a decrease of $2,707,138 in first quarter of 2017. The government guaranteed portion of the 2018 increase amounted to $2,877,441, resulting in a net credit exposure increase of $4,064,278.

Noninterest income decreased from $621,987 in the first quarter of 2017 to $513,106 during the same period in 2018. This decrease was due to the write off of loan servicing rights associated with a loan previously sold with servicing retained. The loan was repurchased during the quarter resulting in the write off. The amount of the servicing rights charged against noninterest income amounted to $179,501. Excluding the servicing rights charged off noninterest income increased by $70,620 due to increases in deposit services charges and insurance commissions. Noninterest expenses increased 9.9 percent from $2,043,173 in the first quarter of 2017, to $2,245,116 in 2018. This increase was primarily due to the salaries, benefits and other cost associated with the opening of a new branch office in December of 2017.

The allowance for loan loss reserves was $3,854,315 or 1.67 percent of total loans as of March 31, 2018. Non-performing assets were 0.20 percent of total assets at March 31, 2018, compared to 0.47 percent on that date in 2017. At March 31, 2018, the allowance equals 144 percent of impaired and non-performing assets, net of government guarantees. 

Total assets as of March 31, 2018 were $294,590,985, an increase of 4.4 percent from $282,215,303 reported as of March 31, 2017. Total deposits were $247,917,486 at quarter-end 2018, a 4.9 percent increase from the $236,425,858 reported at the end of the first quarter of 2017. Net loans increased to $227,331,402 at the end of the first quarter of 2018, compared to $206,044,608, as of March 31, 2017, a 10.3 percent decrease.

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

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.

(Dollars in thousands, except per share amounts)

  March 31
  December 31
  March 31
  (unaudited)       (unaudited)  
Total assets $ 294,591     $ 300,510     $ 282,215    
Total loans     231,186         224,244       209,671    
Investments      42,199         55,816       53,663    
Deposits     247,917         253,655       236,426    
Borrowed funds      -          -        750    
Stockholders' equity      42,701         42,046       41,450    
Non-performing assets to total assets     0.20       0.16     0.47  
Loans past due more than 90 days to total loans     0.03       0.04 %     0.01  
Allowance for loan losses to total loans     1.67       1.72     1.73  
Tangible book value per common share $   10.64     $   10.38     $ 10.06    


(Dollars in thousands, except per share amounts)

    For the Three Months
Ended March 31,
    2018     2017  
Interest income  $ 3,384     $ 2,915  
Interest expense   226       224  
Net interest income   3,158       2,691  
Provision for loan losses   50       (187
Net interest income after provision for loan losses   3,108       2,878  
Noninterest income   513       622  
Noninterest expense   2,245       2,043  
Net income before taxes   1,376       1,457  
Provision for income taxes   313       509  
Net income   1,063       948  
Preferred stock dividend declared   6       45  
Net income available to common shareholders $ 1,057     $ 903  
Basic net income per share 0.29     $ 0.26  
Diluted net income per share 0.26     $ 0.23  
Return on average total assets (1)   1.45 %     1.36 %
Return on average total equity (1)   10.01 %     9.19 %
Yield on average interest earning assets   5.05 %     4.57 %
Cost of funds   0.37 %     0.39 %
Net yield on average interest earning assets   4.71 %     4.22 %
Overhead efficiency ratio   61.16 %     61.67 %
Net charge-offs/average loans   0.02 %     -0.06 %

(1) Annualized for all periods presented.   

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

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