Surrey Bancorp Reports 2019 Earnings of $4,913,391

MOUNT AIRY, N.C., Feb. 26, 2020 (GLOBE NEWSWIRE) -- Surrey Bancorp (the “Company”, Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the fourth quarter of 2019 and the full year.

For the quarter ended December 31, 2019, net income totaled $1,129,170 or $0.27 per fully diluted share, compared with $1,579,148 or $0.38 per fully diluted common share earned during the fourth quarter of 2018. The decrease in earnings results from a decrease in noninterest income and increases in noninterest expense and income tax expense.

Net interest income increased by 2.9 percent from $3,129,027 in the fourth quarter of 2018 to $3,219,853 for the same period in 2019. This increase is due to an increase in interest rates on loans and loan growth. Loan yields increased from 5.33 percent in the fourth quarter of 2018 to 5.56 percent during same quarter in 2019. Average loans in the fourth quarter of 2019 amounted to $236,118,580 compared to $232,913,357 in the fourth quarter of 2018. Overall the net interest margin decreased from 4.33 percent in the fourth quarter of 2018 to 4.19 percent for the same period in 2019 due to a change in the earning asset mix. Higher yielding loans made up 81.3 percent of average interest earning assets in the fourth quarter of 2018 as opposed to 76.6 percent in the fourth quarter of 2019. Conversely, lower yielding interest bearing deposits in other banks made up 15.5 percent of average interest earning assets in the fourth quarter of 2018 compared to 20.6 percent in the fourth quarter of 2019. Yields on interest bearing bank balances decreased from 2.03 percent in the fourth quarter of 2018 to 1.52 percent in 2019. The cost of funds increased slightly from 0.42 percent in the fourth quarter of 2018 to 0.50 percent in the fourth quarter of 2019. An increase in average non-interest bearing demand deposits help keep the cost of funds stable in 2019. Average non-interest bearing demand deposits increased from $85,170,915 in the fourth quarter of 2018 to $93,307,268 in the fourth quarter of 2019. Average demand deposits amounted to 33.6 percent of total deposits in the fourth quarter of 2019 compared to 32.8 percent in the fourth quarter of 2018. The provision for loan losses decreased from $161,407 in the fourth quarter of 2018 to $45,826 in 2019. Noninterest income decreased from $890,133 in the fourth quarter of 2018 to $774,350 in 2019. This decrease was attributable to the sale of the brokerage business of the Bank’s subsidiary, Surrey Investment Services, Inc. in the fourth quarter of 2018. Brokerage income amounted to $97,837 in the fourth quarter of 2018 with no income associated with brokerage operations in 2019. Noninterest expenses increased from $2,058,820 in the fourth quarter of 2018 to $2,417,217 in the fourth quarter of 2019. This increase is attributable to salaries and employee benefits. Income tax expense increased due to reductions in deferred tax assets.

For the year ended December 31, 2019, the Company reported net income of $4,913,391 or $1.18 per fully diluted common share. This represents a 3.7 percent decrease in profitability from year-end 2018, when the Company reported earnings of $5,101,935, or $1.22 per fully diluted common share. The decrease in earnings results from an increase in the provision for income taxes due reductions in deferred income taxes and other adjustments. Net interest income increased 6.4 percent from $12,648,070 for the year ended 2018 to $13,462,474 at year-end 2019. This increase was due to loan growth and the recapture of interest income and late fees on a government guaranteed nonaccrual loan that was paid off during the third quarter of 2019. The additional interest income was also increased by the recognition of discounts and prepayment penalties upon the early payoff of another government guaranteed loan. The net effect of these transactions added approximately $225,000 to interest income from loans during 2019. Noninterest income decreased 2.2 percent to $2,646,339 in 2019, compared to $2,705,441 reported for the year ended December 31, 2018, due to the end of brokerage operations in 2018. The provision for loan losses decreased from a provision of $370,032 in 2018 to a provision of $123,652 in 2019. The decrease is due to the reduction of specific reserves associated with impaired loans. Noninterest expenses increased 5.0 percent, from $8,874,074 in 2018, to $9,317,807 in 2019. Most of the increase results from costs associated with salaries and benefits, data processing and cyber security. 

Loan loss reserves were $4,121,569 or 1.74 percent of total loans as of December 31, 2019. Non-performing assets were 0.38 percent of total assets at December 31, 2019, compared to 1.43 percent on that date in 2018. At December 31, 2019, the allowance for loan loss reserves equals 184.6 percent of impaired and non-performing assets, net of government guarantees compared to 146.2 percent at the end of 2018.

Total assets were $329,520,292 as of December 31, 2019, an increase of 6.6 percent from $309,150,095 reported as of December 31, 2018. Total deposits were $276,359,576 at year-end 2019, an increase of 6.5 percent from the $259,378,103 reported at the end of year of 2018. Net loans increased 2.1 percent to $233,271,790 at December 31, 2019, compared to $228,422,181 as of December 31, 2018.

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 through its wholly owned subsidiary Surrey Investment Services, Inc. The insurance agency, dba SB&T Insurance, is located at 199 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 regarding 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, 2019					December 31, 2018
		(unaudited)
Total assets		$	329,520				$	309,150
Total loans			237,393					232,617
Investments			72,777					55,428
Deposits			276,360					259,378
Stockholders’ equity			47,927					45,150
Non-performing assets to total assets			0.38		%			1.43		%
Loans past due more than 90 days to total loans			0.02		%			0.01		%
Allowance for loan losses to total loans			1.74		%			1.81		%
Tangible book value per common share		$	11.20				$	10.59

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,
		2019				2018				2019				2018
Interest income		$	3,564			$	3,405			$	14,762				$	13,646
Interest expense			344				276				1,300					998
Net interest income			3,220				3,129				13,462					12,648
Provision for loan losses			46				161				123					370
Net interest income after provision for loan losses			3,174				2,968				13,339					12,278
Noninterest income			774				890				2,646					2,705
Noninterest expense			2,417				2,059				9,318					8,874
Net income before taxes			1,531				1,799				6,667					6,109
Provision for income taxes			402				220				1,754					1,007
Net income			1,129				1,579				4,913					5,102
Preferred stock dividend declared			-				-				-					6
Net income available to common shareholders		$	1,129			$	1,579			$	4,913				$	5,096
Basic net income per share		$	0.27			$	0.38			$	1.18				$	1.27
Diluted net income per share		$	0.27			$	0.38			$	1.18				$	1.22
Return on average total assets (1)			1.36	%			2.04	%			1.55	%				1.69	%
Return on average total equity (1)			9.41	%			14.10	%			10.49	%				11.69	%
Yield on average interest earning assets			4.64	%			4.71	%			5.01	%				4.89	%
Cost of funds			0.50	%			0.42	%			0.49	%				0.39	%
Net yield on average interest earning assets			4.19	%			4.33	%			4.57	%				4.53	%
Overhead efficiency ratio			60.52	%			51.23	%			57.84	%				57.80	%
Net charge-offs/average loans			0.01	%			0.00	%			0.08	%				0.01	%

⁽¹⁾ Annualized for all periods presented.

CONTACT: For additional information, please contact
Ted Ashby, CEO, or Mark Towe, CFO 
[phone]