Surrey Bancorp Reports Second Quarter Net Income of $971,563

MOUNT AIRY, N.C., July 23, 2020 (GLOBE NEWSWIRE) -- Surrey Bancorp (the “Company”), (Pink Sheets: SRYB), the holding company for Surrey Bank & Trust, today reported earnings for the second quarter of 2020.

For the quarter ended June 30, 2020, net income totaled $971,563 or $0.23 per fully diluted share, compared to $1,165,651 or $0.28 per fully diluted common share earned during the second quarter of 2019. 

The decrease in earnings results from a decrease in the net interest income.

Net interest income decreased from $3,338,262 in the second quarter of 2019 to $2,877,332 in the second quarter of 2020. The decrease in net interest income is the result of a sudden decrease in interest rates due to the COVID 19 pandemic. Average loans outstanding in the second quarter of 2020 amounted to $268,196,488 compared to $242,438,661 in the second quarter of 2019. Loan yields decreased from 5.61 percent in the second quarter of 2019 to 4.72 percent in the same quarter of 2020. The yield on interest earning assets decreased from 5.05 percent to 3.57 percent from the second quarter of 2019 to the second quarter of 2020. In addition to the overall decrease in interest rates, lower yields were affected by the bank’s participation in the Small Business Administration’s Paycheck Protection Plan (PPP). The Bank funded approximately $47,369,000 of PPP loans in the second quarter of 2020. These loans carry an interest rate of 1.00 percent and carry a 100 percent government guarantee. The cost of funds decreased from 0.49 percent in the second quarter of 2019 to 0.37 percent in 2020 due to general rate decreases.

The provision for loan losses increased from $146,685 in the second quarter of 2019 to a provision of $260,051 in 2020, a $113,366 increase. This increase is due to the estimated economic impact of the current pandemic.  

Noninterest income increased from $623,511 in the second quarter of 2019 to $667,751 in 2020. Increases in fees on mortgage loans delivered to correspondents and insurance commissions offset the loss of revenue from service charges on deposit accounts. Noninterest expenses decreased 10.9 percent from $2,290,837 in the second quarter of 2019, to $2,040,969 in 2020. This decrease was primarily due to decreases in salaries and benefits, data processing fees and professional fees. Salaries expense allocated to the deferral of loan origination cost, primarily in the production of PPP loans, accounted for the decrease.    

Loan loss reserves were $4,545,010 or 1.63 percent of total loans as of June 30, 2020. Non-performing assets were 0.10 percent of total assets at June 30, 2020, compared to 1.41 percent on that date in 2019. At June 30, 2020, the allowance for loan loss reserves equals 465 percent of impaired and non-performing assets, net of government guarantees.    

Total assets were $403,514,398 as of June 30, 2020, an increase of 27.9 percent from $315,430,610 reported as of June 30, 2019. Total deposits were $347,135,297 at quarter-end 2020, a 31.6 percent increase from the $263,758,257 reported at the end of the second quarter of 2019. Net loans increased to $275,656,373, or 14.0 percent, compared to $241,731,085, at June 30, 2019.

Net income for the six months ended June 30, 2020, was $2,027,575 or $0.49 per diluted share, compared to $2,107,415 or $0.51 per diluted share, for the same period in 2019.

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.

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)

	June 30, 2020				December 31, 2019				June 30, 2019
	(unaudited)				(audited)				(unaudited)
Total assets	$	403,514			$	329,520			$	315,431
Total loans		347,135				237,393				246,219
Investments		101,847				72,777				47,288
Deposits		347,135				276,360				263,758
Stockholders’ equity		49,104				47,927				46,467
Non-performing assets to total assets		0.10	%			0.38	%			1.41	%
Loans past due more than 90 days to total loans		0.00	%			0.02	%			0.00	%
Allowance for loan losses to total loans		1.63	%			1.74	%			1.83	%
Tangible book value per common share	$	11.44			$	11.20			$	10.83

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

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2020				2019				2020				2019
Interest income	$	3,175			$	3,661			$	6,694			$	7,204
Interest expense		298				323				624				620
Net interest income		2,877				3,338				6,070				6,584
Provision for loan losses		260				146				368				209
Net interest income after provision for loan losses		2,617				3,192				5,702				6,375
Noninterest income		668				624				1,369				1,253
Noninterest expense		2,041				2,291				4,470				4,679
Net income before taxes		1,244				1,525				2,601				2,949
Provision for income taxes		272				359				573				842
Net income		972				1,166				2,028				2,107
Basic net income per share	$	0.23			$	0.28			$	0.49			$	0.51
Diluted net income per share	$	0.23			$	0.28			$	0.49			$	0.51
Return on average total assets (1)		1.01	%			1.49	%			1.13	%			1.36	%
Return on average total equity (1)		7.93	%			10.10	%			8.33	%			9.16	%
Yield on average interest earning assets		4.03	%			5.05	%			4.03	%			5.05	%
Cost of funds		0.41	%			0.49	%			0.41	%			0.48	%
Net yield on average interest earning assets		3.65	%			4.61	%			3.65	%			4.61	%
Overhead efficiency ratio		57.57	%			57.82	%			60.10	%			59.69	%
Net charge-offs (recoveries)/average loans		0.00	%			(0.01	)%			(0.02	)%			(0.04	)%
(1)  Annualized for all periods presented.

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